Product-Led Growth (PLG) is a strategy where the product itself acts as the primary driver for acquiring, expanding, converting, and retaining customers. In a PLG model, users experience the value of the product before committing to a contract or subscription. If you’ve used the free versions of Spotify, Slack, or Zoom, you’ve experienced this directly.
This approach allows users to engage with the product before a purchase, often through free trials or freemium models. This hands-on experience helps potential customers understand the product’s value without extensive sales interactions.
In a product-led approach, every department within the company is aligned on driving value for users quickly and converting those users into paying customers. By centering the strategy around the product, PLG companies streamline the buying process, empower users to make informed decisions, and develop products that deliver greater value to users faster, ultimately driving revenue growth at a lower cost.
In this guide, we will provide a complete overview of Product-Led Growth, including what it is and why it matters.
Why Product-Led Growth Matters in 2025
Starting with why PLG matters, here are some key outcomes of adopting a PLG strategy:
- Reduced Customer Acquisition Costs (CAC): PLG minimizes the need for extensive sales teams and expensive marketing campaigns. By allowing users to try the product for free, companies can convert sales without incurring high upfront costs. This approach reduces the cost of advertising by increasing word-of-mouth (organic) growth through a satisfied user base and a free offer. If you know anything about marketing, free sells. In a PLG company, the product does the heavy lifting with the selling. Although this puts a lot of pressure on the product, if it delivers on its promises, this greatly reduces CAC by creating a self-service sale, reducing the need for a large sales team to support a long sales process and turning satisfied users into an organic marketing machine.
- Faster Time to Value: PLG accelerates the rate at which prospects (users in PLG) become sales by allowing them to engage with the product before purchase. When done right, this quick access to value helps users realize the benefits of the product sooner, contributing to an accelerated time to revenue. One of the biggest reasons people don’t buy is skepticism about whether the product works. PLG companies overcome this skepticism by allowing users to see for themselves that it works.
- Increased Customer Retention: For a PLG motion to be effective, the product needs to be great, and support for that product needs to be exceptional. The product does the heavy lifting for sales and client satisfaction. A strong product means happy customers, and happy customers lead to a lower churn rate and higher retention rate. When users find a product that meets their needs effectively, they are more likely to continue using it and recommend it to others. It may sound simple, and it is. However, achieving this is not easy. If successful, a PLG company will have higher retention rates than a non-PLG company, leading to an overall higher lifetime value.
- Strong Growth: What does lower CAC, faster time to value, and increased retention mean? Stronger growth. One study by OpenView Partners found that the growth rate of PLG companies compared to traditional SaaS companies was over double—50% for PLG leaders compared to 23% for traditional SaaS.
In summary, PLG matters not just as a trend but as a strategic approach to drive growth. With more and more tech companies adopting this strategy, you are likely to hear the term “Product-Led Growth” more often.
A Product-Led Growth Go-To-Market Strategy
To effectively implement a Product-Led Growth go-to-market strategy, consider asking the following questions:
- Who is your ideal customer or client profile?
- Identify the end-users who will benefit from your product and focus on their needs and pain points. In a product-led approach, you should be selling to the people who will actually use your product.
- Have you defined your buyer personas?
- Develop detailed buyer personas that represent your target users. Include information about their goals, challenges, and how they prefer to engage with products like yours.
- How aware is your market?
- Assess the awareness level of your target market regarding your product and its benefits. Identify whether they are unaware, problem-aware, solution-aware, or product-aware.
- Unaware: Buyers do not realize they have a problem that your product can solve.
- Problem Aware: Buyers recognize they have a problem but do not know the best way to solve it.
- Solution Aware: Buyers know the type of solution they need but are not familiar with your specific product.
- Product Aware: Buyers are aware of your product and are considering it as a potential solution.
- How will your buyers find your product?
- PLG relies on virality and word of mouth, rather than traditional promotion strategies. More specifically, happy users will share your product with friends and coworkers, driving organic growth. Additionally, select marketing channels that align with your market’s awareness level. If your target market is solution-aware, paid search works well. If they are unaware or problem-aware, most of your investment should be in thought leadership across LinkedIn, podcasts, and social media.
- What is your pricing strategy?
- Determine your pricing model, whether it’s freemium, subscription-based, or tiered pricing. Ensure it aligns with the value provided and encourages upgrades.
- How do they purchase your product?
- Users should become buyers within the product itself—or at least after experiencing the product firsthand—rather than via sales reps. This self-service model enhances the user experience.
- Do you have the right talent?
- Evaluate whether your team has the necessary skills and expertise to support a PLG strategy. This includes product development, customer success, and marketing capabilities. Strong talent is one of the most under-discussed items in any business strategy, so it’s important to mention it here.
Real-World Examples of Product-Led Companies
B2C Examples of Product-Led Growth
Spotify
Spotify allows users to access its music streaming service for free, with the option to upgrade to a premium subscription. This model enables users to experience the product’s value before committing financially, driving user acquisition and retention. Spotify reported over 657 million monthly active users as of Q4 2024 and showcases a strong market cap of over $120 billion. (source: Spotify)
Canva
Canva provides a free design platform that allows users to create graphics, presentations, and social media posts. Users can access a wide range of templates and tools without any cost, leading to high user engagement and a significant number of upgrades to premium features. As of October 2024, Canva reached a valuation of $49 billion and is expected to IPO in 2025 (source: Forbes).
B2B Examples of Product-Led Growth
Slack
Slack offers a free version of its collaboration tool, allowing teams to experience its features before deciding to invest in a paid plan. This strategy has led to widespread adoption and organic growth through word-of-mouth referrals. Slack was acquired by Salesforce for $27.7 billion in 2020, underscoring its value in the market. (source: CNBC)
HubSpot
HubSpot provides a free CRM that allows businesses to manage their customer relationships effectively. The free version offers essential features that encourage users to explore the platform, leading to upgrades for more advanced marketing and sales tools. HubSpot’s revenue reached $2.63 billion in 2024 (source: Yahoo Finance), demonstrating its successful PLG strategy.
Notion
Notion offers a free version of its all-in-one workspace tool, allowing users to create notes, databases, and project management boards. This hands-on experience helps users understand the product’s versatility, leading to increased adoption and paid upgrades. Notion raised $275 million in a funding round in 2021, valuing the company at $10 billion (source: EquityBee).
Key Components of a Product-Led Strategy
A successful product-led strategy relies on several key components:
- Minimizing Barriers to Entry: Users should be able to access the product easily, whether through free trials or freemium models. This approach encourages experimentation and increases the likelihood of conversion to paid plans.
- Quick Time to Value: The product must deliver value to users quickly, prioritizing the user experience and allowing them to have that “Aha moment” sooner rather than later. This can be achieved through intuitive design and features that address user pain points.
- Product Qualified Lead Definition: For B2B, developing a way to identify users who have shown a high level of engagement with the product and are more likely to convert as customers with a sales touch or special offer is important. At many organizations, these users are called Product Qualified Leads (PQL).
- Product Feedback Loops: Continuous feedback loops are important. Companies should actively seek user feedback to improve the product and adapt to changing needs. Users who love a product are what Product-Led Growth relies on.
Metrics and Principles of Product-Led Growth
Key Metrics to Track for PLG Success
To measure the effectiveness of your PLG strategy, focus on the following key metrics:
- Product Qualified Leads (PQLs): Identify users who have experienced the value of your product and are likely to become paying customers based on their interactions with the product.
- PQL Volume: The number of PQLs over a defined period of time.
- User to PQL Conversion Rate: The rate of users that become PQLs.
- PQL to Closed/Won Opportunity Conversion Rate: The number of closed/won opportunities that originate from product-qualified leads.
- Time to Value (TTV): Measure how quickly users realize the value of your product. Placing a focus on decreasing a user’s TTV will help you generate more PQLs.
- Customer Acquisition Cost (CAC): Track the total cost associated with acquiring new customers. A benefit of a PLG strategy is that it should drive an overall lower CAC than your traditional SaaS.
- Lifetime Value (LTV): Calculate the average total revenue expected from a customer over their relationship with your company. A higher LTV suggests effective pricing, retention, and expansion efforts. LTV is a cornerstone metric in a PLG go-to-market motion. Note that CLV is often used interchangeably with LTV.
- Total LTV/CAC Ratio: Monitoring your LTV/CAC ratios will help you keep your marketing and sales costs under control and drive sustainable growth.
Product-Led Growth vs. Sales-Led Growth
Key Differences: Product-Led Growth vs. Sales-Led Growth
- Focus on Users vs. Buyers: PLG emphasizes selling to the end-users who will actually use the product, while sales-led growth often targets decision-makers who may not be the end-users, such as executives or senior managers. In a PLG go-to-market motion, you rely on the end-users using your product to win support from internal stakeholders like executives.
- Use of Demos vs. Free Access to the Product: In a sales-led organization, the call-to-action is often “request a demo.” The goal of getting prospects to request a demo is to get them on a call with a Business Development Representative (BDR) or Sales. A standalone “request a demo” CTA is a clear indicator that an organization is sales-led rather than product-led. In a product-led organization, CTAs may include “try for free,” “sign up,” or “get started for free,” all of which give users access to the actual product.
- Organic Growth vs. Traditional Marketing: PLG relies on virality and word-of-mouth marketing, while sales-led growth often depends on traditional marketing strategies and direct sales efforts.
When to use Product-Led Growth vs Sales-Led Growth
- Product-Led Growth: Best suited for companies with products where users can easily experience value with minimal guidance or self-guided tutorials.
- Sales-Led Growth: More effective for complex products that require significant training or customization to experience the value of the product.
Steps to Becoming Product-Led
Transitioning to a Product-Led Growth (PLG) model requires a cultural shift within the organization. Here are key steps to guide your journey:
- Evaluate Fit for PLG: Carefully assess if your product is a good fit for product-led growth. Can users experience value from your product with self-guided tutorials, or does the product need to be highly customized per account to function? If it’s the latter, your company might not be the right fit for true product-led growth at this time.
- Ensure Alignment: Make sure that all departments are aligned on the goal of driving end-user value. Encourage a culture where every team prioritizes user success. This means that product development, marketing, sales, and customer support all work together to enhance the user experience.
- Establish Metrics to Measure: Define key performance indicators (KPIs) that reflect user success and product engagement. PQLs, TTV, CAC, LTV, and LTV/CAC ratio should all be on the shortlist of metrics that matter for product-led growth.
- Collect Data and Feedback: Implement systems to gather user feedback and data on product usage. This information will help you understand user behavior and identify areas for improvement.
- Iterate and Improve: Use the data and feedback collected to continuously iterate on the product and the go-to-market strategy. Regular updates and improvements based on user input will help maintain engagement and satisfaction.
