How a Product Growth Strategy Builds Customer Buy-in

What type of strategy works the best when you need to grow your ecommerce business? You can focus your efforts on a viral marketing campaign that turns everyday customers into brand ambassadors, write a useful blog to generate organic leads online, or even hire a robust sales team to get the word out.

But one strategy to consider for growing your business is a product-led growth strategy, using methods like free trials and freemium models to help great products sell themselves. While this strategy still requires sales and marketing efforts to reach customers, it takes a different approach by getting products into the hands of customers as quickly as possible to prove their value.

Here’s how this type of growth strategy works, when it makes sense for your business, and the specific tactics that turn curious browsers into committed customers.

What is a product growth strategy?

A product growth strategy, also known as a product-led growth (PLG) strategy, is a type of business strategy that relies on product usage as the main driver for sales. By making it easy for customers to access and use your product through methods like freemium plans, product sampling, or free trials, a product-led growth strategy focuses on acquiring and retaining customers based on the value of the product itself.

Here are some of the key characteristics of a product-led growth strategy:

• Immediate value. This type of business growth strategy requires a low barrier to entry, making it as easy as possible for customers to access and use a product quickly.
• Transparent pricing structure. Since this type of strategy often includes a tiered pricing structure or subscription model, it’s important to put all pricing information upfront to avoid customers feeling tricked into further costs down the line.
• Paywalls. Companies strategically limit free access to create natural upgrade moments. These paywalls allow users to experience core aspects of the product, encouraging them to upgrade for the full experience.
• Data-driven. Product-led growth strategies rely on customer feedback loops to continually enhance the product experience (PX) and make consistent improvements to the product itself.
• Self-service. PLG strategies often include a self-service model, where customers can access and use products on their own without the help of a sales, customer support, or onboarding team—highlighting a product’s ease of use and simplicity.

Product-led growth vs. other growth strategies

1. Product-led growth strategy
2. Market development growth strategy
3. Diversification growth strategy
4. Market penetration growth strategy

No matter your business model, you will likely fall into at least one of four frameworks when growing your company—and a product growth strategy can overlap with all of them. Here’s a breakdown of the four primary types of growth strategies that companies can consider based on their business model, target market, and product offerings:

1. Product-led growth strategy

A product development strategy involves introducing new products or services in a market to stimulate growth by investing in research and development (R&D) and creating innovative new offerings. A company generating interest for their new software tool by launching a marketing campaign for free trials of the tool would fall into this category.

2. Market development growth strategy

A market development strategy involves selling existing products or services to new customers through methods like expanding into new geographical areas, identifying new customer segments in your existing market, and investing in new distribution channels for delivering offerings to a wider customer pool.

3. Diversification growth strategy

A diversification growth strategy requires companies to create new services, products, or product line extensions to increase sales by expanding a company’s offerings in an existing market. For example, a software company could expand into physical products that appeal to both its current customers and an untapped demographic.

4. Market penetration growth strategy

This growth strategy focuses on expanding a company’s market share in an existing market with aggressive pricing strategies designed to undercut competitors and new-and-improved products. A company using this approach might slash prices while upgrading features based on customer feedback to steal market share from competitors.

Benefits of a product growth strategy

A product-led growth strategy can benefit your business in a variety of ways, including:

• Lower customer acquisition costs. By engaging customers with a freemium plan or free trial of a product, this type of growth strategy can result in a lower customer acquisition cost (CAC)—the total cost of acquiring a single customer—and increase revenue without leaning as much on paid ads or long sales cycles with large sales teams reaching out to qualified prospects. 
• Opportunity for scalability. Product-led growth strategies are highly scalable because you can serve thousands of new users without proportionally expanding your sales team or expensive marketing budget.
• Shorter sales cycle. Using product-led growth strategies like product sampling can encourage users to engage with a product immediately, which shortens the sales cycle when compared to longer sales-led strategies involving lead qualification, pitching, and product demos.
• Quicker time to value. Time to value (TTV) is a metric for how quickly users realize the value of a particular product. By offering a low barrier to entry for product usage, a product-led growth strategy can create a low TTV—meaning customers realize the value of your products much faster than if they’re going through a long sales cycle.

Examples of product growth strategies in action

• Free trials
• Freemium business model
• Growth loops
• Free samples

Sometimes, it’s easiest to learn by example. Here are some case studies of companies using product growth strategies to earn new customers and grow their businesses:

Free trials

Shopify uses a free trial model that lets ecommerce merchants sign up for the platform for free for three days with no credit card required. Merchants can build and customize their ecommerce stores and create product selections within that trial period, then decide from there whether they want to continue using the platform for $1 per month (for the first three months) after the trial period ends. Free trials like this allow users to experience the value of a product immediately and encourage those users to convert into paying customers by creating a sense of urgency.

Freemium business model

Zoom is a video conferencing platform that uses a freemium business model—which involves providing customers with a baseline version of a product for free, while offering paid plans for more features. Zoom offers a free version with unlimited meetings of up to 40 minutes each; paid plans include features like an AI companion, cloud storage, a meeting scheduler, and more.

The freemium strategy gives new users the chance to engage with a limited version of the product to quickly prove its value and create incentives for upgrading.

Growth loops

Communication platform Slack uses another popular product-led growth strategy to earn new customers: growth loops, which drive customer acquisition by including shareability as a key function of the product. Growth loops are cycles where the actions existing users take result in more users engaging with the product.

For example, an ecommerce merchant who downloads and uses Slack can easily share the tool with the rest of their team for easier communications. On the main menu of Slack, the merchant can click the “Invite people” button to generate an active invite link and send it to other team members through a channel like messaging, emailing, or onboarding documents. As more team members in the company join, Slack becomes a more effective communication tool for the merchant while organically bringing more users onto the platform—an effective growth loop.

Free samples

Beauty retailer Z Skin Cosmetics uses a product sampling strategy by including free samples of its cosmetic products in every order in an effort to turn one-time buyers into repeat customers. Z Skin Cosmetics strategically matches samples to each customer’s purchase—like including a neck cream sample for a customer who orders an eye cream product. This strategy can increase brand awareness for your product offerings and create a sense of reciprocity—where shoppers feel a subtle obligation to return the favor of a free gift by purchasing from you again.

How to execute a product growth strategy

• Create customer feedback loops
• Use quantifiable growth metrics
• Develop a knowledge base
• Set up a customer referral program

If your business aligns with a product-led growth strategy, consider these best practices for how to execute that strategy successfully:

Create customer feedback loops

Since businesses using a product-led growth strategy rely on the quality of their products to grow their businesses, it’s essential to prioritize customer satisfaction. Customer feedback loops are structured processes for collecting and acting on customer questions and feedback.

You can gather user feedback with customer surveys, interviews, reviews, focus groups, or product feedback forms. For example, a messaging tool like Shopify Inbox can help you ask your customers relevant questions about your products in real time.

Ask, categorize, act, follow up (ACAF) is a helpful framework for organizing customer feedback loops:

• Ask. Request feedback from existing customers using email, live chat, or social media.
• Categorize. Collect and categorize feedback in a central location, so it’s easy for your team to access.
• Act. Implement updates in response to the feedback. 
• Follow up. Check in with customers about their experience with the updates. (This also shows customers that you value their continued feedback.)

Use quantifiable growth metrics

Measuring product-led growth with quantifiable metrics, or key performance indicators (KPIs), will help you understand and improve your customer experience. Consider product growth metrics such as:

• Activation rate. This is the percentage of users who complete a specific action with your product, like upgrading from a freemium plan to a paid plan.
• Customer lifetime value (CLV). Your CLV estimates the total profit your company generates from a single customer during their entire relationship with you.
• Net Promoter Score (NPS). NPS measures your customers’ likelihood of recommending your products.
• Churn rate. Your company’s churn rate is the percentage of customers who stop using your products.
• Active users. This measures the number of unique users engaging with your products over specific periods of time, such as daily active users (DAU), weekly active users (WAU), and monthly active users (MAU).

Businesses can utilize these metrics to inform decisions about how to improve the overall product experience and earn customers using a product-led growth strategy. For example, a software-as-a-service (SaaS) company with a low activation rate could focus efforts on simplifying the initial onboarding process or making it more interactive with a welcome survey to personalize the user journey. Similarly, a company could use a Net Promoter Score to evaluate how effectively it can introduce growth loops into a product update to earn new users.

Develop a knowledge base

A knowledge base is a centralized repository of important information about your business and product offerings, which enables users to easily answer questions and understand new features. Since product-led growth strategies often focus on a self-service model, comprehensive knowledge bases can empower customers to learn about a product without leaning as much on sales teams or customer support teams to explain how to use it.

Customers can interact with your knowledge base through FAQ pages on your website or via AI chatbots that respond directly to customers’ questions with information from that base. SaaS companies using this strategy can include in-app notifications within their software tools that pull from your knowledge base to walk customers through their user journey step by step, highlighting and explaining different product features.

Set up a customer referral program

Establish a referral program that encourages customers to recommend your products to others by using a clear incentive structure. You can offer discounts, free products, or exclusive access to new products before they’re officially released. Make it easy for your customers to recommend your products by providing pre-written messages and links that they can copy and share on any platform—email, social media, and messaging apps.

Use referral tracking software to manage, automate, and track how your customers are engaging with your referral program and make informed decisions about how to optimize your rewards and messaging.