Why "Try Before You Buy" is the crux of product-led growth strategy and which model to pick?

This post is a summary of concepts from Wes Bush’s book, Product-Led Growth that I was very fascinated by. It also includes growth strategy concepts from Tony Ulwick that I had covered in my previous post.

Wes’s book is interspersed with a lot of business wisdom. It’s a good collectible for every business and product person. I can’t recommend it enough. 

Two weeks ago, I got a fresh pair of glasses for my farsightedness from Ace and Tate here in Karlsruhe. What blew me over was their Try Before You Buy offer.  They offered me to send four frames in mail that I could try from the comfort of my home for 5 days. You then send them the frames back in the package supplied free of charge. While I was quite  intrigued by the offer, I chose to pick it up rightaway from the offer as it was urgent.

There are dozens of companies who are offering try-before-buy options for physical products. 

Since I am a software product manager, my focus  is to mull on this subject of ‘try-before-buy’ in the context of digital SaaS products. 

Before we try to find why "try-before-buy" is the crux of product-led growth strategy, lets understand what does product-led growth mean?

What is product-led growth (PLG)?

Product-led growth was first coined by OpenView Partners, that defined it as a Go-To Market strategy that relies on using your product as the main vehicle to acquire, activate and retain customers. 

A sales-led growth looks like this:

In sales-led growth, the product is often an after-thought. This product roadmap runs the risk of being dictated by one or two big customers. 

A product-led growth looks like this:

In product-led growth, the product team is involved thought out the entire spectrum of all business functions. It enabled products to create a seamless customer experience across every department. What makes a product-led business unique is that all teams leverage the product to hit their goals.  

In a product-led growth, the marketing team asks how can a product generate a demand flywheel. The sales team asks how can we use the product to qualify prospects for them. Customer success asks how can we create a product that helps customers become successful. The engineering team asks - “How can we create a product with a quick time-to-value?”. When every team is focused on the product, it is called a product-led growth.

Try before buy allows this to happen on the product. It allows the potential customers to see and use a product before buying it. Buyers prefer to self educate than learn about a product from a sales representative, It prevents to get into a lengthy sales process to see if its good. 

There are many flavours of try before buy. 

• Free trial

• Fremium

• Demo

Wes Bush in his book, Product-Led Growth, offers a decision framework to compare the free-trial, freemium and demo models. 

Difference between free trial and freemium model?

• A free trial is a customer acquisition model that provides a partial or complete product to prospects free of charge for a limited time.

• A freemium model is a customer acquisition model that provides access to part of software product to prospects free of charge without a time limit.

It might seem like a freemium model is a just an indefinite free trial, but go-to-market strategies could not be more different. 

Once you know your go-to-market strategy, it will be easy to decide between the free trial, demo and freemium. 

There are three types of Go-To-Market strategy:

•  Dominant 

• Disruptive

• Differentiated

This comes from Tony Ulwick and I had written a separate post on this topic. 

The three growth strategies have a unique advantage.

Dominant Growth Strategy

The dominant growth strategy works great if you can do something better than your market and can significantly less.

Companies that have dominant growth strategy include:

• Netflix

• Uber

• Shopiy

A freemium model is vital in a dominant growth strategy and can help you take a sizeable chunk out of the market. 

You need a significant volume of users for this model to work. 

Which model to choose here?

• Both freemium and free trials work much better than the traditional sales (i.e demo requests) because you keep costs low and prevent competitors from stealing your market share. 

• Thats your competitive advantage - low cost for an exceptional product. 

Questions to ask when deciding if a dominant strategy is right for you?

• Is your TAM big enough to support a freemium model?

• Does your product solve a specific problem significantly better?

• Can your user realise significant ongoing value quickly with little or no help from company personell?

• Do you want to be undisputed market leader in your category?

Differentiated SaaS Growth Strategy

This is a common strategy if you want to pick and win your fight with an industry Goliath. Your main line of defence against the Goliath in your market is specialisation. For instance, you were to take away Hubspot’s CRM marketshare, you might discover an underserved niche, (eg real estate agents) and create a CRM product tailored for that audience.

Differentiated growth requires you to do a specific job better than the competition, and charge significantly more. This is not a one size fits all model,

This approach works well with free trials and demos. 

Due to inherent specialisation, and complexity of products, its difficult to create a freemium experience with a quick time-to-value. 

Which questions to ask?

• Is your market compromised of underserved markets?

• WHAT IS your TAM?

• Is your annual contract value (ACV) high enough to support a low or high touch sales team?

• Could your prospects experience an “Aha” moment during a free trial?

Disruptive SaaS Growth Strategy

The disruptive growth strategy requires you to charge less for what many consider an “inferior” product. Most people think this is a bad idea, but it’s not. Example, position Canva against Adobe Photoshop. With all the features of photoshop, Canva loses every time. 

But with so many over-served customers in this particular market, Canva was able to build a much simpler product that solved very specific pain point, such as creating social media graphics in seconds. 

Other companies that have taken this approach: 

• Google docs (relative to Microsoft Word)

• Udacity (relative to traditional universities)

• Wave (relative to traditional accounting software)

Freemium model thrives in disruptive environment,, Keeping costs low draws in prospects using existing solutions.

Since the product is a scaled down version of an existing solution, it must be easy to use. You can use a free trial with a disruptive growth strategy, but it weakens the magnetic draw enjoyed by the freemium model. 

Questions to ask yourself when deciding if disruptive is rights for you:

• Is your market full of over-served customers?

• Are you competing in a hyper-competitive market?

• Is your market large enough to support a freemium model?

• Do you have the resources to support a freemium model?

• Can your onboarding be completely self-service?

So, how to decide on your growth strategy?

You should ask yourself the following questions:

• Do you want to offer the best solution for the lowest price? (Dominant strategy)

• Do you want to offer the best-customised solution for the highest price to underserved customers? (Differentiated strategy)

• Do you want to offer the simplest product for the lowest price to over-served customers? (Disruptibve strategy)

• Or are you planning for a hybrid strategy?