Enterprise tech companies usually grow by investing in a costly sales and marketing operation, suffering through long, expensive sales cycles. Eventually, if it works, their software is adopted “top down” throughout an enterprise. That approach is tried-and-true, but it’s not the one that Dropbox or Slack followed. Over the last decade, those companies and many others have pioneered a disruptive new business model that is taking over the $250 billion software-as-a-service market.
However, there is a catch. Companies that follow the PLG playbook risk getting stuck in what we call the PLG trap. Although the PLG approach yields rapid initial adoption and growth, scaling a PLG company is a different story.showed that public companies that initially pursued a PLG model are actually 5–10% less profitable compared to their sales-led counterparts — implying that many PLG companies, despite initially benefiting from superior unit economics, actually lose efficiency as they scale.
In building a great product that is appealing to end-users, companies optimize their product and support organizations for small teams. The company then realizes they’re trapped in a chasm: the early adopters found the minimum feature set adequate, but the majority of the market does not. Meanwhile, the customer support team is not accustomed to servicing large enterprises and the marketing team has been targeting small end users, not senior IT executives. The PLG company is not truly “enterprise ready” on a product or organizational level. Sales stall.
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