AI-driven Growth Strategies for Startups

Starting a new venture in a sea of competitors is difficult. Every choice and decision is daunting. Take marketing, for example. You have to decide what channels to use at the start and allocate budgets for each one. Next, you have to determine which leads to pursue and which to cut off. Imagine adding this kind of guesswork in building a product. But wait, that’s exactly what most companies do. They let their sales teams determine the product based on how easy it is to sell.

This archaic model worked when sales created the tightest feedback loop with the customer. The product would ship in six months to yearly cycles, and by the time customer feedback was received, a feature freeze was already in place for the next release. But that’s not the case anymore. Now usage data, continuous release cycles, and freemium offerings mean customer feedback is constantly guiding product priorities on a near-hourly basis.

Today, startups need to cater to their users if they want to survive. Startups must embody the principle of product-led growth to prosper. A growth strategy is the favorite method of marketing for new-age startups. Unlike sales-led techniques, PLG uses the product to acquire users. The product drives revenue, leads, engagement, and marketing. Because of so much emphasis on the product, companies ensure that it is up to the mark. One of the by-products of product-led growth is that companies become customer-centric. The only valid metric for a good product is customer satisfaction. That means you need happy customers.

PLG companies take out time to listen to users and take feedback using . Developers then make required changes to benefit the user. It is hard for most companies to resist the urge to release features that their competitors offer. PLG companies, on the other hand, prioritize features that users want and request. That’s why PLG companies stand out from the crowd. In the previous section, I talked about how PLG makes companies customer-centric and increases customer satisfaction. While that benefit alone offers immense value, there are a few more noteworthy ones.

Benefits of Product-Led Growth

1. Growth without dependency: Product-led companies can operate at much higher margins as they can allocate resources back into the product instead of chasing leads. The best part is that there are no barriers to try out the product. Users get started in minutes through an intuitive experience that gradually adds more functionality and complexity. This is possible because product-led companies make use of freemium pricing models. You can access most of the features at no cost, like in Figma. Power users who require more features can opt for paid plans to meet their requirements.

2. Virality: Thanks to free trials, users can try out the product. Once they like the product, they share it with their friends and family, which works as a form of word-of-mouth marketing. Every happy customer of your product acts as a salesperson, allowing product-led companies to grow exponentially.

3. Empowering the end user: We have entered a new era of technology. Software is not just a tool anymore but a part of life. People find the best software and apps to make their lives better. Or you could say that we have entered the Age of Connected Work. It’s important to note that this wasn’t always the case. Software didn’t have mass adoption before. This was largely due to a steep learning curve and high prices. Software wasn’t made to help the mass end user with productivity. Instead, it was built for executives to manage their employees better. Today, everyone has access to the best software thanks to product-led companies.

Now that we understand the benefits of product-led growth, let’s take a look back at the different eras that have led us to this point.

A Look Back: The Evolution of Software

To understand the impact of product-led growth, it’s important to look at the evolution of software over the decades. Here’s a brief overview of the different eras that have shaped the software industry:

1980s — 1990s: The On-Premise Era

During this period, software had to be installed from a physical box. These software programs were both expensive to build and buy. Software was only sold to enterprises, and salespeople would try to convince CIOs of companies to buy their software.

The 2000s: The Cloud

In the 2000s, development costs became lesser. Companies such as Salesforce were driving software into the cloud. Sales teams used marketing-led sales tactics to sell software to non-tech execs. These execs cared about improving team productivity and getting a good investment return. During this period, everyone could access the best software thanks to affordability. Small business owners and individuals started using software that previously would be commercial grade.

The 2010s: Software to All

In 2010, the SaaS revolution started taking shape. Software became more accessible to businesses of all sizes. Startups began disrupting various industries by providing affordable and easy-to-use software solutions. This was the era where companies like Slack, Zoom, and Notion gained popularity.

The 2020s: Connectivity and Collaboration

We are currently living in the era of connectivity and collaboration. Software has become an integral part of our daily lives, helping us streamline workflows, automate tasks, and stay connected with teams. Companies now rely on software to carry out most tasks, especially during the pandemic when remote work became the norm. Tools like Slack, Zoom, and Teams helped colleagues feel connected while being physically distant.

Throughout these different eras, the role of software has evolved from something limited to enterprises to a tool accessible to individuals and small businesses. Product-led growth has played a significant role in making software more user-centric and accessible.

How a Company Can Become Product-Led

Now that we understand the importance and benefits of product-led growth, let’s explore how a company can become product-led. Here are some key steps to follow:

1. Create a Product-Led Growth Team

A sudden shift to a product-led approach can shock everyone in the company. It’s important to help everyone acclimate to this cultural shift. Assembling a product-led team of the most dedicated members is a great way to start. The product-led team can strategize and create a plan to move forward. This plan will include changes to recruiting, customer interaction, features, and flexibility.

2. Understand the User Better

The user’s happiness is crucial for product-led growth. User research is the best way to understand your users and their pain points. User research helps you understand what problem you can solve and how to offer value. You can also think of it as finding product-market fit. User research’s pleasant side effect is a smooth user experience. That’s because you take time to interact with users using tools like DevRev to understand their problems. You can also distinguish your users by segmenting them into active, new, inactive, and churned users. You can set up calls with these users and get feedback. Prioritize the users who stop using the product the highest.

3. Small Incremental Changes to the Product

To become product-led, companies must build on the user’s requirements. Flashy features with no benefit should be avoided. Only features that users need should be implemented. You can let a certain subset of your active groups try out your beta product whenever a feature is added. This will help your company get relevant feedback and make changes. It will also help the company to build incrementally instead of dumping a bunch of features after a year.

4. Build in Public

A company that has shifted to product-led will have to release features and get feedback early. Your users become your stakeholders and will know what happens behind the scenes. Users feel more connected with the founders and the company when they hear about daily wins and hardships.

5. Scale

Once you are done with the previous steps, all that is left is to scale the product. That means you must now look at the global audience. You will need to optimize pricing, automate the business, and use an omnichannel support system. You will also have to hire more people, especially in leadership roles.

How to Measure Product-Led Growth

Measuring the success of product-led growth is essential to track progress and make informed decisions. Here are some key metrics to consider:

1. Time to Value

This metric measures the time it takes a user who has landed on your product to become a new user. PLG companies should strive to reduce this time. This means making the onboarding process very easy for better conversion.

2. Net Churn

This metric is used to determine the health of a company. It measures the money lost after accounting for new or expansion revenue.

3. Virality

Virality measures a product’s adoption rate with each additional user. k = the number of invitations sent by each customer * the % conversion rate of each invite When k is greater than 1, the product can grow exponentially with virality.

4. Customer Lifetime Value

This metric measures the revenue a company can expect from a single user throughout the user’s lifetime. You get enhanced statistics when you use this metric on the user segments we discussed earlier. This metric helps you predict how much a customer is worth now and in the future. Based on this information, you can change your pricing and customer strategies.

5. Revenue per User

This is the average revenue from a user. It is calculated by dividing monthly recurring revenue by the total number of customers. It is used to determine the health of a company and its potential.

6. Expansion Revenue

Expansion revenue is generated from extra features, packs, and add-ons. Expansion revenue is an indicator of the loyalty of your users. Companies should focus on increasing their expansion revenue. It is cheaper and easier to sell to existing users. This will also improve the total revenue significantly.

Unlike sales-led growth, product-led growth uses the product to drive sales and revenue. PLG is defined by three pillars:

1. Design for the End User: The users’ needs must be put before everything else. The UI and overall experience should prioritize user satisfaction and ease of use.

2. Provide Value First: Product-led companies release products fast to understand the market and users. They release an MVP with all the basic but groundbreaking features. Users can give feedback fast, which helps improve the product.

3. Use Market Data To Gain an Advantage: Product-led companies collect and analyze data about how users react to the product. This data is used to improve customer satisfaction, resulting in more growth and revenue. The revenue can then be invested back into the product, creating a flywheel of growth.

The company’s PLG team is responsible for analyzing data from different sources and using it to accelerate growth and find product-market fit.

In conclusion, product-led growth is a modern approach to building successful startups. It focuses on providing value to users, building a user-centric product, and leveraging data to drive growth and revenue. By adopting product-led growth principles, startups can thrive in today’s competitive market and build a strong foundation for long-term success.

Ready to get started on your AI-driven growth strategy? Contact us at logiclabsai.com for a demo and start building the future of customer relationships.

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