Based on the valuation collapse of the past 12 months, the phrase “efficient growth” echoes in SaaS boardrooms around the world. Every software leader tries to increase revenue, reduce costs and show a clear path to profitability.
At the center of this conversation is product-driven growth (PLG), a strategy that sees acquisition, monetization, and customer retention through a product lens, rather than hiring expensive marketing, sales, and success organizations.
With high-profile examples such as Figma’s $28 billion acquisition by Adobe, ChatGPT’s two-month race to 100 million users, and Hubspot’s pivot to PLG that helped generate nearly $2 billion in revenue, most SaaS boards are trying to understand how they can benefit from this proven sales move. PLG is fast becoming a necessity, not a choice.
To find out what constitutes a well-aligned and well-oiled PLG strategy, we analyzed data from more than 30,000 SaaS companies that collectively generated more than $28 billion in ARR through the Paddle and ProfitWell platforms. Based on this data, I think there are five key ways software companies, large and small, can improve their product-driven, efficient growth.
To find out what constitutes a well-oiled PLG strategy, we analyzed data from more than 30,000 SaaS companies that collectively generated more than $28 billion in ARR.
1. Fix the leaks in your funnel
Since your product handles much of your customer acquisition and retention in a PLG configuration, you’re likely to experience what’s known as “delinquent” churn—customers involuntarily leaving your service because of leaks in your funnel.
This can account for 20-40% of your total customer churn and is usually related to failed payments, which means improving your billing processes should be a top priority. Common funnel “leaks” to watch for include:
- Insufficient money from customers, which is especially common for payments with credit cards with limits. To fix this, try making the payments again (use smart technology to do this at a time when the chances of success are higher) or offer payment methods that can access multiple funding sources, such as PayPal.
- Cross-border transaction failures, which sometimes happens because of different standards between banks. A strong solution is to bank locally where your customers are based, or use a payment provider that already has local banking relationships.
- Currency conversations, which can often lead to fraud triggers. Selling to customers in their local currency is key to avoiding this: our data shows it can increase payment acceptance rates by 1 to 11%.
2. Go hybrid or go home
Unsurprisingly, product-driven growth moves are product-centric, with acquisition, conversion, retention, and expansion all driven by the product itself. Instead of booking a demo with a sales team, customers are usually offered trials, freemium models, and other self-service calls-to-action, streamlining the acquisition process.
But that doesn’t mean sales aren’t important, especially as your business grows. The industry is full of success stories where small SaaS companies move from a solely product-driven growth strategy to a sales-assisted or sales-led growth movement (SLG). When they do this, their customer base shifts from individual users and small teams to larger companies. Just take a look at the trajectory of some of the most successful names in the cloud: