First published on Glass.io on January 25, 2023
Product led growth and sales led growth are two different business growth strategies for increasing software revenue.
Product led growth is all about building a product that is so good and user-friendly that it sells itself and usually initiated using free trials. On the other hand, sales led growth focuses on using a sales team to actively sell a product to potential customers.
As we will see, product led growth and sales led growth don't share a lot of common ground, and there's really only one winning growth strategy being deployed by most SaaS companies today.
Different sales processes
The sales process for product led growth is focused exclusively on the end user. To start, a product must come with a clear value proposition targeting a specific user need or job to be done: this is me and this is what I can help you do. Next, our product must deliver a great product experience and it needs to deliver value fast to delivery success in product led growth.
Customer acquisition for product led growth demands that a product must fit a specific need because no one buys Swiss Army products, meaning a product should focus on doing one thing and one thing only. Driving product led adoption starts by enabling our target audience to self-educate about a product, often in the form of short demos and great documentation with plenty of examples. It needs to be super easy for prospective users to learn what a product does and how it could fit into existing workflows and tools, meaning things like flexibility and easy integration are really important, too.
Sales led growth focuses on hiring and deploying a sales team to engage and sell to customers. Our entry point for an opportunity starts with the highest point we can reach in terms of power, influence and decision making. Sales led growth involves multiple touch points across the customer, engaging and winning over each in lengthier sales cycles as compared to a product led model.
The sales cycle for a sales led motion is all about establishing rapport, building trust and demonstrating capability, each of which takes time and resources. Well trained sales teams able to control multiple stakeholders and priorities are critical to success and they don’t come cheap, so a shorter sales cycle is a highly sought after goal of sales led companies.
What drives growth?
A product led sales strategy demands products that are sticky to drive customer acquisition. They must deliver value continuously to keep the user coming back again and again. Frequent use creates familiarity and when coupled with constant value gives rise to customer loyalty. Organic growth is a crucial step to achieving success with product led growth and it only happens when a product delivers both a great experience and tangible value. Now bring these happy new users together with others in community support channels, encourage them to share tips and customer success becomes organic, too.
And as long as the product continues to deliver a great product experience, user voices will grow ever louder until the nirvana breakout event of the product going viral. I say nirvana because product led growth is all about creating a fully self-service sales environment, which scales automatically and doesn't require large amounts of additional resources like expensive sales teams. Technology to replace sales people. Magic, really.
A sales led model suits products that solve big problems. It starts with marketing providing sales with qualified leads. Sales reps take charge leading sales meetings to drive opportunities down the sales funnel. The sales team is responsible for creating internal champions to help navigate complex organisational structures and align our product to company objectives and priorities. But that’s just the start as a product must undergo detailed security to validate it satisfies detailed technical and business requirements.
A value proposition from the marketing team alone isn’t enough for sales led growth because companies only invest in solutions with a clear and demonstrable return-on-investment. Oh no, for these are complex environments our sales team must fearlessly navigate. Once we've validated our solution we need the approval of architecture committees, hope we survive stringent security reviews and finally gain the hallowed green light status as an approved product and supplier. And then we need that final piece of magic to fall in place: budget approval.
Phew, I mean why would a sales led company do all this hard work, right? It’s the big payoff, of course. You’re only putting teams in place to win these sorts of opportunities when there’s significant upside on the table. A sales led strategy is also well suited to upselling existing customers.
What about market entry and pricing?
The sales process and customer journey for product led sales starts by offering a free trial of the product, either limited by available features and/or consumption metrics, or by providing a free trial period. I strongly advise the companies I consult with to publish clear pricing, too, as most potential customers only invest time with a new product if they know up front what it’s going to cost if they want to continue.
Tracking and analysing product usage and performance in real-time lies at the heart of continuously deliver great experiences for a product led company. Growth is all about providing a frictionless sign up process to onboard new users fast. It’s a simple numbers game that pairs nicely with an attractive price point, too, and most product led strategies making pricing easy to find early in the customer journey.
All this sits in contrast to a sales led company where product features and direction are aligned and prioritised to serve the needs of existing customers - and often the higher paying customers at that. Customer feedback is captured but customer success teams where its periodically reviewed and prioritised by the product team.
The acquisition strategy of sales led growth starts by advertising across multiple channels to create leads that enter a traditional marketing funnel. Sales qualified leads are measured against strict qualification criteria to ensure each sales team is focused and working on the best opportunities. Pricing is often based on multiple factors and rarely published for public consumption.
How do you measure success?
Different metrics are used to measure success with each sales approach. While customer sign ups, logins and user retention are good early indicators for product led growth, it’s the number of active users and the length of each product session that are of far greater importance. With product led growth, active users is the golden metric of truth that a product is delivering real value. Monitoring and analysing every user interaction is crucial for product led companies to identify where and how improvements can be made to the user experience.
Product led companies prioritise the development and improvement of their product as the primary driver for growth. As a result, they focus on building a strong product-market fit and a solid user base before considering customer acquisition cost (CAC). When a product led company has achieved solid revenue growth and is experiencing accelerated growth in key target markets, it is a sign that their product is resonating with customers and gaining traction. At this point, it becomes important to start thinking about CAC to ensure that the cost of acquiring new customers is in line with revenue and profitability goals.
Success metrics for sales led growth include number of new leads, number of first meetings scheduled and conducted, number of demos, number of prospects engaging with pilots or POCs, the number of proposals sent out and finally the number of contracts under negotiation. Given the lengthier sales cycle and far more complex buying process as compared to product led companies, these metrics are classically presented and analysed on a weekly basis at that Monday morning standup that every sales rep just loves.
Can you have a hybrid growth strategy?
What about a hybrid approach where we offer the best sales led and product led approaches? Can we employ both methodologies at the same time to achieve even greater success? No, at least not in the beginning, because these two growth strategies are polar opposites. Consider the product messaging: for product led sales we highlight the value and benefits as they apply to the end user while messaging for sales led growth, with its entry point being senior management and project stakeholders, focuses on business benefits that can be realised through product adoption.
The go to market strategy and the composition of a sales team for sales led growth require completely different skills: product advocates, digital marketers and growth hackers are the new talents required for product led growth. The whole structure, flow and call-to-action of the product website is also different: product led growth is focused on user sign ups while sales led growth is all about triggering visitors to schedule that first call or free demo session with the sales team.
Can you shift and become product led?
Is it possible to shift from product led to sales led to achieve success? Yes, but moving to product led sales certainly doesn’t happen overnight. We’ve witnessed this happen with the large software companies as they were eventually all forced to adopt cloud first strategies or die. You know the ones… Oracle, SAP, Adobe and the like. But today it’s no longer really even a choice, as “87% of buyers want to self-serve part or all of their buying journey” according to this 2021 B2B report from TrustRadius.
I was lucky to be part of an early startup that started with a sales led approach but pivoted to a product led growth strategy. It was a fascinating process to reimagine every aspect of the business. It demanded a complete overhaul on how we drove interest and demand. The biggest change was in our rewriting the messaging in tandem with delivering a freemium pricing model. There was no substitute for quality documentation and great customer support, having a great product is just the first piece of the complex puzzle of sales growth.
What about network effect?
Another phenomenon that’s only possible with product led sales is achieving hyper scale growth, and this is arguably only possible for products with a strong network effect. Slack, GitHub and LinkedIn are great examples - the value of these products grows with every additional user. However, it’s far beyond this article’s capabilities to get into all of the magical happenings of products with strong network effects so I’ll leave that subject for another time.
Product led growth is a relatively new strategy born out of the shift to cloud based SaaS products. It didn’t really exist before the rise and mass adoption of cloud services from AWS, GCP and Azure. The cloud provides the perfect delivery platform for any product to reach any target market. And delivering a SaaS product means we can wire in all the tracking and analytics required to ensure delivery of the perfect customer experience. Product led growth is also the perfect evolution of agile development, where engineering teams can quickly test and improve new features in a truly data-driven manner.
One clear winner
Sales led growth, I’m afraid your time is up and you're just not suitable to driving revenue for SaaS businesses. The product led era has well and truly arrived and you just can't compete with the superiority of the product led growth model.
We respect that you’ve built revenue mountains for countless products, but I’m afraid you just can’t do what new product led growth can and the benefits are just too compelling:
Self-service model means no sales rep required & lower customer acquisition costs
Data-driven product decisions fuelled by real-time user insights
Hyper growth supported by default
Now, product led growth… where's a good place to get a drink around here?
Comments