58% of companies have already started doing product-led growth, a go-to-market strategy that transforms the way products are designed and delivered, according to Gainsight’s newly-published Product-Led Growth Index for 2022.
PLG achieves these objectives with product usage data to deliver immersive product experiences at scale. Subscription-based SaaS businesses, which need to align their products to their customers’ needs at every stage of the customer journey, are a natural candidate for PLG strategies, according to Gainsight.
A traditional model based on the marketing and sales funnel no longer works effectively to build sustainable growth for subscription-based SaaS, Gainsight maintains. Instead, companies are searching for ways to successfully maximize customer lifetime value by lowering customer acquisition cost and improving net revenue retention without drastically increasing spending with high-touch resources.
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The solution is to make the product itself a key player in the customer lifecycle and experience. The PLG strategy puts the product at the forefront of the customer journey to drive conversion, adoption, retention and expansion, the Gainsight report said.
Better results with product qualified leads
Some 91% of companies are adopting a PLG plan to increase their investment in PLG, according to the report. Further, 47% plan to double their investment.
Of companies that use product-experience data, 57% use it to develop product roadmaps. More frequently, “the best product teams don’t hedge bets — they use data to define their decisions,’’ the report said.
SaaS companies are having success with their PLG initiatives too. Another finding was that free trials using product qualified leads convert users to paid customers 25% of the time. Compared to only a 9% conversion rate from free accounts to paid accounts, companies using PQLs see better results and improved sales opportunities.
Further, 36%of responding companies said they’re using product data to predict customer churn, another PLG strategy, and 38% of companies said they are leveraging usage data to identify expansion opportunities, according to the report.
But most companies don’t have everything figured out, as they are not effectively tracking PLG metrics. Only 17% said they are tracking time-to-value, just 26% are tracking activation rate and 24% are tracking PQLs.
In terms of other tech usage, nearly half (46%) of respondents said they are using in-product engagement tools, meaning that most companies are not yet leveraging their product as a conduit to their users by creating personalized experiences.
“The results are very encouraging overall,” said Mickey Alon, chief technology officer of PX at Gainsight, in a statement. “The most exciting takeaway from all the data is that there is still so much opportunity for PLG to drive durable growth for SaaS companies. As businesses mature their PLG strategies, the result will be a stronger unit of economics and progression beyond acquisition-led growth to retention-and expansion-led growth.”
From delivering early value using free trials and freemium models, to driving product adoption that accelerates time-to-value and stickiness, the PLG strategy produces engaged customers who are much more likely to be retained and primed for expansion.
“Growth-minded companies are looking to PLG strategies to help achieve maximum customer lifetime value — it’s not a question of if, it’s a question of when your company will adopt this model or get disrupted by it,’’ the report said.
Along with benchmarking research firm RevOps Squared, Gainsight surveyed over 600 companies of various sizes, with varying annual contract values and across multiple industries.