Becoming product-led: What does it mean? - Mixpanel
Becoming product-led: What does it mean?
Product Foundations

Becoming product-led: What does it mean?

Last edited: Mar 10, 2022 Published: Feb 23, 2022
Corinna Stukan VP of Product @ Roam Digital

Becoming product-led has become an aspiration of many technology product companies today. Despite the rise in popularity, there are still many misconceptions about what it truly means to be product-led.

At its core, being product-led means focusing on providing true value through your product. 

In contrast to more marketing- or sales-led models, product-led companies focus on acquiring and retaining customers through their product experience and unique value proposition. This does not reduce the importance of marketing or sales in any way, though—it’s more a change in mindset and focus, as product-led companies center all of their activities around the product’s value.

The benefits of becoming product-led

It’s useful to understand how the industry of technology products has evolved over the years: Previously, companies would launch products through a heavily sales- or marketing-led model by investing in their acquisition channels and offering licenses to use their software. Because the space was still evolving, companies that were first movers in, for example, offering customer relationship management (CRM) or design software were able to get customers on one-year or even longer licensing agreements.

Today, however, we have an overwhelming choice of products to choose from. To stay competitive, product companies need to truly differentiate their product offering. They need to solve a unique problem, focus on providing more value than their competitors, and change their pricing models to offer more flexible, customer-centric options. One of the most prominent examples of this transformation is Adobe, which shifted its heavily sales-led model to offering flexible monthly subscriptions (and free versions to try) and greatly transformed its business and revenue growth.

How to become product-led

It’s not just the pricing model though, the shift to becoming product led can generally be seen in many areas of the business:

  • Products offer free trials so customers can test the product before they buy
  • Product onboarding journeys are being optimized to reduce the “time to value”, meaning customers can experience the value of the product very early on
  • Product companies spend a lot of research and effort on truly differentiating from their competitor by finding new customer problems and value to provide
  • Companies target more niche markets and their unique problems to provide even more value to those specific customers
  • Marketing and sales teams craft tailored messaging centered around this unique value proposition
  • Pricing models are optimized around the customer experience and provide more flexibility, like by offering subscription models

The common thread in all of those is the word “value.” If the customer doesn’t feel their needs are met and the product doesn’t provide value, customers churn and move on to the next product.

Because of this, the first step for companies to become product-led is to find out what customers value the most in their product. What are the biggest customer problems the product solves? Which features and functionality could your customers not live without and drive true long-term engagement?

Armed with this knowledge, companies can optimize their product offering, onboarding experience, marketing and sales messaging, pricing models, and trial options to ensure customers can experience the product’s unique value proposition in all parts of the journey.

The role of product analytics in a product-led strategy

This shift to becoming more product-led opens up completely new challenges for businesses on how to operate and measure their product and business success.

In the past, companies would analyze their sales and marketing performance through their CRMs, marketing tools, and a range of business intelligence tools that can plug into those. Once a customer converted from a lead to a paying customer, revenue was fairly predictable with long-term licensing agreements in place.

And while measuring the effectiveness of sales and marketing channels is still absolutely crucial today, the shift to becoming more product-led has introduced a new question: How do we measure “value”?

This is where the need for product analytics comes in. Depending on the value proposition of the product, product teams need to define their specific key metrics and customer behaviors that indicate whether their customers are using the core functionalities and with that the core value of the product. Tools like Mixpanel are then able to visualize those product metrics through their powerful analytics dashboards.

Related: How we implemented data and analytics for product-led growth at Mixpanel

While not an exclusive list, and the questions always need to be tailored to the specific product and value proposition at hand, here are some ideas of useful questions to ask to measure value:

  • What is the key goal or outcome we want our users to achieve, and what customer behaviors can be tracked to measure this?
  • What is the percentage of users who onboard and use our key feature in the first days of onboarding? (Customer activation)
  • How useful the product is: How often do customers engage with the product in a meaningful way? (Customer engagement, with the measure of engagement being a key action rather than just logging in, for example)
  • How sticky the product is: Do customers continue to use the product for long periods of time because it solves a very specific problem very well for them? (Customer retention)

The shift to becoming product-led is all about value. It’s not disregarding the importance of sales, marketing, or the financial or business viability when building products. It means that the entire organization works toward providing and communicating the best value possible to their customers to stay competitive in today’s market where customers have so many products to choose from.

With effective product analytics tools and practices, businesses are able to measure customer behavior and this mythical “value”, which will ultimately offer crucial insights on whether the business is performing well or where to course-correct to achieve the overall business goals.

Gain insights into how best to convert, engage, and retain your users with Mixpanel’s powerful product analytics. Try it free.

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