The growth of your company is one of the most important decisions you’ll have to make as a founder. This decision sets the pace for your whole business and shapes the product experiences your users will have.
There is the time-tested product-led growth strategy that highlights the core strength of your product. But then there’s sales-led growth, which it focuses on improving your sales process by having a strong sales team.
But which growth strategy should you choose? Product-led growth vs. sales-led growth - which is better?
In this article, we'll compare both strategies and show you what makes each one effective. Then we'll help you choose the best strategy for your business. So let's get started!
Product-led growth is a strategy in which the product serves as the driving force for customer acquisition, retention and monetization.
Instead of acquiring customers through traditional marketing channels such as paid ads or PR, you use your product experience to move users down the funnel toward becoming repeat buyers.
Product-led growth often provides businesses with several advantages over other approaches to expansion.
Below are the top 5 benefits of product led growth in
Companies with great products often have a built-in propensity for viral growth, so individual users are eager to invite their teammates and access more features. This organic expansion leads to the adoption of the product by the masses.
Dropbox is an excellent example of this. When users first sign up for Dropbox, they are given free space. But as more people join their network, they get more free space.
With a similar product led growth approach, a company can expand its user base by offering an incentive at each growth stage.
As you grow organically using PLG, your CAC will likely decrease over time.
This happens because customers are “pulled” into the product rather than “pushed” or “sprayed.” This means you don’t have to spend as much on marketing and advertising because you can rely on word of mouth and organic growth from referrals.
The shorter your sales cycle, the more efficient you are at closing deals. When you’re growing organically using PLG, you’ll likely be able to close more deals faster because customers are being pulled into your product.
This means that they won’t need as much “hand-holding” during their decision-making process because they will have already heard about your product from someone else before reaching out to you for help with their problem.
Product-led companies focus on creating meaningful, long-term relationships with their users by providing them with a steady stream of value. Because of this focus, product-led companies have lower churn rates than those focused solely on sales or marketing.
When you’re growing organically, it means that your customers are coming to you because they want or need your product. If you have a high-quality product and an excellent customer experience, then it should be easier for them to stay with you instead of leaving for another solution.
Product-led companies can plan and budget more effectively than those focusing solely on sales or marketing. This is because they know exactly how much money they’ll need to spend on customer acquisition and retention, which enables them to make smarter decisions about what channels and tactics will be most effective at any given time.
By investing in customer service, selling the value of your product, and developing new features, you can save on sales and marketing costs. The benefits will eventually flow in when you have a loyal customer base becoming sales advocates for you.
A sales-led growth strategy focuses on acquiring new customers with a strong sales team. This approach is especially effective when you have a enterprise or highly-priced product but still want to grow rapidly.
It's also a good strategy if you have a product or service that requires direct sales contact with customers, such as B2B software or SaaS products.
When done well, this approach can be very effective at getting new customers and increasing revenue.
Sales-led growth has multiple advantages, which make it an excellent model to follow for most companies. Here are some notable benefits of sales-led growth:
For companies that sell products directly to customers, the sales team is responsible for informing them about what your product does and how they can use it.
This means that the sales team is better positioned to help customers understand how your product can be used and what value it brings them.
Removing friction points and decreasing the likelihood of churn can increase your product's adoption rate.
Enterprise organizations are much more likely to buy from a sales-led organization than a non-sales-driven one. This is because enterprise organizations have higher budgets, longer time horizons, and more complex needs than SMBs.
If your company targets enterprises, a sales-driven approach will help you reach them faster and with better results.
With a sales-driven approach, your company will be focused on understanding the customer's unique needs and helping them achieve those goals through your product or service. You'll be able to do this because you are developing a strong relationships with your prospects in your sales process.
This helps you understand what they need, how they want to use it and why they're buying from you.
A sales-driven approach will help you build these relationships so that when a customer or prospect needs something new, they come back to you first.
A sales-driven approach helps you gain a deep understanding of your customer and their needs, as your sales reps are in direct contact with them. A sales-driven approach will help you ask the right questions, uncover insights and create value for your customers.
This means you can better understand which features are most important to them, what use cases they're trying to solve with your product or service, and how they want to use it. By gaining this insight, you can make more informed decisions about where to invest in building new features that will help drive revenue.
Until now, you learned about the individual concepts of these growth strategies: product-driven and sales-led growth. But what is the difference between them?
Here are the some of them:
A product-led approach to growth means building a business around a great product.
For example, companies like Dropbox or Slack let customers experience their products before making them pay for anything by offering free trials and freemium pricing models—which ultimately sets the revenue stage later down the line.
This model requires no sales team because the product sells itself. On the other hand, sales-led growth means building a business around sales. In this model, companies employ a sales team to sell their products and services and generate revenue from the get-go.
In a PLG company, product management isn't just one discipline among others—it's the driving force behind customer acquisition, retention and monetization. This strategy applies to all teams: from engineering to sales and marketing.
In sales-led companies, the sales team is responsible for acquiring new customers and keeping existing ones. This typically involves a funnel where leads are qualified to either become marketing-qualified leads or sales-qualified ones (depending on product type).
Then these SQLs will then be passed on to the sales team as fodder for nurturing leads into customers.
Product-Led companies can turn customers into brand advocates by offering quick wins. When customers experience the product and receives incentives, they’re more likely to share their experiences with their networks. This helps build awareness of your brand, leading to higher sales and customer retention rates over time.
The best example is Calendly. If someone have to schedule a meeting, they can use this tool to set up a meeting in just one click. This saves both time and effort for both parties, which makes them more likely to recommend it to others.
But with sales led growth, there’s no clear path for customer advocacy. Sure, you can offer your customers incentives to share their experiences with others, but that doesn’t work as it does for product-led companies.
Product-led companies have a clear path for increasing their customer lifetime value (CLV). They can increase the price of their products over time, allowing them to earn more from each customer.
This is especially important for subscription-based businesses where customers may not be willing to pay more than once per month. Sales led growth doesn’t offer this same benefit.
The sales cycle tends to be much shorter for product-led companies, which makes it easier for them to attract new customers. The reason is that it takes less time to sell a product that people already know, so you can focus on building relationships with existing customers instead of having to educate them about what your brand offers.
But when it comes to sales led growth, the opposite is true. Salespeople often have to spend a lot of time with prospects before they can close a deal, meaning it takes longer to generate new customers.
It depends on your business, your target audience, and your product.
Sales-led growth is the way to go if you are selling a product suitable only for enterprise customers. You’ll need a team of salespeople who can work directly with your customers to develop relationships and close deals. But if you are selling a product that appeals to both B2B and B2C audiences, then a product-led approach may be more suitable.
You can also decide the strategy based on your pricing model. If you have a freemium plan, you can use a product-led strategy to grow your user base and convert those users into paying customers. The key is to know your target audience, what they want from the product, and how much they’re willing to pay for it.
On the other hand, if your product has complex pricing, it's better to stick with the sales led growth as it needs your sales team to explain the benefits of your product, demonstrate it to potential buyers, and close deals with them.
But it's important to note that product led growth is not a substitute for sales or marketing. To be a profitable company, you need to maximize the use of its products, actively engage users, and employ other sales and marketing tactics that increase growth.
Today, the appeal of shortening sales cycles and increasing revenue that you get with the PLG is difficult to ignore.
And that's why most SaaS companies rely on product-led strategies—but these can't work in isolation. The two departments need to work together in order to build a cohesive strategy that will help your company grow.
That’s where the role of product-led sales comes in.
Product-led sales is a business model where the Sales and Marketing teams are strategic partners.
It is more like a sales-assisted product-led model where a product manager and salesperson work together to drive revenue. The product-led sales team helps the company identify, develop and market its products. They also work closely with marketing to create campaigns highlighting the value of your SaaS offering.
Sales-assisted is about offering a personalized customer experience from the get-go and “assisting" prospects in their self-discovery—without being salesy.
Here is the typical sales-led PLG sequence,
This is where the customer starts by exploring the product and getting familiar with it. The aim is to help them understand the value of your product without interacting with them directly.
With interactive product demos, you can give the feel of your live product to the user without giving any access to your live product. This way, they will experience the value of your product without any free trials or freemium models.
Storylane helps you create interactive demos with a drag-and-drop editor. With this software, creating a product demo is simple, as it comes with tons of editing features.
A great example of this is Toplyne. They have included an interactive product demo on their home page to showcase the product’s features.
The demo allows their visitors to try and experience the product instead of simply describing how it works. This helped them to boost their conversion rates by 25% without offering any freemium model.
By giving your prospects first-hand experience, you can double the chances of getting them on board.
The next step is to pitch them. Though most users who interact with the demo, ,they will not convert into customers, the demo has done its job by getting you closer to your prospects. You now know what they want and how it can help them solve their problem.
So, you need to analyze your demo and customize the sales message based on it. This can help you get more conversions.
With Storylane, you can track how your prospects interact with your demo in real time. This helps you customize your sales message accordingly and get them to jump on a discovery call to start a conversation. Ultimately, the demo is a tool that helps you understand your prospects better and get more conversions.
If the prospect responds, your Account Executive (AE) or Customer Success Manager (CSM)—whoever is assigned to onboard new customers—will get started with them immediately and help ensure they successfully use your product.
Once they become a paid customer, customers go into the cycle of retention, upselling and cross-selling—so your job is to maximize their lifetime value.
In a nutshell, this is how your sales led PLG will look like,
And there’s one more thing to remember: Your sales team should constantly observe and analyze the data they gather from each interaction. This way, when you review their performance, you can understand what is working and what isn’t—to improve your entire sales pipeline and achieve better results.
While product-led and sales-led growth strategies play an important role in revenue, it's natural to wonder which is the fastest way to grow your SaaS company.
As we mentioned, it depends on your business. Sometimes, a sales-led strategy can work better than a product-led one. But if your goal is to build a sustainable business that scales independently, then you should focus on the sales-led PLG.
The reason is that when you have a demo and focus on sales, your company can generate revenue faster. The main reason is that the sales process is more predictable—it's easier to know how many leads will close and how much they'll spend.
Storylane helps you get closer to your prospects by filling the gap with the interactive product demo. This way, you can showcase the value of your product and how it can help your prospects solve their problems. The interactive demo also helps you build a stronger relationship with your prospect, which is one of the essential steps toward getting them to buy from you.
Want to implement product-led Sales in your business? Schedule a free demo today, and we will assist you in creating a better growth strategy.