A new era for eCommerce:
Product Led Growth

“Product-Led Growth” (PLG) is a go-to-market strategy that has revolutionized the software industry and is now doing the same for e-commerce businesses.

PLG (Product-Led Growth) streamlines processes, fosters enduring connections with shoppers, and utilizes data to steer business decisions, delivering unparalleled value:

• Enhanced product purchasing experiences
• Capital-efficient growth
• Accelerated growth
• Expanded market reach

The winners in the next phase of e-commerce evolution will redefine how they leverage their products as a growth engine, integrating PLG principles into their advertising, presentation, and monetization strategies.

How did we get here?

E-commerce has evolved from an online distribution channel to become the connective tissue of the entire business, with digital experiences serving as the primary method of engaging with customers.

It enabled connecting consumers where they’re already spending time, whether that’s in-browser, in-app, on a mobile device, or even through a connected machine.

Let’s explore how we reached this point and what it means for you.

Trend 1 – Unsustainable customer acquisition cost (CAC)

According to research conducted by SimplicityDX, customer acquisition costs have surged by up to 60% over the past five years.

One might have anticipated that the substantial increase in ad capacity supply, driven by the rapid growth of social media platforms, would create heightened competition and subsequently lower ad cost.

However, it appears that the exponential growth in the number of online stores has outpaced the expansion of ad placement capacity. This has led to intense bidding wars and pushed customer acquisition costs to unsustainable highs.

This challenging situation has been exacerbated by various market developments, including:

• Google’s emergence as a paid search monopoly, which is contributing to additional price hikes in paid advertisements.
• Google’s disabling of keyword tracking, significantly reducing the effectiveness of search engine optimization (SEO) and effective management of paid-search campaigns.
• AI-driven advertisement algorithms prioritizing ad platform metrics over merchant revenue.
• iOS 14.5, released by Apple, which introduced several privacy-focused changes that significantly impacted digital advertising, particularly in relation to app tracking and user data transparency.
• The phasing out of third-party cookies.
• Increased consumer privacy legislation, such as CCPA and GDPR.

Collectively, these factors have placed ecommerce marketers in a demanding predicament, compelling them to innovate new go to market strategies.

Trend 2 – Raise of social media

Social apps like Facebook, Instagram, and Twitter have revolutionized online experiences by offering simple, intuitive interfaces. More importantly, these platforms continuously deliver tailored content aligned with users’ interests through use of smart algorithms.

This now establishes a new benchmark for online shopping experiences as well.

For instance, online shoppers are now less inclined to use site navigation, search, or filtering options to discover products of interest. If a product isn’t directly displayed on a screen, it’s almost as if it doesn’t exist at all.

The next generation of e-commerce sites must go beyond pretty pixels and intuitive navigation to provide social app like buying experiences.

Trend 3 – Identity resolution

A new breed of data vendors is providing the ability to capture identity of anonymous shoppers visiting online stores.

Though, very controversial offering from the privacy point of view, these offerings are taking marketplace by the storm.

Merchants are excited about new ability to grow their emails and text lists so they can reach out and continually engage with previously unreachable web visitors.

However, having more contacts by itself is not a solution. To monetize these new prospects merchants need to have increased ability to make their emails and text more relevant to shoppers prior online behavior.

Trend 4 – AI is driving the next economic super cycle

AI is generating a level of excitement reminiscent of the early days of the Internet.

As Peter Diamandis, Chairman of XPRIZE, often notes, the pace of this change has been slower than expected, but now that it is occurring, it will likely accelerate faster than expected.

With its abundant treasure trove of customer and product data, the e-commerce landscape stands as a fertile ground for cultivating groundbreaking AI-powered applications.

This fusion of e-commerce and AI is not just a technological revolution; it’s a societal shift redefining the fabric of our commercial interactions where e-commerce is assuming the role of a fundamental utility akin to water, electricity, the Internet, and mobile broadband in our daily lives.

In this transformative era, AI’s integration within e-commerce operations is not merely an option but a necessity for sustained relevance and competitive advantage.

PLG Principles for AI driven e-commerce

How can a company transition into a product-led growth (PLG) e-commerce company?

While there isn’t a single prescribed path to achieve PLG, we’ve compiled a set of principles below to guide online brands in navigating this transformation.

You don’t need to adopt all principles listed below into your PLG strategy. Instead, use as many as are applicable to your brand. This will help build a defensible competitive advantage for your business, enabling long-term success.

Start by embracing the Acquisition and Monetization principles; these are fundamental for a strong foundation. Then, integrate the Experience and Retention principles to further enhance and amplify your efforts.

1. Acquire based on product performance

Campaign → Product Performance

Conventional marketing traditionally revolves around crafting ad campaigns targeting audiences that yield the highest return on ad spend (ROAS).

However, with the advent of product feeds for shopping ads facilitated by Google and other platforms, the market potential has significantly expanded.

Presently, this marketing-led model encounters significant challenges:

• The complexity of ad performance management has surged due to Google’s Merchant Center and similar product feed mechanisms offered by other ad platforms.
• Attribution models such as Data Driven Attribution (DDA) favoring individual platforms distort results, complicating merchants’ effective ad spend decisions.
• AI-driven campaigns like Google’s Performance Max further diminish merchants’ ability to gain insights and exert management impact.

These trends further consolidate more power within ad platforms’ hands.

The Product-Led Growth (PLG) methodology counters this trend by empowering marketers to actively manage their campaigns.

PLG establishes a symbiotic relationship between ad platforms and merchants by complementing their respective strengths: driving traffic to websites (ad platforms) and leveraging products performance metrics (merchants).

By ensuring that ad campaign feeds promote top-performing products, merchants effectively reach audiences interested in products they are inclined to purchase.

Principle: Product performance metrics reign supreme. They serve as a powerful ‘lever’ marketers can pull to attract high-intent shoppers to online store.

2. Stage dynamic product discovery experiences

Design → Product Discovery

A visually appealing site design with a strong brand identity remains crucial, but it alone is insufficient to maintain a competitive edge in today’s business landscape.

When over 90% of web visitors leave an average online store without adding any products to their shopping cart, the need for an enhanced product discovery experience becomes paramount.

Merchants can no longer rely on the assumption that web shoppers will navigate pages, use search functions, or filter product grids on their own.

Modern-day shoppers, accustomed to seamless experiences on social media apps, anticipate that online stores will effortlessly provide ways to discover products of interest automatically.

Product-led solutions are addressing this challenge by dramatically expanding a store’s ‘shelf-space’ to showcase available products in various ways, targeting diverse buyer personas with unique product requirements.

Principle: Ensure your products are easily discoverable by employing various methods to display them effectively.

3. Monetize every visitor engagement

Conversion → Customer Behavior

Approaches to monetizing web traffic vary among companies.

Some rely on periodic site redesigns to enhance brand image and implement optimal usability practices. Others focus on continuous conversion rate optimization campaigns, while some prioritize personalized buying experiences. All of these initiatives yield high ROI.

However, they don’t adequately address the challenge posed by the fact that 98% of shoppers remain anonymous with unknown product needs.

The solution to this issue lies in utilizing product performance metrics.

As different buyers independently discover products, they leave behind engagement traces that serve as indicators for similar buyers to follow.

The Product-Led Growth solution effectively captures these buying signals to connect the right product with the right buyer in real-time.

A noteworthy historical fact: Amazon was the first to recognize that visitor behavior is a better predictor of product preferences than historical data alone.

This discovery by Amazon laid the foundation for the Product-Led Growth methodology in e-commerce.

 Principle: Utilize live visitor actions as buying signals to dynamically display the right products in real-time

4. Retain with relevant products

Audience → Product Relevance

Traditionally, customer retention in e-commerce has focused on activities aimed at nurturing long-term relationships and fostering loyalty once a prospect completes a purchase and becomes a customer.

Operated under the mantra of “know your customers,” merchants analyze purchase data to categorize customers into audience groups for subsequent marketing campaigns.

With the rapid advancement in capturing contact information from anonymous online shoppers, the scope of retention campaigns has expanded to include those who have not yet converted into customers.

Whether a person on the company’s mailing or text list is a customer or a prospect who abandoned the site, the fundamental challenge remains: how to entice these individuals back to the online store.

Product-Led Growth technology addresses this challenge by enabling the personalization of email and text communications based on product performance signals from prior store visits.

This approach creates relevance to products already purchased or viewed while also showcasing additional products that an individual may not be aware the brand offers.

Principle: Utilize product performance signals from prior engagements to enhance the relevance of retention campaigns.

Conclusion

Product-Led Growth in e-commerce embodies both a technological advancement and a mindset shift. Technological innovation is facilitated by high-resolution product performance data and real-time AI capabilities. Conversely, the mindset shift centers on the counter-intuitive reality that product performance metrics constitute the next frontier for e-commerce growth