#8 The Demise of PLG?

I won’t make the claim that PLG is a complete fugazi, but it’s popularity has certainly been buoyed by the low interest rate environment of the past decade.

Product-led growth (PLG) is a business strategy that focuses on using the product itself as the primary driver of customer acquisition, retention, and expansion. The idea is that a great product that solves a real need for customers will naturally lead to growth as users spread the word and bring in more users.

It’s success is predicated on the fact that companies have tons of money to invest in building super sticky products. It also depends on a healthy number of end-users that are gainfully employed and deriving enough value from these products to personally buy them, or build the internal business case to buy it.

Those dependencies have reduced significantly over the past year, and will continue to reduce as companies look to be more efficient.

The new reality is that with widespread layoffs and erosion of VC funding, company decision-making on additional spend rests solely with the CFO. No longer are end-users able to procure a cool new tool that plugs a tiny hole with minimal business impact.

Candidly, those end-users with enough time on their hands to tinker with those tools probably no longer have a job.

Since every new software purchase will be heavily scrutinized, enterprise technology that actually has significant business impact will require seasoned sales executives selling at the C-Level and proving out the ROI.

Nice-to-haves like Slack will no longer grow in this new environment. Microsoft and Google offer very good chat tools as part of their office products i.e. they are free as part of a platform, and it’s hard to compete with free.

Companies like Airtable experienced significant virality through the low-interest rate environment. In 2023 and beyond, they will need to reposition themselves as a must-have platform that effectively drives business productivity and command high-dollar enterprise license agreements (“ELAs”) vs the small, low-dollar deployments that help pockets of employees better manage their workloads.

User-growth no longer leads to long-tail revenue generation based on virality alone. Unless your product yields significant business impact, free users generated through a PLG playbook will be difficult to monetize without an ELA.