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Sales & Marketing
René Bonvanie  |  March 14, 2022
What PLG means to marketing

As with many acronyms, and probably even more so in the marketing domain, the illusion of novelty is greatly exaggerated. But often, when we lift the cover, many common themes reveal themselves. That was certainly true of “ABM” (Account-based Marketing) and is now also true of “PLG” (Product-led Growth.)

Or isn’t it?

PLG is real, and it’s very different. This article will help marketing leaders understand its origins and nuances and will discuss focus areas.

I remember my very first mass grassroots program at Oracle. It was initially called the Oracle Developer Network but quickly became the Oracle Technology Network. It was 1996 and its goal was to seed Oracle products, especially the company’s database product and developer tools, to the developer masses. I implemented what became Seth Godin’s Permission Marketing principles. There was no cost to developers, free support and education, and the only restriction was on commercial use of the resulting application. There were no pesky phone calls from Oracle’s (in)famous Inside Sales Division or emails from Oracle’s marketing department. And there was no enforcement either – I decided to apply and trust the honor system. And while the initial distribution was based on downloads from Oracle’s website, we expanded through many other means – from gluing CDs to developer magazines to open-source distribution mechanisms for Oracle’s Linux products to “cloud”-based experiences.

The first real change to that playbook was when we were able to provide developers a sandbox in “the cloud.” Of course, truth be told, the cloud as we know it today didn’t yet exist, but we were able to provide a high-fidelity, on-premises experience to developers from their browser with no hardware of their own involved. That was a breakthrough in two significant ways: It took almost all friction out of the developers’ experience, and it provided us, for the first time ever, telemetry on their use of our products.

This all happened more than twenty years ago. So, what’s new now, one would ask?

Certainly, the backend infrastructure to conduct such an approach is new. I wish we had the elasticity and resources we have now back then, as scaling programs at that time was only for the very rich. I wish we had the bandwidth back then, as only very well-connected developers could participate. Today, thanks to low-cost cloud computing, it’s attainable to everyone and usable by everyone.

But as marketers, the biggest changes in our customer-acquisition and expansion strategy come from PLG being ‘built in’ rather than being ‘bolted on.’ That’s to say, the telemetry we’re now able to capture from the product and the actions that the product – and not humans or out-of-band communications – now perform to ‘nudge’ people along the way to both significantly improve their understanding and appreciation of the product and get them to the point they’re ready to buy. Twenty years ago, there was some telemetry, but in truth, the products themselves were not built to provide a lot of it. We knew when we provisioned a database and accounts, and we knew when Database Administrators (DBAs) logged in, created schemas, and loaded data into the Oracle database. In a very simplistic way, we were able to run queries that reminded and/or suggested users to take a next step. We would use emails to prompt them; not because we wanted to, but because the product’s UI had no way to communicate directly with them. We would run the queries and workflows in our home-grown marketing automation system (remember, this was 5+ years before the likes of Marketo* came to market) that took in several parameters and created emails that communicated a next-best action.

And this is where a lot changed. Today, we can take in any amount of telemetry as long as we build rich collection mechanisms into the product. We can use that telemetry in any possible way as long as we collect it in structures that allow for large-scale, near-real time use. We can use algorithms that can precisely calculate a next-best action, an example of which you can see here. And we can use the product to communicate that next-best action to the end-user if we build rich collaborative capabilities into the product.

But those are the mechanics of PLG.

After more than twenty years, the psychology of the PLG approach is still heavily debated. It still takes a lot of courage to trust permission- marketing principles. Most companies I work with believe that there must be some limitations on the length, capability, or scale of the PLG experience. Most marketing and sales leaders have a hard time not releasing the “bloodhounds” – whether on the web, the phone, or in person – when the end-user shows early signs of potential.

Creating an enchanting environment that allows the end-user to fully benefit from the product experience takes a lot of effort. By now, they understand they’re being observed. But at the same time, they will want to feel safe and unhindered in their exploits. This is where we as marketers need to walk a fine line between not seeming to care and being ‘in their hair.’ My experience has taught me to ‘box’ up the experience, make it a two-way interaction, and solely conduct these interactions through the product. In other words, we only use the product to interact with the end-users, and end-users can use the product to interact with us – both in pro-active and reactive scenarios. We have seen such interaction models for support and customer success for years. Now it’s time for marketing leaders to embrace it as well.

This is also where marketing leaders need to provide guidance and exercise leadership. Sure, we are cheerleaders for our companies, and we need to own the pipeline. But as our companies’ psychologists and sociologists, we also need to perfectly understand the experience we’re creating for the individual end-users and the community we’re fostering. And that experience needs to be long-term, from the very start of the exploration process to the ‘land’ motion to the ‘expand’ motion.

To the PLG marketer, true growth isn’t just measured as the increase in inbound traffic, product-qualified leads (PQLs,) or even the increase in new logo acquisition. As a rule of thumb, I use this simplified growth formula:

Growth = Δusers x Δuse-cases x Δprice

By observing this formula, we see the long-term nature of PLG efforts. The true measurement of its success is the “trinity.” Marketers need to take the long-term view of PLG, and their efforts need to fall into these categories:

  1. Drive more pre-acquisition use and lower friction;
  2. Drive more and faster conversion to paid use;
  3. Drive more and faster expansion to more users;
  4. Drive more and faster expansion to more use cases; and
  5. Drive more premium platform value

I will come back to specific actions in the categories in my next blog post Modern Demand Management, but wanted to mention here that what matters most is the psychology of them. The PLG marketer’s role is to lead the creation of an in-product experience that at any time feels comfortable to the end-user, guarantees they succeed in what they’re trying to achieve, and creates the trust that is needed to build long-term affinity. It is my firm belief and experience that when this almost viral experience is established, success will ensue. It takes the brute force land-and-expand approach out of the go-to-market machines of the past.

As marketers, we were often way too fast jumping from ‘sensing a pulse’ to taking action. It’s however what traditional lead management suggested we do: qualify fast, run flows, be prescriptive, etc. It’s also why I have been very vocal on many stages and in many articles to call out the evils of being focused on leads. A lead, in my opinion, is nothing more than an artifact among many in the long journey to court a new customer. It should never be the purpose of a marketer nor the currency that passes between sales and marketing.

Finally, I have observed that many marketing teams believe that PQLs somehow take the place of MQLs (marketing-qualified leads.) I fundamentally disagree with that. While product signals are extremely valuable, so are other signals that prospective customers produce outside the product. In other words, it’s not about PQLs vs. MQLs, but about PQLs and MQLs and combining those different signals into an even more effective acquisition and expansion strategy.

Marketers need to lead the PLG strategy. Sure, it needs brilliant product management, customer success, and engineering talent to pull it off. But in the end, PLG is a mind game for attention, trust, and success. If anything, PLG is teaching us that it takes many very precise and deliberate actions to ‘nudge’ an end-user to the next phase. Hence, there is nothing fast about PLG and in my 20+ years of doing it, I haven’t found a shortcut yet. But when it works, it works exceptionally well and has the potential to create legendary companies.

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*Denotes a past or present Battery portfolio company. For a full list of all Battery investments, please click here. No assumptions should be made that any investments identified above were or will be profitable. It should not be assumed that recommendations in the future will be profitable or equal the performance of the companies identified above.

Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this post nor notify its readers in the event that any information, opinion, projection, forecast or estimate included, changes or subsequently becomes inaccurate.

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