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4 min read

Product-led growth vs marketing-led growth: Which is a better fit for your organisation and why?

Product Marketing Strategy

During my career as a product marketer, I was fortunate to get diverse experience working on different B2C and B2B products.

Although my goal in every role was generally the same - increase product usage - I’ve noticed that in each case, I had to wear a different ‘PMM hat’.

Sometimes I focused primarily on the Go-To-Market (for example, launching TV & Digital campaigns to drive new users), but in other cases, my job was completely different and I had to deep dive into product analytics and leverage in-product tools for growing usage.

To put these two distinct experiences into a more academic wording, I’ve worked both with teams using “traditional” Marketing-Led Growth (MLG) and also with those who prioritised Product-Led Growth (PLG) principles.

MLG is a strategy that relies on marketing efforts to drive customer acquisition, retention, and expansion, while PLG leverages the product itself to achieve these same objectives.

In every team that I worked in, I made sure to contribute to choosing which strategy (MLG or PLG) our product should take - as I believe product marketers should have a say in this thanks to our knowledge of both products and customers.

In this article, I’ll share six key questions that, based on my experience, will be helpful for defining the right strategy for your product.

  • How is your industry doing?
  • Does your product already have a large install base?
  • Is there potential for a referral system?
  • How does decision-making work among your customers?
  • How are your marketing channels performing?

How is your industry doing?

When recession hits and marketing budgets are cut (as it happened in early 2023), PLG becomes a valuable strategy to reduce acquisition and retention costs while still maintaining customer loyalty and trust.

PLG has truly become a buzzword specifically for its magical promise to reduce costs, and that’s why so many organisations nowadays are considering or have already switched to this strategy.

One might say that PLG is a necessity during an economic downturn, and if your industry is facing tough times - your organisation should be definitely prioritising PLG-related activities vs. investing in MLG.

From my personal experience, even outside of recessions cycles, some products have close to zero marketing budgets due to the scale of their business or other internal reasons. In such cases, product marketers are naturally expected to master the PLG strategy.

Does your product already have a large install base?

If your product has a large install base (or, in other words, a large base of signed up customers - even if they are inactive), most of the growth can be generated by increasing engagement and retention of these users vs. attracting new leads.

In this scenario, it absolutely doesn’t make sense to spend marketing budgets on acquisition, and PLG is the best growth strategy.

For example, when shaping a growth strategy for one of the apps that I worked on, I discovered that 80% of our install base was actually inactive.

This data insight led to prioritising the PLG approach, which included working with the product team to add more in-app education & re-engagement tools (such as, for example, in-app messaging and notifications).

Is there potential for a referral system?

PLG can harness the power of word-of-mouth recommendations, which are more likely to occur when the product is already being used by many.

One of the key differences between the two strategies is that with PLG a traditional growth funnel (Acquisition -> Activation -> Retention) can become a loop mechanic where retained users bring in newly acquired customers through word-of-mouth or a referral system that your business can build to nurture this loop dynamics.

How does decision-making work among your customers?

For complex products that require a long sales cycle and involve specific decision-makers, MLG may be the better option, as analyst relations and understanding the decision-making of the buying committee are critical.

To put it simply, there’re industries where purchase decisions are made by people in very specific roles that’s known to all suppliers - from my experience, this is usually true for B2B products.

In such cases, the most efficient sales are driven by influencing these known decision-makers via a sales team, or traditional marketing channels targeted at this audience.

However, nowadays the decision-making power is moving to the end-user vs. a buying committee across most industries (even B2B), and a more data-driven approach might be required.

For example, while in the past a decision to purchase a certain software was made by specific stakeholders inside the company, now the end users can easily access the tools for trial and make the decision themselves. I’ve found PLG to be a better strategy fit in this scenario.

How are your marketing channels performing?

If you’re already running some marketing activities as a part of an MLG strategy, consider having a deeper look into their performance and ROI for your business

It’s important to look not only at upper-funnel results (incremental new users), but also at the performance down the funnel (retained users). If traditional marketing channels are yielding low-quality leads, PLG can improve the user experience and drive better conversion rates.

There were a few cases in my career when I drove the internal shift from MGL to PLG strategy exactly for this reason. We noticed that only a small % of the new users driven by marketing channels retain within the first week (despite all possible channel optimisations), which shows that investing in MLG is not efficient for the business in the long run.

Is your internal structure ready to change?

Last but not least, it’s important to consider internal resources for a potential change in the growth strategy. From my personal experience of driving a product strategy shift from MLG to PLG, it requires a few deep dive sessions with the leadership & their ultimate buy-in and support.

The reason is that this change means rebuilding existing product processes, cutting down on marketing resourcing (both in terms of budgets and people) and other significant internal changes.

Conclusion

Both PLG and MLG have their own advantages and disadvantages, especially in the context of our roles as product marketers - since we and the essence of our work are directly impacted by whichever path the organisation decides to follow.

Therefore, we should definitely contribute to the decision-making process, and hopefully, the six key questions above will help you form a point of view on the question.

Written by:

Olga Laul

Olga Laul

Olya is based in London, UK, and focuses on product marketing for Google apps across the EMEA region. She specializes in bringing new consumer products to market and driving adoption for them.

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Product-led growth vs marketing-led growth: Which is a better fit for your organisation and why?