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Sorry, "product led growth" may not be growth lever!

Recently, there is a lot of chatter around “product-led growth”. I was talking to a good friend yesterday and he was thinking hard about applying that to this business.
Unfortunately, as cool as product-led growth sounds, it may not apply to everyone.
First, what is product-led growth? Here’s how the internet describes it.
Product-led growth (PLG) is a business methodology in which user acquisition, expansion, conversion, and retention are all driven primarily by the product itself.
Many times, there are businesses with inherent network effects and referral potential that can be used to unlock upper funnel growth.
These happen in two primary ways -
  • You productize the referral loop 
One of the earliest examples of this is Hotmail, where one single line in the email, triggered a virality loop where the receiver would learn about Hotmail and may sign up for it.
Sometimes, the product experience was better if your friends were using it.
For example Venmo, splitwise or clubhouse- the more people use it, the better it gets. Hence you invite your friends to join along too.
  • Your users generate organic content that wins in SEO Tripadvisor, Yelp, etc are all examples of platforms where user-generated content is architected in a way that the pages show up when users search for topics relevant to them.
PLG can be a very powerful acquisition mechanism, especially if you have a community aspect to your product or some sort of network effect that you can leverage for referral and virality.
What PLG ensures is that your initial set of users will keep getting you more users as they use the product.
Hence, as a startup, your product drives distribution
Now, here’s the bad news.
There are plenty of businesses out there who do not have such innate referral / network effect loops.
Most of these businesses happen to be low usage frequency, high LTV businesses. The lack of repeat usage further makes it hard to incentivize referrals and use the product as a group.
For example:
Most lending businesses by default generally do not have such strong network loops. It’s hard to get 2-3 of your friends to take a loan at the same time, from the same place when you take a loan. Each individual is different and will go wherever they get the best rate & service.
If your business is about providing storage space in urban areas, your business won’t grow just because people are using your storage space.
You still have hope! Inherently, in every business, strong product experience drives Word of Mouth. So there is always some product led growth at play 😉
There is nothing PLG about Marvel Movies. But, if the move is good, you will talk about it with your friends. The same is true for a new restaurant that you may have discovered.
Second, you can always build adjacent products to your core products that enables PLG.
For example, Marvel movies can build a simple online Quiz around ‘which superhero are you?’ and ‘invite your friends to form Avengers’. Stuff like that get high engagement and virality all the time.
Every great consumer experience, where you over deliver on expectations, creates opportunity for organic growth.
  • Understand the dynamics of your business. If the product experience gets better because of group usage or there are inherent virality loops, then PLG would make sense for you
  • Otherwise, focus on how to deliver the best customer value and enabling word of mouth
  • Once you have done the above, you can also think of adding layers of adjacent products that might enable PLG
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Gaurav Agarwal

I share quick insights on growth and startups acquired after building two 9 figure revenue businesses and advising half a dozen startups.
Everything about growth 📈.

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