After valuation As the past 12 months have crumbled, the phrase “efficient growth” has echoed across SaaS boardrooms around the world. Every software leader is looking to grow revenue, cut costs, and demonstrate a clear path to profitability.
At the heart of this conversation is product-led growth (PLG), a strategy for acquiring, monetizing, and retaining customers through a product lens, rather than by hiring an expensive marketing, sales, and success organization.
With Figma being acquired by Adobe for $28B, ChatGPT’s two-month quest to 100M users, and Hubspot’s move to PLG helping drive nearly $2B in revenue, most SaaS boards are looking to understand how they get from this Benefit from a proven product sales pitch. PLG is quickly becoming a necessity rather than an option.
To find out what makes for a fine-tuned and well-functioning PLG strategy, we analyzed data from over 30,000 SaaS companies that collectively generate over $28B in ARR through the Paddle and ProfitWell platforms. Based on this data, I see five key ways that software companies, large and small, can enhance their productive, product-led growth.
To find out what makes a well-functioning PLG strategy, we analyzed data from over 30,000 SaaS companies collectively generating over $28B in ARR.
1. Fix bugs in the funnel
When your product handles the majority of customer acquisition and retention in a PLG setting, you may experience what is known as “delinquent” churn – customers involuntarily leaving your service due to channel leaks.
This can account for 20-40% of your overall churn and is often related to failed payments, which means upgrading your billing process should be a top priority. Common “holes” in the funnel you should be aware of include:
- Client has insufficient funds, which is especially common for payments made with limited credit cards. To fix this, try retrying the payment — using smart technology to do so when it’s more likely to succeed — or offer a payment method that gives access to multiple funding sources, such as PayPal.
- Cross-border transaction failure, sometimes occurs due to differences in standards between banks. A strong solution is to do local banking where the customer is, or use a payment service provider that already has a local banking relationship.
- currency dialogue, which often leads to fraud. Selling to customers in their local currency is critical to preventing this: our data shows that doing so can increase payment acceptance rates by 1% to 11%.
2. Mix or go home
Unsurprisingly, the product-led growth movement puts the product center stage, with acquisition, conversion, retention and expansion driven by the product itself. Often instead of booking a demo with a sales team, offer trials, freemium models, and other self-serve calls to action to customers, simplifying the purchasing process.
But that doesn’t mean sales aren’t important, especially as your company scales. The industry is full of success stories where small SaaS companies transitioned from an entirely product-led growth strategy to a sales-led or sales-led growth model (SLG). When they do, their customer base shifts from individual users and small teams to large enterprises. Take a look at the trajectory of some of the most successful cloud names: