OpenView 2023 Product Benchmarks Report
OpenView just published their fourth Product Benchmarks report, having surveyed more than 1,000 respondents about their Product Led Growth (PLG) motion.
You can access the full report on the button below, but here are some highlights.
How do you define Product Led Growth?
Product Led Growth is an increasingly popular term, but the two main components have existed as long as SaaS has.
Freemium - you provide your customers with a free entry point to your product.
This might be a free tier available indefinitely, a reverse trial (where you get full access for a period of time then revert back to the free tier indefinitely), or a totally free and ungated product experience.
Free Trial - a limited time access to the product after which access is removed.
PLG exists as an alternative to a sales led motion where sales teams provide demos and set up access for customers in a more traditional sales motion.
What is the PLG user journey?
This chart is worth printing and sticking to the wall.
It defines each of the common steps that your user goes through as they discover you product, start using it via your freemium or free trial model, convert to a paid customer and then scale across different teams or use cases.
What are typical conversion rates along the PLG journey?
As your users travel through their product journey there is natural drop off.
Freemium has a larger conversion from website to signup than free trial - as you are typically offering them more value than a limited time trial.
Conversely free trials have a higher conversion to paid than freemium - potentially because the freemium version is ‘good enough’ or the freemium product didn’t help users reach the value they expected to expand their usage of the product.
How do PLG companies generate leads?
Product Led Growth companies rely much more on lower cost organic channels than sales led companies.
By organic we mean word of mouth, direct website visits, organic search, press activity, social.
These channels can be very effective and encouraging individual users to try out a freemium or free trial product.
Companies with more enterprise solutions (CRM, ERP, HR) rely more on sales led motions to drive business via their SDR and AE teams.
What percentage of PLG users activate the product?
Having users sign up to your product is of no use if they don’t get value from it.
Back in the early days of Twitter and Facebook they quickly learned that if a new user followed or added five friends within a week they would most likely go on to be an active user.
Activation consists of doing the one or two actions that give the user your core value.
Uploading a photo
Sharing a document
Building a workflow
Adding a teammate
Across the 1,000 respondents activation varies widely - primarily because each respondent defines activation in their own terms.
(I’m interested to know the activation definition for the 7% who have 100% activation!)
What percentage of PLG users convert to paid users?
The purpose of a PLG motion is to give customers enough value via the free tier that they feel encouraged to become a paying user - to access more features, more storage, more value.
Again this varies considerably but we can see that free trial users convert to paying at double the rate of freemium users.
This makes sense as the only way for a free trial user to continue to get value is by paying.
How do sales teams affect PLG conversion rates?
A second dimension to why freemium and free trial conversion rates differ is that with free trials respondents are far more likely to have a sales team contact the customer to answer questions, understand their use case and help them with their onboarding.
Conversion rates double for free trials and quadruple with freemium when sales reaches out to more than 50% of the sign ups.
Summary
PLG is not new, but it is focusing the mind of SaaS founders on their buyer’s experience.
Focus on providing a conveyor belt experience that helps your user discover your product, find value in it, and want to become a paying customer.
PLG is not a complete answer in itself. Sales teams working on Product Qualified leads can quadruple your conversion rates of freemium sign ups.
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