According to our 2022 SaaS Growth Benchmarks report, almost 60% of the surveyed companies have already implemented a product-led growth motion. But is this strategy well-suited to achieve your growth goals? Should your company transition from sales-led to product-led?
To find answers, a deep dive into the building blocks of product-led growth vs. sales-led growth is essential. Each strategy presents its own set of benefits and limitations, and as you'll discover in the article, the path to scaling your SaaS business doesn’t adhere to a universal approach.
The trick is figuring out what’s best for you, which might entail adopting a hybrid model for some. Let’s get started.
Product-Led Growth (PLG) Model
Product-led growth uses the product as the primary driver for both customer acquisition and retention.
In a PLG model, customers can try out the SaaS product before making a purchase or committing to a paid subscription. By offering a free trial or a freemium version, potential customers can experience the value and benefits of your SaaS product. This self-serve approach enables users to explore the product at their own pace, eliminating, in many instances, the necessity for direct sales involvement.
The strategy goal is to create a seamless user experience that efficiently guides users to their "Aha!" moment. Doing so requires a collaborative effort across company departments to understand the user journey, optimize onboarding, and continuously use data and user feedback to iterate.
Dive deeper into the product-led growth methodology with ProductLed founder and bestselling author, Wes Bush, in the 40-minute PLG framework masterclass below.
Advantages of Product-Led Growth
Product-led growth offers diverse benefits that amplify customer engagement and revenue potential. These advantages include:
- Lower Customer Acquisition Costs: With a product-led growth strategy, you can significantly reduce customer acquisition costs. Instead of relying on expensive marketing campaigns or sales representatives, you can leverage the product's value and features to attract and convert customers.
- Increased Customer Satisfaction: By allowing customers to try a free trial or freemium model of your product before making a purchase, you are allowing them to experience its value firsthand. This leads to higher customer satisfaction as they can make informed decisions based on their experience. PLG further enhances the users’ experience by encouraging continuous improvement and innovation based on customer feedback.
- Faster Time-To-Value (TTV): With a PLG strategy, customers can start using your product immediately, without the need for lengthy sales cycles or negotiations. This reduces the TTV and achieves their desired outcomes. As a result, they are more likely to become paying customers and stay engaged with your product in the long run.
- Viral Growth: By focusing on delivering a remarkable product experience, you can turn your customers into brand advocates who help spread the word about your product. When customers have a positive experience with your product, they're inclined to share it with others, setting off a chain reaction of viral growth. These valuable word-of-mouth referrals, in turn, become a driving force behind organic growth.
- Informed-Driven Decisions: A product-led growth strategy allows you to gather valuable usage data on how customers are using your product. This data can provide insights into user behavior, preferences, and pain points, enabling you to make data-driven decisions to improve your product and drive growth.
Explore deeper insights into the game-changing power of product-led growth in “14 Benefits of Product-Led Growth” on our blog.
Challenges of Product-Led Growth
Just like with any business approach, there are potential challenges that SaaS founders should always remain mindful of. Here are key PLG obstacles to consider:
- Lacking Team Alignment: All departments — Marketing, Engineering, Customer Success, Product Management, etc. — must align on shared success metrics. Without this cohesion, conflicting goals could arise, leading to inefficiencies and missed opportunities.
- Scaling Hurdles: Product-led growth can be highly effective for startups and small businesses, but as companies scale, they may encounter challenges in maintaining the same level of growth. Planning and investing in infrastructure and resources are necessary for sustaining growth. Handling increased demand and maintaining customer support is paramount.
- Adaptability Needed: Agility and responsiveness to feedback and market shifts are inherent to product-led growth. Yet, rigid processes and reluctance to iterate hinder progress. Embracing improvement and adjusting to customer needs and market changes is crucial.
By being aware of these potential PLG roadblocks, companies can proactively address them and iterate to maximize their product-led potential.
Need help choosing which free model is right for your business? Check out ProductLed Academy where you're coached by Wes Bush to master the nine components of a product-led business – including your free offer.
Sales-Led Growth (SLG) Model
Sales-led growth is a traditional business strategy that relies heavily on the efforts of a sales team to drive customer acquisition, retention, and revenue growth. In a sales-led company, the Sales team moves prospects through the sales pipeline and closes deals.
Unlike product-led growth, sales-led growth relies on the personal touch and expertise of salespeople to drive conversions. This approach often involves a more hands-on sales process, with sales reps actively engaging with prospects, conducting demos, and negotiating deals.
Sales-Led Model Perks
In some instances, a sales-led model has the upper hand over PLG.
Sales-led models are generally more efficient for businesses offering complex or high-touch solutions, especially in industries where customer education and personalized guidance are crucial. PLG, on the other hand, typically works better for products with intuitive interfaces that users can adopt and explore independently.
A company can additionally benefit from a sales-led approach for enterprise sales, where negotiations, customizations, and contract discussions are common. These interactions require the human touch and flexibility that PLG might not provide, as SaaS products in a product-led model are often designed for self-service and rapid adoption.
6 Key Differences Between PLG vs. SLG Strategies
A PLG strategy centers on swiftly solving user pain points with a superior product, while SLG highlights the art of selling, with sales teams leading the way.
Let's now delve deeper into the distinctions between these growth strategies below:
1. What Drives Business
In the product-led growth approach, the primary focus revolves around improving the SaaS product to solve the pain points of ideal users as quickly as possible. By prioritizing delivering an exceptional product, understanding that revenue will naturally ensue.
Conversely, in a traditional sales-led model, the primary emphasis is on making the sale. Sales teams take the lead in advocating for their company's product by telling (not showing) consumers its benefits to potential consumers.
2. Initial User Engagement
Product-led consumers try before they buy.
As an example, consider Canva, which offers free design tools for almost any work or personal occasion. The company’s free templates make the process effortless, and as freemium users grasp the value it offers and desire additional features, they have the option to upgrade to enhanced design capabilities or opt for a paid plan.
Sales-led consumers may spend a lot of one-on-one time with a sales rep, but their first engagement with the product is not until a sales demo or after they've paid.
3. Product Value
The product-led model revolves around delivering value to the consumer before their purchase, whereas a sales-led model provides product value after the sale is complete.
PLG goes beyond just offering a free trial. The strategy aims to deliver a product that addresses real user pain, offering concrete value that leaves them wanting more.
In contrast, sales reps outline the product's value proposition within a sales-led model. After the sale is finalized, the customer gains access to the product to start experiencing its inherent value.
4. User Guidance
A low friction experience in a self-serve product-led model empowers users to independently explore and onboard.
Alternatively, in a sales-led growth model, sales representatives are gatekeepers crucial in customer acquisition. Their role involves engaging with potential customers, understanding their needs and pain points, selling the product's features and benefits, and guiding them through the sales journey.
5. How Success is Defined
Customer success is a critical component of a successful product-led growth strategy. It drives adoption, increases customer advocacy, fuels customer growth, aligns with product development, and enables scalability.
Alternatively, in a sales-led model, success is measured by the Sales team's productivity in converting prospects into paying consumers.
6. Team Structure
In a PLG model, teams are organized around leveraging the product to drive business growth. Unlike sales-led models, where teams are often siloed, the Marketing, Product, Sales, Engineering, and Customer Success departments work collaboratively to achieve their goals.
Now that we understand the basics of the PLG and SLG strategies and what makes them different, it's important to recognize that these strategies aren’t fixed in one way.
Certain SaaS companies opt for a hybrid model, combining sales with a product-led foundation. This hybrid approach is the topic of the next section.
A hybrid product-led sales approach involves combining elements of both a self-serve product-led growth model and a sales-led strategy. In this approach, a company initially emphasizes a self-serve model to attract and convert customers, but as revenue plateaus or specific circumstances arise, a sales team is introduced to assist with certain high-touch customer segments or situations.
The decision to move to a hybrid model is prompted by several factors. While self-serve models can drive growth up to a point, revenue may eventually stagnate. At this stage, a sales team can help target specific customer needs, close larger deals, and explore new revenue streams.
Shifting to a hybrid model doesn't mean discarding the existing product-led model but rather complementing it with sales efforts to tap into untapped opportunities.
Factors such as company size, revenue growth, investor expectations, and the target market all play a role in determining when the timing is right.
Learn the finer details of the self-serve model, with a particular emphasis on the role of sales in “Pros and Cons of Self-Serve Sales Driven Hybrid Model” on our blog.
Refining Product-Led Strategy With Sales
While product-led growth emphasizes the self-serve nature of the product, there may still be instances where adding a sales component can enhance the customer experience and drive revenue growth. For example, some customers may require personalized onboarding or have complex use cases that benefit from a consultative sales approach.
To integrate sales alongside your product-led strategy, finding a balance between self-serve and human touch is key. You can achieve this by introducing a sales-assisted model, where sales teams provide guidance and support to customers when needed, without being the primary driver of customer acquisition and retention.
A product-led sales strategy can leverage the strengths of both approaches and create a seamless customer journey that combines the efficiency of self-serve with the personalization of human interaction.
For insights on scaling your SaaS company, explore the ProductLed Method, a comprehensive framework that covers all the major components of building a product-led business and helps you spotlight what you should focus on first.
Alternatively, if you’d like to work with a coach to implement the best growth strategy into your business, be sure to check out ProductLed Academy.
It’s our intensive coaching program where we’ll help you build a strong foundation for product-led growth so that you can scale faster and with more control.
What’s unique about this program is we’ll work with you and your team to implement the proven ProductLed Method so that you can scale faster with less stress.
We’ll go through everything we went through today with your team so you can create an irresistible offer for your users.