Not so long ago, companies of all types gave most of their attention to the human tasks performed in interfacing with customers. They focused carefully on processes like providing recommendations, taking orders seamlessly, and cross-selling and upselling.
Today, however, many software companies are embedding these processes in software, relying as little as possible on human customer contact for their sales, marketing, and service functions. These cloud-based organizations count on software capabilities alone to meet customer needs, and they strive for rapid expansion without adding customer-facing staff members.
Called product-led growth, or PLG (a term attributed to venture capital firm OpenView, which has used it since 2016), this business model includes these key attributes:
- Free or very low-cost introductory pricing, with higher prices for more functionality (like what’s offered by communications tool Slack).
- A product that is desirable or useful enough to be widely shared (like the calendar tool Calendly, which has grown by being shared by users looking to collaborate with colleagues and friends).
- Ease of use of product features, conversion activities, payment, and other services (like what users have found with video communications platform Zoom).
While many PLG companies come from the software industry, it’s not just a software strategy: Aspects of the ethos behind this growth model are spreading to other businesses that rely in part on customer-facing software.
A Shining Example of PLG: Zoom
One excellent example of a PLG product with highly successful growth is Zoom. It offers free subscriptions for individuals, levels of paid membership for businesses, and high ease of use compared with previous generations of such tools.
Zoom’s software was launched in 2013 and had 40 million users by 2017. During the pandemic, of course, usage grew much more rapidly — from 10 million daily meeting participants in 2019 to 300 million in April 2020. Its profits went from $7 million in 2018 to just over $1 billion in 2021. Zoom had some stumbles in terms of data privacy issues and hacker “Zoom bombing,” but it has largely overcome them and added more use cases and capabilities.
Source: Barry Libert and Thomas H. Davenport | Sloanreview.mit.edu