Why Product-Led Growth Doesn’t Work Everywhere

What B2B2C and Regulated Industries Need Instead

Executive Summary

Product-Led Growth (PLG) has become the default gospel in SaaS: let users discover value, convert themselves, and scale virally. But in B2B2C models and regulated industries like healthcare, fintech, and legal, the assumptions that power PLG break down. Regulation slows experimentation, the buyer and the user aren’t the same, and multiple stakeholders hold veto power.

The companies that win in these sectors won’t abandon PLG altogether. Instead, they’ll build hybrid growth strategies that combine high-touch trust-building with self-service scale. In these industries, trust, compliance, and stakeholder alignment are the real growth engines—not viral loops.

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The PLG Assumptions and Why They Fail in Complex Industries

PLG is built on three assumptions:

1. The end user is the buyer.
   
   

2. Adoption flows quickly from individual delight to organizational purchase.
   
   

3. You can experiment fast and iterate to product-market fit.

In B2B2C and regulated industries, all three fail.

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1. Compliance Trumps Convenience

In regulated SaaS, experimentation isn’t free. Healthcare, legal, and financial products must pass through compliance reviews before new features ship. A “move fast and break things” release strategy is a liability.

As The Good notes, regulated SaaS firms “face a longer and more complex buyer’s journey, more risk-averse buyers, and restrictions on experimentation”.  PLG thrives on quick iteration and A/B testing but when every change needs approval or certification, the velocity drops.

Bold reality: In regulated industries, speed to market ≠ product velocity. Done right, moving carefully and building compliance into the product is the moat competitors can’t copy.

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2. The User Isn’t the Buyer

PLG depends on the idea that the person who uses the product has budget authority. In B2B2C, that’s rarely the case.

Take healthcare: a doctor may trial a scheduling tool, but IT, compliance, and finance committees approve the contract. In legaltech, an associate may test a drafting app, but procurement and risk teams make the decision. In fintech, consumers might sign up, but banks or channel partners control distribution.

Amplitude’s analysis is blunt: “Not all B2B companies should be doing PLG”. Complex B2B sales cycles require sales-led or marketing-led approaches alongside the product. PLG may help with top-of-funnel awareness, but it can’t close enterprise deals on its own.

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3. Dual Stakeholders, Conflicting Incentives

In B2B2C models, you serve both the business partner and the end consumer. Their needs often conflict.

• Consumers want simplicity, speed, and delightful UX.
  
  

• Business partners want control, compliance, margin protection, and auditability.

StoreHippo identifies “customized buyer journeys and seamless integrations” as core challenges in B2B2C, precisely because multiple stakeholders must be satisfied simultaneously. A feature optimized for the consumer might frustrate the partner - or violate regulatory requirements.

Bold reality: Pure PLG almost always optimizes for the end consumer. In B2B2C and regulated markets, that’s not enough.

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Why Trust, Not Virality, Drives Growth

In regulated industries, trust is the product. Without it, adoption stalls no matter how elegant the UX.

A study on AI/ML validation across healthcare industries found that the “lack of common standards for validation across organizations is a primary barrier to adoption”. Translation: buyers don’t trust what they can’t audit.

This is why “show, don’t tell” PLG tactics often backfire. A freemium model doesn’t persuade an enterprise healthcare buyer; proof of compliance, documented validation, and secure audit logs do.

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“In regulated industries, velocity doesn’t mean faster - it means safer. And done right, safety becomes a moat.”

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The Hybrid Growth Playbook

So what replaces “classic” PLG? A playbook that balances trust, compliance, and scale.

1. Sales-Led Upfront, PLG Later
   High-touch sales or field engagement to land regulated or enterprise accounts. Self-service and PLG motions layered on top once risk and compliance hurdles are cleared.
   
   

2. Compliance as a Feature
   Don’t bury compliance in footnotes. Surface audit logs, consent flows, and validation steps in the product. In fintech and healthcare, this is part of the value proposition, not an obstacle.
   
   

3. Data Governance Discipline
   AI/ML products in regulated industries fail without robust governance pipelines and consistent terminology across compliance, engineering, and legal  Build governance as infrastructure, not an afterthought.
   
   

4. Align Incentives Across Layers
   In B2B2C, ensure the business partner and consumer both see value. This might mean adding configurability for partners even if it complicates UX for consumers.
   
   

5. Segment Growth Motions

• SMB / low-risk segments: PLG can shine.

• Enterprise / regulated segments: Sales-led, partner-led, compliance-first.

 This hybrid approach ensures you’re not leaving growth on the table by forcing one model everywhere.

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Predictions: Where Growth in These Industries Is Headed

• Compliance as Differentiator: Companies that embed compliance dashboards and validation into their product will win deals by proving trust faster.
  
  

• Hybrid Motions Become Default: Expect regulated SaaS firms to blend PLG for SMB/consumer adoption with sales-led for enterprise buyers.
  
  

• Trust Metrics Overtake PLG Metrics: Net Revenue Retention (NRR) and virality will be secondary to compliance certifications, audit pass rates, and governance transparency.
  
  

• The New Growth Role: Chief Trust Officer: As data governance and compliance become product features, expect new leadership roles owning both growth and trust.

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The Bold Takeaway

PLG is powerful but it’s not universal. In B2B2C and regulated industries, trying to force PLG often leads to frustration, underperformance, or wasted resources. The winners won’t abandon PLG, they’ll adapt it into a hybrid model where trust, compliance, and stakeholder alignment drive growth.

Bottom line: In these markets, trust is the growth engine. Build it into your product, and you’ll scale. Ignore it, and you’ll keep chasing metrics that never materialize.

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Sources

• The Good – Why Regulated SaaS Companies Need a Different Approach to Growth
  
  

• Amplitude – Not All B2B Companies Should Be Doing PLG
  
  

• StoreHippo – 7 Challenges of the B2B2C Model
  
  

• Arxiv – Validation of AI/ML Products across Regulated Healthcare Industries