The 6 Secrets to Building a PLG Business

SaaStr Europa was back last week with the 2022 conference being hosted in Barcelona. We are big fans of this event, hosted by Jason Lemkin, and we have supported SaaStr Europa since it launched in Paris a few years ago.

This year, I was invited to share the outcomes of the research that I am conducting around PLG (product-led growth) best practices in Europe. Those who know me well are aware that I am a big believer in PLG as a way to ignite the growth of product-led businesses. Companies that use their products to acquire, engage and grow their businesses can only succeed if they offer the best experience to their users. Whilst I don’t believe that building a great product will always ensure a company’s success, I do believe that a very good product is a prerequisite to becoming a category leader. Today businesses, employees and prosumers expect to get a consumer-like experience from the products they use to run their businesses. As a result, we, as founders and investors, need to pay more attention, than we ever have before, to the products being built.

In less than 4 years, Europe has produced more than 50 PLG unicorns. This number continues to grow and today it is possible to build a SaaS unicorn from anywhere around the world. However, whilst the number of unicorns continues to grow, there is limited information about the strategies that PLG companies use to be successful.

So, a few weeks ago, I ran a short survey through LinkedIn, as well as the slack community of PLG businesses in Europe.I asked founders and experts to share the one or two top tips they would give to a new, upcoming PLG founder. This article summarises 6 of the main points cited by the contributors. I have also used examples of companies to make the points clear.

#1. Born, not made

As PLG has become a popular topic, and it has been proven to be a very efficient strategy to scale a business, an increasing number of businesses are trying to build PLG capabilities into their products. In general, we’ve found that many companies struggle to build PLG motions within sales-led companies. Some of the reasons they fail include:

  1. The onboarding is not seamless: onboarding is a critical point for PLG businesses and unfortunately, products in sales-led businesses require a lot of external support and, in some cases, complex integrations to be adopted.
  2. There is no virality: the best PLG businesses use their own products to grow inside and outside their customers. Sales-led businesses don’t have these capabilities in place and, in many cases, it is not trivial to build them into these products.  
  3. Companies are not product-led: this is probably one of the main reasons for sales-led businesses to fail when they try to build PLG strategies. In sales-led organisations, product teams are not used for taking on revenue responsibilities which are absolutely required in PLG businesses.

So integrating PLG strategies into sales-led businesses is not easy - but it is not impossible! Some companies have been able to do it… Paddle is one of our portfolio companies that began as a sales-led organisation and then built the PLG motion after.

Paddle is a payment management solution for SaaS companies. Paddle built a new product category and, as such, they had to educate the market before letting themselves serve the product. Today, PLG is the focus for Paddle and they are using it in combination with sales-led motions for larger customers. Paddle is a good example of a business that has successfully implemented a PLG motion, after being a sales-led organisation.

#2. Value-based pricing

PLG is often confused with Freemium, and the reality is that they are not the same thing. The best PLG businesses are built on top of value-based pricing strategies.

TestGorilla is a good example of a value-based pricing business. TestGorilla is a  Notion portfolio company that provides a pre-employment assessment platform to test candidates throughout the recruitment process. The company is growing rapidly by charging customers per test. Customers scale when they screen candidates and they see the value of the product in that way.

#3. NRR through PLG

PLG is not only a strategy to acquire customers, but it can also be used as an expansion channel. Many businesses are using their own products to grow within their customers. YuLife, which is one of my investments, is a good example of a company that primarily has a sales-led strategy to acquire customers but is using its own product to increase the NRR.

YuLife provides life insurance to businesses and through their application, employees get rewards when they stay active and healthy. Through that app, employees can also enrol their family members into the life insurance policies and they can buy additional insurance products such as PMI or dental insurance. YuLife is able to increase NRR through their own product.

#4. Building stickiness

Products that are sold through PLG channels are easy to buy online, as they have low entry prices. They are also easy to adopt and they have a very short time-to-value. However, in the same way that they are easy and quick to buy, they are also easy to replace. It is important for PLG businesses to build stickinesses within their customers. Some companies provide integrations, so that the products get embedded within the workflows of their customers. Others become a system of record for the customers in such a way that customers will lose information if they stop using the product. And others use collaboration capabilities as a tool to expand within and outside their organisations and create sticky products.

Airtable has done this incredibly well. Through collaboration, and by creating a system of records, Airtable is building loyalty through their customers who continue to build and share tables within and outside of their organisations.

#5. Personalisation

We have been talking about personalisation for a while and, the reality is, that there are very few companies doing this right. It is important to make users feel that the product is made just for them. The idea is that we can pre-populate the dashboards with information from our users as soon as they log in for the first time. The challenge is to gather data to pre-populate the dashboard without asking for too much data during the onboarding. We want to keep the onboarding short and seamless, so how do we do it?

Gretel is doing this in a very smart way. The company is building a data layer that can help marketing teams be more productive, by accessing the information they need when they need it. When users sign up for the first time into the product, Gretel scrapes the information from their websites and personalises the dashboards for them.

#6. Real PLG

Through the years, I’ve seen many businesses that say that they are a product-led business. But when you dig a bit deeper, I realise that, in fact, most of their customers are not onboarded through a PLG motion. So, in theory, they are trying to let customers try the product by themselves, but instead, they are taking them through a demo or through a short onboarding call with someone in the team. In some cases, the onboarding process is not seamless enough to let users try the product by themselves. In other cases, founders have perceived that churn is lower in customers that have been assisted during onboarding. And, to be honest, that might be true for many products.

While there are many companies that give up on the mission of building true-PLG businesses others persist and end up building massive companies such as Dropbox, Slack and Airtable. There is one company called Folk that I have been following for a while and I have been impressed with the way they are iterating to build a scalable PLG motion. Folk is building the next generation of CRM by integrating with new communication tools like Slack, Notion and WhatsApp. While the integrations are necessary to get value out of the product, the team is building a step-by-step onboarding process, letting users discover different parts of the product as they use it (stay tuned for the release of the product to GA).

These are just 6 of the key best practices shared by PLG founders and experts  in the survey I ran. The survey includes many other great points, which we will discuss in an upcoming blog post.

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