Product-led growth is many things. But here is what it's NOT.

Seven misconceptions about PLG.

Product-led growth (PLG) is many things, but here are SEVEN things it is not:

1. Not a substitute for Sales-led growth (SLG)

2. Not a cheap way to generate a pipeline

3. Not a fast way to make revenue

4. Not a viable growth motion for every business

5. Not powerful without marketing and sales

6. Not a growth motion without connection to monetization 

7. Not successful without Product ownership

Let’s dive in!

Not a substitute for the Sales-Led Growth

Product-led and Sales-led growth motions are successful across different segments, personas, and use cases and should be set up to complement each other, not compete or replace.

• PLG cannot succeed in the enterprise segment with enterprise buyers like SLG: hard to communicate enterprise value prop in a product, have to have the right group of decision makers onboard, end users <> buyer, sales can more effectively increase perceived value, etc.

• SLG cannot succeed in SMB: it may not be the preferred way to transact, ACVs cannot justify human involvement, etc.

So choose PLG and SLG for a segment it can be most successful in, not as a substitute for each other.

Not a cheap way to generate a pipeline

Product-led growth (PLG) effectively attracts many end-users because it simplifies the entry process by offering self-serve options, often for free or under trial. It is also cheaper to acquire users through PLG than through enterprise buyers. However, it is crucial to keep in mind that:

1. Not every end-user is a marketing-qualified lead (MQL)

2. Not all product usage can be converted into pipeline revenue

Even if self-serve usage can be translated into pipeline revenue, it typically takes a year to do so, as seen with companies like Miro, Netlify, and Amplitude. This means that a significant amount of product and development costs will be incurred, which may not only be comparable to your sales and marketing budget but could even be higher.

Not a fast way to make revenue

1. Product-led growth (PLG) focuses on enabling users to realize the product's value, eventually triggering monetization. In contrast, sales models tend to overhype the value, and users only realize it after purchasing the product. This means that monetization is inherently delayed for PLG, but the benefit of PLG is high utilization and ongoing, habitual usage.

2. PLG typically acquires problems that are more focused on end-users with lower complexity and lower perceived value than enterprise-wide solutions. Consequently, the average contract value (ACV) captured through PLG is usually lower than that of traditional sales-led growth (SLG). However, the potential for ACV expansion through continuous usage is higher for PLG than SLG.

Not a viable growth motion for every business

Product-led growth success anchors on three factors: end-user high Motivation, Ability, and Permission to solve the problem. Or you will need sales to assist.

1. Motivation: End-users must be selfishly motivated to solve the problem and actively search for a solution. If not, sales can assist with convincing.

2. Ability: End-user needs the self-serve ability to get to a solution in your product. If not, sales can offer excellent white glove treatment.

3. Permission: End-user needs to have permission from the organization to solve the problem. This includes access to suitable systems/passwords & decision-making ability. If not, sales can help unlock permission by engaging the right stakeholders.

With high motivation, ability, and permission, pure PLG motion is a fantastic strategy for the business. But if any of these factors are low, sales and marketing offer an incredible bridge to complete the task.

Not powerful without marketing and sales

Pure PLG motion leaves a lot on the table as not everything (yet!) can be solved in an automated, self-serve way. But Marketing and Sales should not only assist PLG. They should play their own, Marketing and Sales-led motions independently as well.

Ultimate business sustainability and competitive defensibility come from triggering all motions across all levers.

Not a growth motion without connection to monetization

Product-led growth starts with the ability to self-serve activate and engage. But it’s not a growth motion unless usage can be connected to monetization - self-serve purchases or product-led sales. Otherwise, it is just vanity product usage, not a sustainable business.

Translation to Product-led acquisition is optional, as not all companies are viral in nature to unlock this lever.

Not successful without Product ownership

Product-led growth (PLG) ideas and initial tests may emerge from marketing or sales, but for PLG to succeed, the product team must take charge. However, some product teams hesitate to do so because PLG involves being responsible for monetization. This is unfamiliar territory for product leaders because, traditionally, monetization has been the responsibility of marketing, finance, and sales. Nevertheless, PLG success hinges on the product team's understanding of its role in the company's growth model and its ability to utilize product experience to drive growth.