Product-led vs. Sales-led. Which is better?
Sales-led growth strategies have previously dominated almost every industry for decades. However, in the past few years, we’ve seen a huge shift towards product-led growth (PLG) strategies, and it’s not going anywhere. In fact, a whopping 91% of B2B SaaS companies are continuing to implement PLG initiatives from 2022 onwards.
Choosing the right growth strategy is absolutely crucial to ensure long-term success for your business. Remember, this will ultimately determine where you focus your efforts and investments within your entire growth funnel.
So, is the traditional sales-led approach better for growth? Or should all SaaS companies turn to a product-led initiative? Keep reading to find out the best option for your SaaS business, including:
- What is Product-Led Growth in SaaS?
- What is Sales-Led Growth in SaaS?
- Sales-Led vs Product-Led: What are the Main Differences?
- Benefits of Product-Led Growth
- Benefits of Sales-Led Growth
- Sales-Led vs Product-Led Growth in SaaS
What is Product-Led Growth in SaaS?
Product-led growth is all about relying on the product itself to acquire and retain customers. By ensuring the best possible product experience, users are able to see the value of the product through their own use of it, ultimately driving them further down the growth funnel. It’s down to the product team to develop a product that sells itself, rather than the business relying on its sales team.
What is Sales-Led Growth in SaaS?
As you may have guessed, sales-led growth relies on the sales team to acquire and retain customers to drive growth. The sales team is responsible for gathering leads and nurturing them through the entire growth funnel. They do this by ensuring the customers see the product’s value and converting them into loyal paying customers.
Sales-Led vs Product-Led: What are the Main Differences?
The definitions above are helpful in identifying the two different approaches to growth. But it’s important to know the main differences in more detail if you want to identify the right growth strategy for your product and business. Here’s a handy table to help you:
|Driving force||The product itself and the product team||Marketing/sales strategies led by the sales team|
|User experience||Allows the user to discover the value of a product by themselves. Usually, they offer a free trial or freemium plan of the product to do this||Nurtures the user through their entire product journey using sales assistants. They usually provide personalized demos to help show the users the value of the product|
|Customer support||Opts for self-service support, such as a knowledge base, to give the user free reign||Provides 1-on-1 support via live demos, chats, or calls for total support|
|Target customers||Larger target of users across a market. Their user base is mostly made up of smaller companies||More specific customer target. Their user base is mostly made up of larger companies|
|Type of product||Simple, easy-to-use product||More complex product|
|Sales cycle||Short sales cycle||Long sales cycle|
The right growth strategy for your business really depends on the nature of your product, your target market, and your pricing model. You might find you need to adjust aspects of your company to optimize your chosen growth strategy, too.
Benefits of PLG
There’s a reason why so many SaaS companies are turning towards a product-led growth strategy. Here are some of the top benefits:
- Lower Customer Acquisition Costs (CAC): With the product as the focus, companies don’t need to invest as many resources to acquire, retain and convert customers through various sales techniques. Not only does this keep the sales cycle nice and short, but it also means the company saves a lot of money.
- More sustainable: Focussing on the product itself is a much more sustainable approach to growth. It’s a lot easier to evolve your product to fulfill your users’ needs rather than adjust your sales strategy. After all, sales require a lot more time, money, and effort to convert users, while your product can do it all by itself.
- Better retention: Allowing your users to experience the product themselves is a sure way to get users to reach their ‘aha moment’ quickly, thus reducing their Time To Value (TTV). This ultimately has a huge impact on your retention rates since your users get to experience the value rather than simply telling them that the value is there.
Benefits of SLG
A traditional sales-led strategy is still a failsafe approach for many SaaS businesses out there. Here are some reasons why that may be:
- Target bigger accounts: As mentioned earlier, sales-led companies usually have more success targeting much larger companies thanks to their more complex products. And, as we know, large companies = more money.
- Personalized onboarding: Sales-led companies provide a personalized onboarding experience (usually in the form of live demos), where sales representatives can guide the users to reach the ‘aha moment’ themselves. Because the sales rep is in total control of the onboarding, it’s a lot less likely for users to experience any friction when using the product, which plays a huge role in reducing churn.
Sales-Led vs Product-Led Growth in SaaS
So, crunch time… which one is better? Well, it really depends on your business. The best way is to start by answering the following questions: What’s your product like? Who is your target audience? What kind of business model do you have?
In fact, many SaaS companies are actually combining the two approaches to create a hybrid growth strategy. By combining a mix of the two, you can reap all the benefits for every stage of your growth funnel. Just take a look at SaaS companies like Slack, Atlassian, and Dropbox – it’s working, big time.
As a product success platform focussed on increasing growth for your SaaS company, FROGED combines sales-led and product-led approaches and features for the best of both worlds. Explore FROGED solutions such as personalized onboarding, knowledge bases, and proactive customer support channels to see how your company could implement the most effective growth strategy that puts your customers first!