More Than a Free Trial: A Look at Different PLG GTM Models
Product-led growth is not one playbook for all. We all define and implement a PLG go-to-market motion a little differently. But, the core sentiment remains the same — using the product as the primary driver of growth.
A lot of people think PLG = freemium. Reality is freemium (Figma) or free trial (Salesforce) is ONE of MANY models that work for PLG.
There are product-led companies that ventured off the beaten path and found success while having their product steer their growth engine. Open source (MongoDB, Elasticsearch), per-seat pricing (Hootsuite, Slack), and usage/consumption-based (Twilio, AWS) are the other GTM motions adapted by product-led companies.
The Open Source Model
Not all products are made the same. For a blue ocean product, the initial GTM strategy needs a lot of emphasis on educating the users.
Let’s look at the example of MongoDB.
They are a developer focussed open source solution. When they started off, MongoDB was building essentially a new category product. In the initial days, they were focused on validating a largely unproven approach to database design. They focused on promoting product adoption through technical sessions for education and awareness and enabling the technical audience to get their hands on the product. This created a community of developers using their product.
MongoDB used events, meetups, hackathons, and advocacy programs to identify and nurture their product advocates while building a strong user base. Their product advocates also produced a lot of user content.
They also have an enterprise sales motion running in parallel to their bottoms-up approach for when their customers scale from building an app to more revenue-generating initiatives.
Making an open-source product where the users can get their hands dirty with the new technology helped MongoDB build credibility and continue to earn the trust of every user, team, and enterprise customer. Keeping their product at the center of their growth model while monetizing on the support and related services is how MongoDB’s product-led growth motion is modeled.
It’s obvious from the title how the pricing model works for this GTM strategy. Your growth is tied to expanding the number of seats per customer. This product-led GTM strategy works for the products that solve problems for teams and customers find value in adding seats. For example, collaborative design tools, planning applications, and project management software.
Per-seat pricing is the popular choice for most PLG SaaS companies. It usually is combined with add-ons like platform license fees.
Hootsuite is not a native PLG company. They built the product to enable a self-serve motion but they’ve focused on enterprise sales for a long time. They have been focussing on a self-serve funnel in addition to sales-led and assisted funnels. They collaborate internally with all teams and operate in a data-driven (product analytics) approach to growth.
Their pricing starts with 1 user and they are ideal for social media teams to work in collaboration. With the ability to assign roles for permissions, their per-user pricing makes sense for mid to large-sized teams.
Some companies are implementing per-seat pricing a bit differently. They charge for the number of active users and not the total number of seats. PLG companies like Slack and Billflow (now Stripe) make it a value deal for their large enterprise customers with this GTM strategy.
Usage or Consumption-Based Pricing
This model allows your lightweight users to start using the product at a low cost. And, as the customers’ needs grow, their product consumption grows and so does the cost of it. Your customers’ long-term success and growth trickles down to your own business growth because of the value your customers get from the product.
Twilio is a great example of a usage-based pricing model.
They have been developer focused since day 1. Twilio looks at their PLG strategy as a long-term play. Their focus has been on delivering value to the users and enabling a great self-serve product experience. In other words, a serve before you sell motto guides their teams. So, when a developer successfully uses Twilio but is not a paid customer, they still consider it a win.
Though Twilio started with a ‘we don’t need sales’ approach, later understood the necessity of having a communication strategy to check in on hand-raisers in the product. Their product-led approach helped them understand and identify the activity that qualifies leads from their product usage (PQLs) that the Sales or Success teams reach out to for a conversation. Keeping tabs on feature adoption and usage helps them prevent churn too. They still use MQLs to acquire new users.
A developer who experienced value from Twilio eventually turns into a paying customer when they have the need. Twilio pricing starts with $0 and scales as the usage increases. Their team calls it a win-win pricing model because the customer pays for what they use and Twilio gets paid for the value they provide. The pay-as-you-go model doesn’t lock their users in long-term contracts and gives discounts for large volumes and committed usage.
Their growth speaks volumes of how their flavor of PLG motion worked well for them.
The success of the go-to-market strategy depends on how effective it is for the type of product and business you are in. Choose the PLG depending on how mature your ideal customers are with the product category, the learning curve, the type of audience you are building for (individuals, teams, developers, etc.), and the time to revenue (TTR).
Product-led growth is not one size fits all. Free trial, freemium, open source, per-seat, and usage-based, and hybrids of these GTM motions are tried and tested by many OG PLG companies. We all can learn from their journeys and figure out what works best for us.
We at Inflection - the only B2B marketing automation solution for PLG companies are going with the usage-based model. Contact us to know more.