What is a product-led growth?

What is a product-led growth?

Written by Luciano Castro

What is a product-led growth?

Product-led growth is a go-to-market strategy that relies on a product itself to drive acquisition, expansion and conversion of a business.

In the contemporary business world, one of the most important things is to learn how to keep your company afloat. It’s not enough to just have an interesting idea, product or a solution. It is very important for the product to have a high market value.

This may sound as a piece of cake, but is not. Companies are using many strategies to succeed in this. One of the go-to-market strategies that companies are using very often nowadays is a product-led growth strategy.


Product led growth is a bottom-up approach that speaks directly to needs of end users. It is a go-to-market strategy which uses a product as a main wheel that acquires leads and contributes to the company’s growth. It helps the company retain customers. This strategy easily converts leads into paying customers. 


Benefits that product led growth provides for the company are: 

  • Shorter sales cycles
  • Higher revenue per employee
  • Lower customer acquisition costs
  • Higher revenue diversity
  • Minimized impact of losing individual accounts
  • Happier customers, higher customer satisfaction, longer customer lifetime
  • Greater team alignment 


Product-led companies


In the interest of explaining how product-led growth works in practice, let’s take a look at some of the product-led companies. 


We have all heard of Zoom, Slack, Dropbox, Hubspot, Pinterest, Zapier, Atlasian, Typeform and Grammarly. Most of us have probably used some of their services and are continuing to do so. Services that we are talking about are actually their products. 


The fact is that these companies are worldwide known just because of the value that their product delivers. Most of us probably do not even perceive these companies as a company, but we perceive and experience them as a product. 


We have all started to use them without reading a whitepaper or any blog about their benefits beforehand. We built our relationship based on trust, on a word of mouth. That is nothing strange or new. It is known that one of the benefits that product-led growth provides is user experience, and that is the most valid reference. 


Furthermore, besides only using these products, we want to be part of their growth, to be a part of the growth of these companies in some way. 


The companies mentioned above are the best examples of product-led companies. What they share among each other and what is common for each of them are  the core values of product-led growth.

  • virality, 
  • frictionless sign-up, 
  • delivering value very fast, 
  • putting value before money, 
  • having a focus on the end-user. 


Uniqueness of a product-led growth is that when creating a product everyone is included in the process. Each team has a say in a product development, they are just answering different questions. The company creates a customer value by allowing different teams to participate in a creation process and share their insights on a product that is about to be created.


Besides, product-led companies involve a product team into business and this is what makes it possible for them to create a seamless customer experience. Every team has to leverage products, which makes product-led companies quite exceptional. 


In order to become a product lead company a company has to undergo two transformations: 

  1. First one is in the product itself. The product should deliver promised value and it has to be a design-led:  light and intuitive product which will be user friendly. Furthermore, it has to be designed in order to serve users in the best possible way.
  2. Second transformation should happen in the organization. This is where focus moves to the needs and desires of users.


Secrets of a product-led growth success 


It is apparent that the secret of success of product-led companies is that they let the product speak for itself and they trust their customers by giving them the keys to unlock all the possibilities that the product holds. After doing this the product sells itself.

Even though it is very cheap to build a startup company, it is very difficult to grow it and to beat the competition which is big and expanding everyday. In addition, companies are struggling to grow leads and convert them into paying customers, so marketing costs can be very high. 

Fortunately, with product-led growth strategy there are no difficulties in growing leads and converting them into paying customers. Here are the secrets of product-led growth:


  1. In order to promote the product, product-led growth’s key strategy is a promotion based on word of mouth and customer referrals. This means that companies do not need to waste time and money on a traditional marketing strategy, but instead, the product is advertising itself. Based on the experience, users will use a certain product because it’s more trustworthy and it delivers more value. Overall, it allows a user experience product first hand. 
  2. In order for a product to lead the growth of the company, the product has to be easy to use and to have a simple onboarding process. By doing this product will acquire and retain customers. The product is the one that speaks to its customers so there is no need for human intervention.
  3. Third secret of product-led growth strategy is the fact that you are selling to users, not buyers, and users like to be heard and treated nicely. Above all, they like when there is a personalized experience when using a product. 80% of people appreciate and would rather work with a company that offers personalization and 51% of B2C customers would switch brands if they are being offered personalized experience.
  4. Product-led growth has a very cunning strategy and it is using everything that is offered. For example, many product-led companies are benefiting from the freemium or free trial periods. Freemium is beneficial for the user but it can be a risk product-wise. In this period, the product has to show value really fast in order to acquire customers and convince them to subscribe to premium and become regular users.  


Hitting the market


In addition to product-led growth as one of the go-to-market (GTM) strategies there are also marketing-led and sales-led growths.


It is clear that in order to position your business for success you would need to choose a right GTM strategy. This means that you have to specify how you’ll reach target customers and achieve competitive advantage.

Before doing this you would need to understand market conditions, competitive positioning, ideal customer and product offering. Once you learn all this, it will be easy to choose your go-to-market strategy. The right strategy will easily acquire, retain and grow customers.   


A customers’ journey starts with visiting the product’s website which eventually converts visitors into someone interested in becoming a customer. It is at that point a product acquires leads. From this point we have the next two stages. The first is in a form of marketing-qualified lead and the second sales-qualified lead.


Marketing-led growth


Marketing-qualified leads (MQLs) are those leads that got interested in a product based on marketing efforts. This means that anyone who showed any interest or engagement for your product, from downloading a trial software book, submitting the email address for a newsletter, adding items to a shopping card or to contacting you to find out more is a marketing-qualified lead. Even though these leads are interested in a product, having MQLs does not guarantee a sale. 

In fact, 98% of MQLs never end up as a closed deal. 


Hidden flaws of MQL are: 

  1. It encourages marketers to gate content to hit their MQL goals.
  2. It focuses on content consumption as a leading indicator of intent.
  3. The entire process rewards creating friction in the buying process.


Sales-led growth


In the next stage MQLs have the potential of becoming sales-qualified leads. Sales-qualified leads (SQLs) are all those leads that are willing to talk to the sales department and eventually make the purchase. In this stage, sales has to agree with marketing that the contact has enough interest and can be a potential buyer. A lead becomes a SQL after showing an interest and going one step forward. 


And this is where we use a sales-led GTM strategy. It means that you are acquiring new leads by talking to them. You are selling your product by talking to customers and describing your product.

This strategy does not allow customers to self – educate themselves or to have a first-hand product experience. Buyer personas are buying something just because they like its story or appearance. 


Pros of sales-led GTM strategy are: 

  • Closing customers with a high Annual Contract Value
  • It is perfect for products with a small Total Addressable Market 
  • It is perfect if launching a new category of product

Cons of a sales-led GTM strategy are:

  • Long sales cycles and high customer acquisition costs
  • Customer acquisition is not secured 
  • The organizational structure makes a product an afterthought and it hinders product development.


Product-led growth


The future of growth is a product-led growth.


In contrast to sales-led GTM, there is product-led GTM which encourages customers to self-educate. It lowers acquisition costs and allows customers to experience the product. 

Implementing a product-led GTM can be a bit challenging because your approach as an organization has to change. You should stop letting sales lead, but focus on the product instead. To do  this every team has to be included so each user would be successful. 


Pros of product-led GTM are:

  • It helps the company scale faster than its competitors thanks to the freemium option, which gives them time to focus on scaling globally.
  • It lowers customer acquisition costs significantly with easy onboarding, requiring fewer people on a team and being more efficient, providing the best user experience.


In order to have a successful product-led growth, you have to follow certain steps.


Step 1.


The key to building a product-led business is in understanding the value of your product and what is there for the customer. Customers need to have a clear picture of what they are getting from the product. This means that the product needs to be well communicated. After everybody understands and knows what the product value is, the product has to show it and deliver on it.


It is important to understand what motivates customers to buy your product. This means that you need to focus on the drivers which lead to purchase:

  • Functional outcome – the main tasks that product has to solve, 
  • Emotional Outcome – thinking about how customers want to feel when using the product
  • Social Outcome – defining how customers want to be regarded in the eyes of society when using the product.


Step 2.


The value of the product has to be communicated in a proper way. This considers transparency of a product and its price. Pricing packages are shown upfront and with a free trial option it is easy to convert people into paying customers.

Afterall, the revenue and B2C customer acquisition go hand in hand with each other and are very dependent on each other. This brings us to the fact that the customer acquisition model cannot be separated from the product. 


Step 3.

The most important part is that you fulfil the promise and deliver what you have promised. The perceived value has to be the same as the experienced value. This is one of the most difficult steps in a product-led business and many companies struggle with it. 


The entire success of your product-led business depends on this step. The fact that customers can try your product before buying it is the key to product-led business, so it is important to deliver as promised. That is how you will build the trust among consumers and sell your product. If you do not deliver the promised value, customers are experiencing a value gap. 


Strong foundation for a product-led business is built through understanding and communicating the product, as well as delivering the value fast. Besides, we should focus on the demand, we should concentrate on the features customers need, as well as looking for the gaps in the market. 


Product-led growth strategy unlocks the path of success of your product. So, let’s look at the criteria for measuring that success. In order to measure success of a product-led growth, we use short time to value (TTV). It includes following factors:

  1. Acquisition
  2. Time to value
  3. Activation
  4. Revenue
  5. Retention
  6. Referral


In the end we can conclude that product-led growth is the future of growth. So, if you want your business to scale fast, acquire leads, convert the acquired leads to customers and expand, product-led strategy is the right choice. It will give you the competitive advantage and make you up-to-date. 

If you have a product and do not know how to make the growth happen – contact us. At Castro & Partners, we will optimize your growth funnels, test prices and models until we find new channels and untapped opportunities.

Do you need help in implementing product-led growth strategy?

Contact information


Castro & Partners - P. IVA: 02325360515
Via Mannini 19, 52100, Arezzo - Italy

Phone: +39 0692949345
Contact: [email protected]



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