In the good old days, selling B2B software included salespeople, numerous rounds of negotiations, and mindblowing capital investments spent before users received any value. And then, guerilla business apps came out of nowhere.
You have probably used Slack, but Slack’s salespeople have never entered your office, and they never initiated any negotiations with your C-suite.
It was probably one of your colleagues who had heard about Slack from a friend, signed up, and started using it within their team. Step by step, the whole company started using Slack, and now nobody understands how you survived before. That’s what product-led growth is.
How to acquire people like Slack
With sales- or marketing-led growth strategies, you first create an app, and then ask yourself:
How can we create demand for our product?
With product-led growth, it works in the opposite direction. You need to bake PLG hooks into your business model from the very beginning to make them work. That’s why you ask yourself a reversed question:
How can our product generate demand?
Usually, your product can generate demand on two conditions:
- It has to be simple enough to show immediate value
- Its audience has to be big enough for a product to gain traction
If you're some kind of nerdy niche fintech B2B app, your chances of product-led growth are close to zero. Unless you are Stripe, of course.
Stripe used word-of-mouth for PLG
When a product solves a previously unsolvable problem for a lot of people, it can essentially sell itself without much effort. That is what happened to Stripe when it entered the payment processing industry.
Before Stripe, businesses needed to sort things out on their own when building compliant payment systems for their sites. That was a risky, expensive and unbearable process. As for small businesses, it was often impossible.
After Stripe, payment processing can be launched by copying and pasting several lines of code. The solution is so awesome that users couldn’t stop talking about it.
How word-of-mouth (WoM) works
Stripe identified a gap in the market and created a solution that relieved users of the complexity of payments.
Two weeks after launching their prototype, Stripe founders presented their product to developers on YCombinator. Developers gave great reviews, and it was a catalyst in Stripe's early traction.
Stripe focused on developers as their target audience. Year after year, they improved their product to melt coders’ grumpy feedback into excited screaming.
Now when you ask cheerful developers about their favorite payments company, they would give you a one-word response:
“Stripe.”
Lessons we can learn from Stripe:
- Identify a gap in the market and solve it with your product
- Get obsessed with user experience to gain the WoM traction
- Don't count on WoM as your primary growth strategy
The problem with Stripe’s success recipe is that virality is not something you can create for sure. Just like with dandelion spreads, it has more to do with the wind direction and random luck.
Loom used demonstration virality for PLG
When we at Eleken UI/UX agency hire new designers, we give them testing tasks to assess candidates’ product designing skills. In response to completed testing tasks, our unbelievably productive design director sends video feedback. Candidates get a link to a screencast video in Loom.
Every month, we make dozens of test reviews. This means that every month, without any intent, Eleken promotes Loom to dozens of people.
That casual promotion is called demonstration virality
Unlike word-of-mouth, demonstration virality doesn't depend on users' goodwill to spread the word.
The app’s features work as burdock seeds — they attach themselves to some spot of the customer journey and wait for a moment to show up in front of new people.
Each time someone sends a Loom link, they’re both using and promoting the product, which creates a viral loop. All that Loom has to do is to make sure that recipients always see the logo of their cool async video messaging app — just in case they want to use it for their own screencast needs.
To encourage existing users to spread the word about Loom, the company adds a little extra motivation. With a freemium account, you can store only 25 videos in your Loom cloud (which is never enough). Once you hit your limit you can either pay or invite a friend to get 50 extra videos.
Lessons we can learn from Loom:
- Build demonstration virality into your app’s tissue
- Make your app’s value instantly clear for newcomers
- Intensify the virality loop with a referral program
Now, let’s see how Figma grows its user base thanks to network effects, the Holy Grail for most successful SaaS startups.
Figma used network effects for PLG
Back in the days when the dinosaurs roamed the Earth and Adobe products were ultimate UI/UX tools, designers worked and stored their files locally on their computers.
Then Dropbox appeared and enabled designers to save designs on the cloud.
Finally, Figma allowed us to save and edit drafts on the cloud.
Figma’s collaborative nature is a ground for network effects
- Now when you are designing a dashboard and need some help from your teammate, you just share a Figma file link.
- When you are finished with the draft and need your design director to review it, you share a link.
- When you want to show colleagues your amazing dashboard, you give them a Figma link again.
In a flash, all your design team is on Figma. That’s how direct network effects work.
A bit later, you need to introduce a brand-new dashboard design to your non-design counterparts.
It's a good thing that Figma enabled comments inside their files. No need to email edits back and forth. You just send everyone a link to a file, and…
- You know that developers think your dashboard is impossible to code
- You see that the Product Manager wants you to add another pie chart
- You realize the client hates the blue color
In a flash, all the project stakeholders are using Figma. That's what we call cross-side network effects.
Figma’s network effects are capable of even more — they can drift like coconuts on ocean waves to take root on foreign islands.
For Eleken designers it happens when they:
- Make 3-day trials tasks for potential clients (in Figma, of course)
- Create useful Figma templates to share with our blog readers
- Write in an email course about Figma’s superiority
Those were global network effects in action.
You see, Figma is not a graphics editor. First and foremost, it’s a collaborative tool. Users get the app’s maximum value when they invite other people (and create viral loops caused by Figma’s numerous network effects).
What we can learn from Figma
- Consider whether your product is a subject to any network effects
- Develop product architecture to maximize network effects
- Think of your network effects on multiple levels: direct, cross-side and global.
No network effect, however, will help you grow unless you remove all the friction in the signup and onboarding processes. So, let’s take a look at the product-led growth example of Zoom to learn how to make ease of use your fuel for grass-roots adoption.
Zoom used the ease of use for PLG
At the end of April 2020, Google made its premium video chat app, Google Meet, free for everyone. At the start of April, Microsoft added to its Skype a feature for jumping into a call via link.
This is a story all about how two dominant tech megacorporations tried to play catch up with Zoom, an underdog that won the pandemic.
How did Zoom beat giants?
Zoom was the lowest hanging pear on a tree — the simplest app to start with.
With Zoom, you don’t need to create a login. It never asks you for an 8-character esoteric password with a letter, a number, and an owl feather. No bulky desktop apps. No credit cards. Just a link you have to open to join a video conference.
As a result, Zoom, which had 10 million daily users as of December 2020, already has 300 million daily users per month at the moment while Google and Microsoft are desperately trying to catch up.
The fact that among dozens of video chat apps only the easiest-to-use one experienced explosive growth, which tells us that impatience is the main trait of SaaS users. They want to immediately solve the pain that brought them to you.
Thereby, frictionless user experience is a necessary condition for product-led growth.
Lessons we can learn from Zoom:
- Remove the onboarding friction
- Deliver value before the paywall
- Hire good UI/UX designers
How to measure a product’s virality
You can always know when viral growth is not happening. Users don’t quite get the value of the app, word-of-mouth isn’t spreading, customer acquisition cost is huge and the sales cycle takes forever.
And you can always know viral growth when it is happening. You are hiring support officers as fast as you can. Your bank account got piled up with customers’ money. Investment bankers lurking by your house.
What you don't know is how to travel the distance between points A and B.
Start by measuring your viral coefficient
The viral coefficient is calculated by multiplying the number of invites sent out by each new customer by the percentage of invites that convert into customers.
(#) Viral Coefficient = (#) Invitations Sent per User x (%) Conversion Rate
That’s said if, for instance, each of your customers invites 10 new users with a conversion rate of 15%, your viral coefficient will be 10 * 0,15 = 1,5.
Check out David Skok’s downloadable spreadsheets.
If you play around with the inputs in a table, you’ll notice that anything you can do to increase the number of invitations sent out and the conversion rate, will have a significant effect on growth.
You’ll also notice that unless you have a Viral Coefficient greater than 1, your growth will stagnate.
And that is still okay.
There are plenty of sectors, like the insurance market, CRM, or any other B2B industry where it’s almost impossible to create inherently social apps and achieve sustained viral growth — just because of complex products and narrow audiences.
While Slack, Loom and Zoom and other our examples of product-led growth achieved their traction largely thanks to virality, it never was their sole growth lever.
Consider a hybrid growth model. Make up for the lack of viral leads with the acquisition channels that work the best for you — SEO, PPC, sales, whatever.
And make sure it's not your product's user experience that holds you back from product-led growth. For help with that, our team at Eleken design agency is here. Book your free consultation, and let’s figure this out together.
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