How to Grow Faster With (Near) $0 CAC
With climbing inflation, waves of tech layoffs, and tighter focus on profitability, “grow at any cost” is no longer viable, even for the best-funded tech startups.
Forward-thinking tech companies have shifted their mindset to reducing their customer acquisition costs (CAC) as low as they can possibly go—even down to zero. Though product-led growth is becoming the accepted strategy to grow fast, how do you trim down your old sales motions and CAC spend to double-down on PLG?
Turns out there are quite a few ways and case studies from successful companies that we can learn from. I covered this topic in a brand-new keynote at the 2022 Traction Conference and am excited to elaborate here. Keep reading for real-life examples and the 11 rules for growing faster with near $0 CAC.
Follow the user journey from the bottom up
Traditional sales motions in software required startups to think about the B2B buying cycle: awareness, doing the demo, and getting to negotiation. These models were time-consuming, resource-intensive, and over-reliant on cash in order to accelerate growth. As more and more software companies compete for the attention of the same pool of executive buyers, this traditional playbook has only gotten more expensive and less effective over the years.
PLG companies should instead focus on the user’s journey. The user discovers a product when they’re experiencing pain or friction in their job. They land on their website and get started, see value (ideally quickly), convert, and then scale up their investment.
You win by making your product discovered by users in their moment of need and in the places where they already hang out. No surprise: this tends to be organic search and SEO for the average user. And the numbers back this up. Standout PLG companies generate 40% of sign-ups from organic search according to OpenView’s 2022 Product Benchmarks report. Of course, organic search is a great place to acquire users because you aren’t paying on a per-click basis.
Target the user, not the C-level buyer
A key principle for PLG is that the power lies with the user, not the buyer. You’ll therefore want to focus your marketing on user pain rather than buyer pain.
Take Grammarly, the online writing assistant, for example. Grammarly’s users aren’t searching for a “business writing assistant” or “grammar correction software”—they may not even know these solutions exist. Instead, they’re trying to figure out whether to use “no one” or “noone” in their writing (guilty!). Grammarly wants to get found when everyday users are in the moment of need, then convince these users to give Grammarly’s product a try.
This also applies in more traditional B2B software including at SafetyCulture, the safety checklist software company based out of Australia. SafetyCulture targets blue collar industries like manufacturing and construction whose employees are most likely going to be in the field and not actively searching for “safety checklist software” on Google. These employees are looking for different kinds of safety checklist templates.
So SafetyCulture built a library of almost 100,000 checklists and made it available for users for free to fill out online and print as a PDF. But after poking around on the site, users discover the value of simply signing up for the app in order to save the data in one place and send it to other people in their organization.
Use your product for marketing to drive growth
Consider leveraging your own product as a marketing channel. It turns out that product-driven acquisitions (referrals, viral loops) generate 16% of new sign-ups for standout PLG products, but only 1% of new sign-ups for traditional sales-led companies.
There are two types of product virality: (1) external virality through product exposure and multi-player use, and (2) internal virality through collaboration.
Calendly actually makes a great case study for both types. To use Calendly effectively, the user has to schedule a meeting with other people, exposing new folks to Calendly’s product who may decide to sign up for their own Calendly account. The social nature of Calendly means it has a viral loop built into its design.
But Calendly doesn’t stop with external virality, as they’ve smartly engineered internal virality to expand within an organization. Calendly has built product features to encourage social sharing within an account. One clear example is around creating a new event type. Calendly lets users choose from four distinct options:
- One-on-one meetings (the classic Calendly use case)
- Group meetings, where multiple invitees can meet with the user at one time
- Collective meetings, where a user can host a meeting jointly with someone else (great for internal collaboration!)
- Round robin meetings, where an event can cycle between multiple hosts (again, great for internal collaboration!)
Remove friction from social features
So you’ve got a great product and people want to share it with others. Tough question: can they? You might be creating friction in your viral loop without realizing it.
Loom—an async video collaboration product—started out with two types of user seats: creators (paid users who could create new Loom videos) and viewers (free users). Viewers did not have access to create their own videos. This model worked well at the time, but it didn’t easily enable new folks to give Loom a try and become creators themselves.
And so the company launched its Creator Lite tier in June 2021, encouraging Loom creators to invite more of their team members into Loom. Creator Lite users can record up to 25 videos with a five-minute time limit before they’re asked to pay. An added bonus of Loom’s Creator Lite tier: it allowed Loom to introduce a successful user referral program via storage incentives.
This principle can apply to non-PLG companies as well. Many software products will block folks from being able to add a user to an account if it exceeds the number of people that they’ve licensed. I’m a fan of doing monthly or quarterly true-ups instead. In this model, you let folks invite users for free, but then notify the admin that they’ve exceeded their plan and can choose to either pay extra or delete folks ahead of the next billing cycle.
Why does this work? It turns out that loss aversion is a real thing. People don’t like to give up something they’ve been using and seeing value in.
Add social elements outside of your product
When people hear the word “social,” they automatically think of channels like Instagram and TikTok. But B2B brands can add social elements as well. Two quick examples:
- Slack integrations. You can push notifications from your product into Slack as a way to expose non-users to the value you’re providing.
- Analytics and reports. These are things that people will want to share with others in the organization because of the valuable data these contain. It makes your user look good and it makes your product look good—folks will want to show it off.
Community is essentially just virality that happens outside of your product, through users talking to other people, promoting it through word of mouth. But community needs more than just a Slack group or a company-sponsored forum. There are four community strategies at PLG companies:
- Be active within existing communities. We usually jump to starting our own community, but it’s best to stop and ask ourselves: is there somewhere else where our users already talk to one another? Can we become a trusted voice in these existing spaces?
- Connect users with their peers. If you’re creating a new category or new way of operating, you can play a powerful role of connecting users with their peers to learn best practices.
- Amplify community creators. People trust other people and your power users can be extremely strong evangelists for your product. You’ll want to document their stories and amplify their voices.
- Build a content community. One final tip: content is a good way to kickstart a community, but it has to be really good content that sparks a conversation.
Then let the flywheel keep spinning
You’ll want to monitor these initiatives and double down on what works. Pro-tip: to optimize your marketing efforts, look at product activation rather than product sign-ups.
Marketing efforts need to be held to a higher standard than simply attracting new folks to your product. These new sign-ups should take the next step to set up their account and start seeing real value. Once a user has activated, they’re far more likely to convert, scale, and become evangelists for your product through virality and community. Your activated users keep your flywheel spinning faster and faster.
The TL;DR – 11 rules for (near) $0 CAC
- Focus your marketing on user pain, not just buyer pain.
- Treat your marketing as a product that offers real value to users (see: SafetyCulture).
- Programmatic “how-to” templates are a great starting point (see: Zapier).
- Free sidecar products work even for non-PLG companies (see: HubSpot’s Website Grader).
- Instead of standard blogs, write product education and docs.
- Viral loops can be extremely powerful for PLG products.
- Start by adding and promoting social features in your product (see: Calendly).
- Then reduce friction from being social—check your pricing! (see: Loom)
- Add social elements outside of your product—celebrate milestones!).
- Think of community as virality that lives outside of your product (see: Webflow).
- To optimize your marketing, look closely at product activation.
Note: Calendly is an OpenView portfolio company. For a full list of OV portfolio companies, please see our website.