What You Need to Know About Product-Led and Sales-Led Growth: Tips and Tricks

If you’re a SaaS founder or marketer, you’ve probably heard about these two terms: product-led growth and sales-led growth. But what do they mean, and which one is better for your business?

In this post, I’ll explain the differences between product-led and sales-led growth, and give you some examples and case studies of companies that use each strategy. I’ll also share some tips on how to choose the right growth model for your SaaS product.

‍

What is product-led growth?

Product-led growth (PLG) is a growth strategy that centers your product as the driving force for customer acquisition, retention, and monetization. This means that your product experience is the main factor that attracts, engages, and converts your users.

In a product-led growth model, you let your users try your product for free or at a low cost, either through a free trial or a freemium plan. You don’t rely on salespeople or demos to convince them to buy. Instead, you let them discover the value of your product by themselves, and guide them with contextual onboarding, in-app messages, and feedback loops.

The goal of product-led growth is to create product qualified leads (PQLs), which are users who have reached a meaningful outcome with your product and are ready to upgrade or buy. For example, sending the first email campaign to a number of subscribers could be a meaningful outcome for an email automation tool like Mailchimp.

Some of the benefits of product-led growth are:

• Lower customer acquisition cost (CAC), since you don’t need to spend as much on marketing and sales.

• Higher user engagement and retention, since your users are more likely to stick with a product that they have tried and liked.

• Faster scalability and virality, since your users can easily share your product with others and invite them to join.

Some of the challenges of product-led growth are:

• Higher customer support cost, since you need to provide more assistance and education to your users.

• Lower conversion rate, since not all users who try your product will become paying customers.

• Higher competition, since other products can easily copy your features and offer similar value propositions.

Some examples of successful product-led growth companies are:

• Slack: The popular collaboration tool lets users sign up for free and use its basic features with unlimited members. Users can then upgrade to paid plans for more storage, integrations, and security options.

• Zoom: The video conferencing platform offers a free plan that allows users to host meetings with up to 100 participants for up to 40 minutes. Users can then upgrade to paid plans for more features and longer meetings.

• Dropbox: The cloud storage service gives users 2 GB of free space and lets them earn more by referring friends or completing tasks. Users can then upgrade to paid plans for more space and advanced features.

‍

What is sales-led growth?

Sales-led growth (SLG) is a growth strategy that relies on your sales processes and teams to drive customer acquisition, retention, and monetization. This means that your salespeople are the main factor that influences your users’ buying decisions.

In a sales-led growth model, you don’t let your users try your product for free or at a low cost. Instead, you require them to fill out a form, request a demo, or schedule a call with a salesperson. You then use marketing campaigns, content, and lead nurturing to generate interest and awareness among your prospects.

The goal of sales-led growth is to create sales qualified leads (SQLs), which are prospects who have expressed interest in your product and are ready to buy. For example, requesting a quote or a proposal could be an indication of interest for an enterprise software solution.

Some of the benefits of sales-led growth are:

• Higher conversion rate, since you only focus on prospects who are likely to buy.

• Higher average revenue per user (ARPU), since you can charge more for complex or customized solutions.

• Higher customer loyalty, since you can build stronger relationships with your customers through personal interactions.

Some of the challenges of sales-led growth are:

• Higher customer acquisition cost (CAC), since you need to spend more on marketing and sales.

• Lower user engagement and retention, since your customers may not fully understand or appreciate the value of your product.

• Slower scalability and virality, since your sales cycles are longer and more dependent on human factors.

Some examples of successful sales-led growth companies are:

• Salesforce: The leading CRM platform targets enterprise customers who need complex and customized solutions. It uses marketing campaigns, content, events, and referrals to generate leads, and then assigns them to sales reps who guide them through demos, trials, negotiations, and contracts.

• HubSpot: The all-in-one marketing software offers a free CRM tool as a lead magnet, but then uses salespeople to upsell prospects to its paid plans for marketing, sales, and service. It also uses content, webinars, and certifications to educate and nurture its leads.

• Oracle: The multinational software company sells a wide range of enterprise solutions, from databases to cloud services. It uses a mix of inbound and outbound marketing strategies to generate leads, and then employs a large sales force to close deals.

Product-Led vs Sales-Led: A Comparison of Customer Journeys

One way to understand the difference between product-led and sales-led growth is to look at how they affect the customer journey. A customer journey is the path that a customer takes from discovering your product or service to becoming a loyal and satisfied user. It consists of various stages, such as acquisition, activation, conversion, retention, and advocacy.

A product-led journey is a customer journey that is driven by the product experience, where the product is the main source of value and differentiation. A sales-led journey is a customer journey that is driven by the sales process, where the sales team is the main source of value and differentiation.

The table below summarizes the main steps and characteristics of each journey:

As you can see from this table, product-led and sales-led journeys have different focuses and approaches when it comes to attracting, engaging, converting, retaining, and delighting customers.

‍

How to choose the right growth model for your SaaS product?

As you can see, product-led and sales-led growth are both valid and effective growth strategies, but they have different advantages and disadvantages. So how do you decide which one is best for your SaaS product?

There is no definitive answer to this question, as it depends on various factors, such as:

• Your target market: If you’re targeting small and medium businesses (SMBs) or consumers, product-led growth may be more suitable, as they prefer self-service and low-cost options. If you’re targeting large enterprises or organizations, sales-led growth may be more suitable, as they need more guidance and customization.

‍

• Your product complexity: If your product is simple and easy to use, product-led growth may be more suitable, as you can let your users experience its value quickly and easily. If your product is complex and hard to use, sales-led growth may be more suitable, as you can help your users understand its benefits and features.

‍

• Your product differentiation: If your product is unique and innovative, product-led growth may be more suitable, as you can showcase its novelty and appeal to your users. If your product is similar to others in the market, sales-led growth may be more suitable, as you can highlight its competitive advantages and differentiate it from the rest.

Of course, these are not hard-and-fast rules, and you can always experiment with different approaches and combinations. For example, you can use a hybrid model that combines elements of both product-led and sales-led growth, such as:

• Offering a free trial or a freemium plan, but also providing an option to request a demo or a call with a salesperson.

• Using salespeople to qualify and convert leads, but also providing them with access to your product and resources.

• Using your product to generate leads, but also using content and marketing campaigns to educate and nurture them.

The key is to find the right balance between your product experience and your sales process that works best for your business goals and customer needs.

‍

Conclusion

Product-led growth and sales-led growth are two different ways of growing your SaaS business. Both have their pros and cons, and both can work well depending on your situation.

The best way to choose the right growth model for your SaaS product is to understand your target market, your product complexity, and your product differentiation. You can also experiment with different approaches and combinations to find the optimal fit.

I hope this post has helped you learn more about product-led and sales-led growth. If you have any questions or comments, feel free to leave them below. I’d love to hear from you! 😊

‍