PLG Funnel vs. PLG Flywheel: Which Strategy Is Right for You?

When it comes to driving growth for SaaS companies, the Product-Led Growth (PLG) funnel and the PLG Flywheel are two popular models that help businesses acquire, retain, and grow their user base. Each model has its strengths, but choosing the right one depends on your business goals and customer journey. This guide provides an in-depth exploration of the PLG funnel versus the PLG Flywheel, helping you understand their differences, benefits, and how to determine which approach will drive the best results for your company.

Understanding the nuances of these two models can help you leverage them effectively for scalable growth. The PLG funnel provides a linear, structured approach to driving user acquisition and conversion, while the PLG Flywheel focuses on building momentum through ongoing customer satisfaction and advocacy. In some cases, a hybrid approach that combines elements of both models may be the best solution for achieving sustained growth. Let’s dive deeper into what makes each of these models unique and how you can leverage them to maximize your SaaS company’s growth.

Understanding the PLG Funnel

The Product-Led Growth (PLG) funnel is a framework designed to guide potential customers through their journey by using the product itself as the primary driver of acquisition, conversion, and retention. Unlike traditional sales-driven approaches, the PLG funnel emphasizes delivering value through the product, allowing users to experience its core functionalities before committing to a purchase.

The concept of the PLG funnel revolves around allowing users to interact directly with the product, which helps build trust and demonstrates the value proposition clearly and effectively. In a PLG funnel, users typically begin their journey with a free trial, a freemium model, or other low-barrier ways to experience the product. This approach provides users with the opportunity to see the value proposition in real-world contexts before deciding to convert into paying customers.

The linear nature of the PLG funnel makes it easier for companies to identify and optimize specific stages of the customer journey. Each stage requires targeted strategies to help users progress smoothly from one stage to the next, ultimately converting them into loyal, paying customers.

Key Stages of the PLG Funnel

1. Awareness: Users become aware of the product through organic means, paid advertising, referrals, or other channels. This is the top of the funnel, where users are introduced to your solution and its benefits. The focus here is on attracting users through effective marketing campaigns, social media presence, and SEO strategies that highlight the product’s capabilities.
   Creating awareness involves educating potential customers about the problem your product solves and positioning it as the best solution available. Leveraging content marketing, influencer partnerships, and targeted ads can help build brand recognition and spark interest among your target audience.
2. Evaluation: Users begin evaluating the product by signing up for a free trial or freemium plan. They explore its features and start to understand how it can solve their problems. During this stage, it’s important to provide content like product guides, webinars, and case studies to help users see how the product meets their needs.
   The evaluation phase is all about demonstrating the value of your product. Providing easy access to educational resources, interactive demos, and customer testimonials can help users make informed decisions and feel confident about the product’s capabilities.
3. Activation: At this stage, users engage with the core value of the product. Activation means that users are getting value from the product, and it’s an indicator that they see its potential to help them achieve their goals. A seamless onboarding process, with guided tutorials and helpful prompts, plays a crucial role in ensuring that users reach this stage.
   Successful activation involves removing barriers that prevent users from experiencing core features. Personalizing the onboarding journey and offering timely assistance can accelerate users’ path to activation, making them more likely to convert into paying customers.
4. Adoption: Once users see value and consistently use the product, they enter the adoption stage. Here, they are likely converting to paying customers. Encouraging adoption involves providing ongoing support, such as helpful resources, dedicated customer success agents, and regular check-ins to ensure users are fully benefiting from the product.
   Adoption is a key milestone in the funnel. Providing proactive customer support, targeted feature recommendations, and interactive tutorials can ensure that users remain engaged and satisfied as they explore more aspects of the product. Encouraging users to fully integrate the product into their workflow is critical to fostering long-term usage.
5. Retention: Retention is key for any SaaS company. It involves keeping users engaged with the product over the long term, ensuring they find value continuously. Successful retention strategies include loyalty programs, feature updates, and proactive customer support to keep users satisfied and prevent churn.
   Retention also involves keeping communication channels open, regularly seeking feedback, and addressing users’ needs. Building long-term relationships requires ongoing value delivery, and using automated engagement campaigns can help maintain user interest. Retention is also enhanced by understanding user behavior and addressing any issues that may cause dissatisfaction.
6. Referral: Happy users may refer others to the product, completing the loop and driving new awareness. Offering referral incentives, such as discounts or account credits, can strengthen this stage and encourage more users to spread the word. By leveraging satisfied customers, you create a cycle of continuous growth and customer acquisition.
   Referral programs can turn satisfied customers into advocates. Creating easy-to-use referral systems and incentivizing sharing can amplify your reach, leveraging word-of-mouth marketing as a powerful growth driver. Providing tools like shareable links and social media templates can also make it easy for customers to recommend your product.

Understanding the PLG Flywheel

The PLG Flywheel, on the other hand, is a growth model that focuses on building momentum by providing continuous value to users and leveraging positive customer experiences to drive growth. The Flywheel approach creates a self-sustaining cycle where delighted users bring in new customers through referrals and advocacy, ultimately creating a compounding effect.

Unlike the linear journey of the funnel, the Flywheel represents a circular process where each positive customer experience adds energy to the growth loop, driving new business. This approach focuses on nurturing user satisfaction and turning customers into advocates who contribute to sustained, long-term growth.

The Flywheel is particularly effective for SaaS companies that prioritize customer delight and want to create a strong, loyal customer base. By ensuring every interaction with the product adds value, the Flywheel creates a cycle of continuous engagement and advocacy.

Key Components of the PLG Flywheel

1. Attract: The Flywheel starts by attracting potential customers through marketing efforts, thought leadership, and providing valuable content that establishes your product as a solution to their problems. The aim is to create interest and get users to try your product.
   Attracting users requires a focus on building credibility and authority within your industry. Leveraging content marketing, SEO, and partnerships can effectively draw attention to your brand, ensuring that potential customers are aware of how your product can benefit them. Thought leadership through blogs, webinars, and industry conferences can also position your brand as an expert in the field.
2. Engage: Once users are in the Flywheel, the focus shifts to engaging them with the product. This is similar to the activation stage of the PLG funnel, where users experience the core value of the product. The engagement phase includes onboarding, in-product education, and ensuring users understand the product’s features.
   Engaging users involves creating meaningful interactions that help them see the value of the product. Providing personalized onboarding, in-app messages, and dedicated support can ensure users are deeply connected to the product’s capabilities. Keeping users engaged also means providing consistent updates and improvements that align with their needs.
3. Delight: The Flywheel emphasizes delighting users to encourage ongoing usage, loyalty, and advocacy. This is achieved through continuous support, proactive customer success initiatives, and ensuring the product evolves based on customer needs. Delighted users are more likely to refer others, creating a positive feedback loop that propels growth.
   Delight is the key to turning customers into brand advocates. Offering surprise incentives, exclusive content, and exceptional customer service can foster loyalty, making users enthusiastic promoters of your product. Ensuring that customer concerns are addressed promptly and effectively also plays a significant role in creating positive experiences.

Choosing the Right Model for Your SaaS Business

To determine which growth model is best suited for your SaaS company, it’s important to consider your current business goals, resources, and target audience. Both the PLG funnel and PLG Flywheel have distinct advantages that cater to different needs and stages of business development.

• When to Use the PLG Funnel: The PLG funnel is an ideal approach if you are primarily focused on user acquisition and want to systematically guide users from initial awareness to conversion. If your company is in the growth phase and needs to quickly scale its customer base, the structured nature of the funnel can help you drive user acquisition efficiently.
• When to Use the PLG Flywheel: The PLG Flywheel is best suited for companies that want to focus on long-term customer relationships and build a loyal user base. If your product relies heavily on word-of-mouth growth, customer delight, and retention, the Flywheel approach ensures continuous engagement and advocacy.
• Hybrid Approach: Many SaaS companies find that combining elements of both the funnel and Flywheel is the most effective strategy. The funnel can help acquire and convert users, while the Flywheel nurtures those users and turns them into advocates. This hybrid approach allows you to leverage the strengths of both models and create a balanced growth strategy.

The Advantages of a Hybrid Approach

Using a combination of the PLG funnel and PLG Flywheel models can offer significant benefits for SaaS companies seeking both rapid acquisition and sustained, long-term growth. Here are some of the key advantages of adopting a hybrid approach:

1. Comprehensive Growth Strategy: By using the PLG funnel to acquire new users and the Flywheel to retain and delight them, SaaS companies can achieve comprehensive growth. This approach ensures that new users are systematically guided through the customer journey while existing users are continually engaged, creating a balanced growth model.
2. Reduced Churn: A hybrid model helps reduce churn by addressing both acquisition and retention effectively. The funnel focuses on converting users into paying customers, while the Flywheel emphasizes keeping those users happy and engaged long-term. This dual focus leads to more satisfied users and fewer cancellations.
3. Maximized Customer Lifetime Value (CLTV): Combining the strengths of the funnel and Flywheel can significantly enhance customer lifetime value. By converting users effectively through the funnel and delighting them through the Flywheel, you create long-lasting relationships that increase CLTV and drive sustainable revenue growth.
4. Stronger Brand Advocacy: The Flywheel aspect of the hybrid model helps build strong brand advocates who willingly share their positive experiences with others. This word-of-mouth marketing amplifies your growth efforts and reduces your overall customer acquisition cost (CAC).
5. Balanced Focus on Acquisition and Retention: A hybrid approach ensures that your company’s focus is not skewed toward either acquisition or retention. Instead, it creates a balance where new users are consistently being acquired, and existing users are nurtured to stay engaged and become advocates.

Common Mistakes to Avoid When Implementing PLG Models

While both the PLG funnel and Flywheel have their advantages, there are common pitfalls that companies should avoid to make the most of these growth models:

1. Focusing Solely on Acquisition

One of the most common mistakes is overemphasizing user acquisition without investing enough in retention. While getting new users through the door is essential, it is equally important to keep those users engaged and satisfied. High acquisition rates are meaningless if users churn quickly after joining. Ensure you have strategies in place for onboarding, engagement, and retention.

2. Neglecting Engagement After Activation

Activation is an important milestone, but the user journey doesn’t end there. Many companies make the mistake of neglecting engagement after the initial activation phase. Continuous engagement, whether through personalized recommendations, targeted feature nudges, or interactive content, is key to driving long-term product adoption and satisfaction.

3. Lack of Personalization

Treating all users the same is a recipe for high churn rates. Users have different needs and preferences, and failing to personalize their journey can result in poor engagement. Use data-driven insights to tailor onboarding, content, and communication based on user behavior, demographics, and usage patterns to ensure each user receives a customized experience.

4. Ignoring Customer Feedback

Customer feedback is a valuable asset that can help you refine your product and user experience. Ignoring feedback not only risks losing users but also limits your ability to understand pain points and opportunities for improvement. Make it a priority to gather feedback regularly and use it to inform product updates and user journey enhancements.

5. Overcomplicating the User Journey

Simplicity is key to a successful PLG model. Overcomplicating the user journey with too many onboarding steps, complex navigation, or unnecessary features can overwhelm users and lead to early drop-off. Focus on delivering core value quickly and provide clear, easy-to-follow pathways that guide users to their desired outcomes.

Measuring Success: Metrics for the PLG Funnel and Flywheel

Measuring the success of your growth model is crucial to optimizing your strategies and ensuring that your efforts are yielding the desired results. Here are some key metrics to track for both the PLG funnel and Flywheel:

Metrics for the PLG Funnel

1. Activation Rate: Measures the percentage of users who reach the activation milestone. This metric helps determine how effectively your onboarding process communicates the product’s value.
2. Conversion Rate: Tracks how many users move from the free tier to a paid plan. It indicates the effectiveness of your trial or freemium offering in convincing users to pay for the product.
3. Adoption Rate: Reflects how many users continue to use the product after activation. A high adoption rate suggests that users are finding ongoing value in the product.
4. Churn Rate: Measures the percentage of users who stop using the product over a given time period. Minimizing churn is crucial for maintaining growth momentum.

Metrics for the PLG Flywheel

1. Customer Satisfaction (CSAT) Score: Gauges how satisfied users are with their experience. A high CSAT score indicates positive user sentiment and can be a precursor to advocacy.
2. Net Promoter Score (NPS): Measures users’ likelihood to recommend the product to others. A high NPS suggests that users are happy and willing to promote the product, fueling the Flywheel.
3. Referral Rate: Tracks how often existing users refer new customers. This metric is essential for understanding the effectiveness of the Flywheel in generating organic growth.
4. Customer Lifetime Value (CLTV): Represents the total revenue a customer is expected to bring over the entire duration of their relationship with the product. A high CLTV indicates strong retention and customer loyalty.
5. Engagement Metrics: Track metrics such as daily or monthly active users (DAU/MAU), feature usage, and session duration to gauge ongoing user engagement and identify areas for improvement.

Conclusion

Product-Led Growth (PLG) is a powerful approach for SaaS companies, and choosing between the PLG funnel and PLG Flywheel can significantly impact your growth trajectory. The PLG funnel is focused on providing a structured path for user acquisition and conversion, while the Flywheel model emphasizes continuous value delivery and customer advocacy. By understanding the strengths of each model and aligning them with your business goals, you can craft an effective strategy that maximizes user engagement and drives sustainable growth.

Remember, both models have unique advantages, and the most successful SaaS companies often leverage a hybrid approach—using the funnel to guide new users through acquisition and conversion, and the Flywheel to maintain momentum, retain customers, and drive advocacy. Test, iterate, and refine your approach to find the right balance between the PLG funnel and Flywheel that works for your business.

Ultimately, the key to success lies in delivering consistent value, building meaningful relationships with users, and fostering a culture of continuous improvement. By doing so, you can create a growth engine that not only attracts new users but also retains and delights them, leading to long-term, sustainable success.