The PLG Trifecta: SaaS Heaven or SaaS Hell?

At Connect Ventures, our thesis is all about product, and we love products even more when they’re the organic engine for growth.

A product that organically draws in high-quality customers will spread quickly and efficiently. As a growth channel, product is almost unlimited and hyper-efficient. PLG stops you from relying on expensive, slow sales cycles and competitive performance marketing campaigns. Those two routes typically don’t scale well. Product-led growth does. This makes it extremely valuable for growing a startup.

While everyone agrees Product Led Growth is a fantastic business driver, it’s also a buzzword with many different definitions. Even more critically, founders and operators can find it hard to execute PLG. It’s important to define it so that we can talk about it properly, and understand how to execute on it well.

Therefore, to help founders and operators maximise their PLG potential, we wanted to lay out our definition, build on the concept of PLG with our new PLG Trifecta framework, and produce practical tips for how to build and optimize it.

Pietro originally wrote about the PLG Trifecta framework with specific reference to Typeform: If product is King, Product-Led Growth is King Kong. With this new post, we’re expanding its scope. We articulate the three Trifecta components for product-led founders and provide a simple way to score PLG potential to figure out SaaS Heaven vs SaaS Hell. We are also giving several examples from well-known product companies across B2B and Consumer.

Our product-led growth definition:

Product-Led Growth is the ability for a business to grow purely as a result of its product being used.

Product-led growth is when users bring in new users through normal usage of the product. If you create a Google Doc and invite others to collaborate with you on it, this causes them to become users too. This is product-led growth.

However, breaking it down, PLG is actually composed of three elements that impact different stages of the go-to-market and customer journey:

• Distribution
• Adoption
• and Expansion.

And here is the trick: the full power of PLG comes when all three components multiply. We call this the PLG Trifecta.

PLD occurs when the product markets itself. This is when each user, by sharing the product, forces consumption by other users, who then become customers. This built-in growth engine brings in new customers as a “free” acquisition channel – it’s viral and it compounds with scale. It’s the most powerful and efficient distribution of them all. Here are some examples:

• When you use Calendly to manage your diary, anyone booking a meeting with you is forced to use Calendly.
• When you share a Spotify playlist, you bring new users on to the Spotify platform.
• When you send a YouTube video via a messaging app, you drive the recipient to YouTube to view it.
• When you use Zoom for a meeting, all other participants must use Zoom too.
• When you use Typeform to gather information, every one of your recipients will use the form you create.

PLA occurs when the product sells itself. It’s the ability of your customers to start using the product quickly and efficiently. The more new users are able to discover value on their own, the more product-led the growth motion is (as opposed to sales-led). PLA impacts how user activation and user engagement work in the funnel journey.

For example Notion immediately offers a new user simple and easy to follow guides so they can get up and running right away.

B2C apps typically have great onboarding built in, as they are self-serve by default. Complex B2C experiences (like fintech) need to do this really well. Onboarding blog Built For Mars has a great case study on how Freetrade does this in a high-stakes, high-complexity context:

• They optimise for understanding over aesthetics (clear labels, click-through explanations etc)
• They only ask questions that you’re able to understand (they do the hard work of translating financial and legal jargon into human language)
• They pass the squint test (if you glance at the page for half a second, do you know what it’s telling you?)

Other experiences optimise for giving you the most value possible. Twitter’s onboarding famously forced you to follow five people. While this definitely forces you to add value, it’s awkward. If you’re new to Twitter how do you know who to follow?

TikTok instead asked new users to declare their interests, which is much easier to do.

They know that the more users watch TikTok, the more data points they have to suggest great content. Rather than let the algorithm work passively, they encourage users to work with it, to get more value, quicker.

PLE occurs when the product upsells itself. With PLE, the initial user gets more value by having more of their colleagues or peers use the product too. In B2B SaaS this is when a product grows organically within a single customer. This generates expansion ARR and increases the total account value, making churn much less likely to occur. Some examples:

• When you share a Notion document, your teammates need to use Notion to read it.
• When you create a file in Figma, your teammates need to use Figma to collaborate with you.
• When you create a dashboard in Looker, anyone that wants to see that information needs to use Looker.
• Some gaming platforms will charge for access to multiplayer – you need to pay £15 per month on Playstation to play certain games with your friends.
• Tinnitus healthcare app Oto has an app that helps people manage their hearing problems. They also offer video consultations with audiologists to give more individualized help, at a higher cost.
• Neobanks often give away basic services for free, and then use that habit to upsell into other opportunities. Monzo created a best-in-class user experience that they use to sell credit products. Revolut gave users a fee-free card for overseas spending, which they used to upsell everything from banking to crypto to travel booking.

PLD, PLA and PLE are the three strategic pillars that define what PLG is. But what about what PLG isn’t?:

• Word of Mouth. Loving the product and telling your friends about it. This is obviously a great target to aspire to, but it’s not PLG. People go to great restaurants because their friends rave about them. This can apply to any business and it’s just about great execution. It doesn’t differentiate your product.
• Referral programs. This is paying your existing users to bring in new users. In principle, it’s just another way to do performance marketing at a lower cost. A restaurant could pay their customers for bringing friends in – again, this isn’t product-led growth.
• Free trials, discounts, freemium models. These are conversion tactics that lower the barrier to users discovering value from the product, but they are pricing-led rather than “product-led”.

So now we’ve defined what PLG is and isn’t, let’s get on to measuring it.

Using the three strategic pillars (PLD, PLA and PLE), we developed a simple scoring formula that enables us to assign an overall PLG score, so we know how we are doing when it comes to PLG.

It’s a fairly straightforward formula:

PLD + PLA + PLE = PLG Score

Product-led Distribution, Product-led Adoption and Product-led Expansion are all additive: the higher these numbers, the greater the potential for the product to scale.

Here’s how to ascribe each score, by scoring each pillar out of 3:

• PLD (out of 3pts):
  • By using the product, does it make new users aware of the product? (1pt)
  • Does it force new users to use the product, in a way that makes them feel and value the experience? (1pt)
  • Do those users typically share affinity or are they in the target market? (1pt)

• PLA (out of 3pts)
  • Does the product sell itself? Can new users sign up and use the product without needing to speak to a CS agent or sales rep to explain how it all works (e.g. Superhuman needs human onboarding)? (1pt)
  • Is time to value and repeatable engagement quick enough? (1pt)
  • Is there a great single-player mode (e.g. you can get at least some value from using it by yourself)? (1pt)

• PLE (out of 3pts)
  • Does this product solve a problem that my colleagues or my peers have too? (1pt)
  • Do I get huge value from the product when my colleagues or my peers can use it too and we collaborate on it or play with it together? (1pt)
  • Does this product have some sort of built-in retention mechanism? (1pt)

We decided to include retention as an element of product-led expansion. Because retention is important for any growth (you don’t want to fill a leaking bucket) and it’s a natural by-product of building a great product and expanding it. The more value you give to customers, the less they will churn. In B2B SaaS for instance, you achieve negative churn when your expansion revenues are bigger than churned revenues. In consumer products, retention is paramount as well: a much-loved product drives loyalty, which drives repeat purchases and pricing upgrades.

Let’s work through some examples of products that have great product-led growth.

Firstly, Slack.
PLD: using Slack internally (i.e. the intra-company use case) doesn’t make anyone external aware of it, so they get 0 points here. If you use Slack for community (inter-company use case), then there is huge PLD – you achieve 3 points there.
PLA: Users can sign up on their own, and it’s very easy to understand (intuitive plus great onboarding). However there’s no single player mode, so they have to invite others to get any value. 2pts.
PLE: Users get huge value from inviting their colleagues, whom it solves a problem for, and are then incentivised to invite others too. Full 3pts here.

Then, Typeform.
PLD: The more forms people create and share, the more it spreads the word. Form respondents are forced to use the product and see why it’s great. They’re not always the target market though. 2pts.
PLA: Typeform is easy to sign up to, create forms, and get full value. It’s very intuitive. 3pts.
PLE: I get good value when my colleagues can collaborate on forms with, but it’s not huge. It solves a problem that lots of people in my team will have. However, they’re not incentivised to invite their colleagues to collaborate either. 1pt.

Finally, Monzo.
PLD: The “request” and “send” money feature were powerful early levers to get users’ friends aware of Monzo. The bright orange (“burnt coral”) cards were also visually arresting, which made people notice every time the cards were used in person. 3pts.
PLA: Easy onboarding, slick experience for opening a bank. Can all be done remotely which at the time was a game-changer. 3pts.
PLE: The Monzo product was game-changing at the time, and quickly became habitual. You use your card for purchases almost every day, and Monzo had a better experience. But over time as they got more visibility into your spending habits, they’ve been able to smoothly upsell lending facilities and other monetised products. 2pts.

This is how we calculate the score to understand the potential that a product can have for product-led growth.

Thanks for reading these tips and hacks for product builders to fully leverage the PLG Trifecta in their own products