Following the valuation collapse of the last 12 months, the phrase “efficient growth” is reverberating around SaaS boardrooms worldwide. Every software leader is seeking to boost revenues, cut costs, and demonstrate a clear path to profitability.
Sitting at the heart of this conversation is product-led growth (PLG), a strategy that sees acquisition, monetization and retention of customers through a product lens, rather than through the hiring of expensive marketing, sales and success organizations.
With standout examples like Figma’s $28B acquisition by Adobe, ChatGPT’s two-month race to 100 million users, and Hubspot’s pivot to PLG that has helped drive almost $2B in revenue, most SaaS boards are seeking to understand how they can benefit from this proven sales motion. PLG is fast becoming a necessity, not a choice.
To find out what makes a fine-tuned and well-oiled PLG strategy, we analyzed data from more than 30,000 SaaS companies that generated more than $28B ARR collectively through the Paddle and ProfitWell platforms. Based on this data, I believe there are five key ways that software companies big and small can level up their product-led, efficient growth.
To find out what makes a well-oiled PLG strategy, we analyzed data from 30,000+ SaaS companies that collectively generated more than $28B ARR.
1. Fix the leaks in your funnel
With your product handling much of your customer acquisition and retention in a PLG setup, you’ll likely experience what is known as ‘delinquent’ churn – customers leaving your service involuntarily due to leaks in your funnel.
This can account for 20-40% of your overall churn rate and is usually to do with failed payments, meaning that leveling up your billing processes should be a top priority. Common ‘leaks’ in the funnel you should be keeping an eye on include:
- Insufficient customer funds, which is particularly common for payments made by credit cards with limits. To fix this, try retrying the payments – using smart technology to do so at a time when it’s more likely to be successful – or offer payment methods that can access multiple sources of funds like PayPal.
- Cross-border transaction failures, which sometimes happens due to different standards between banks. A strong solution is to bank locally where your customers are based, or to use a payment provider which already has local banking relationships.
- Currency conversations, which can often create fraud triggers. Selling to customers in their local currency is essential to prevent this: our data shows that doing so can increase payment acceptance rates by 1 to 11%.
2. Go hybrid or go home
Unsurprisingly, product-led growth motions let the product take center stage, with acquisition, conversion, retention, and expansion all being driven by the product itself. Instead of booking a demo with a sales team, customers are usually offered trials, freemium models and other self-serve calls to action, streamlining the acquisition process.
But that doesn’t mean sales isn’t important, especially as your company scales up. The industry is full of success stories in which small SaaS companies graduate from an exclusively product-led growth strategy to a sales-assisted, or sales-led growth motion (SLG). When they do this, their customer base shifts from individual users and small teams to larger businesses. Just look at the trajectory of some of cloud’s most successful names: