Product-led growth is a strategy that focuses on using your product as the main driver to aware, attain, and convert the customers. For example, if you’ve ever used Slack or Notion, it’s either because of the referral or organic search but not because of any cold or promotional email.
PLG emphasizes on how customers want to see the product in action without any general interference from the sales team or brand.
But why is the product-led approach so different from the sales led —the traditional one?
This article will cover defining aspects of product-led and sales-led growth.
The concept of product-led growth revolves around the product. The business solely relies on product usage and customer experience to acquire new users.
Most of the companies with product-led growth concepts have two types of pricing models:
There are a lot of benefits of having a PLG approach in your business. It helps you cut down your overhead costs by reducing the sales and marketing budget.
This is because the product-led approach doesn’t believe in cold emailing any random person just because they match your buyer persona but have never used the product.
PLG approach works over the concept of product-led qualified leads. PQLs are hot or warm leads which means they have already used your product in one way or another.
So when your team works with such molded customers, it takes less time and effort to convert them as compared to unknown cold leads. This is why every SaaS brand is trying to make the PLG approach work for them.
This also means that your software has to be your focal and strongest point in this game. You cannot rely on product-led growth without a product that solves your ideal customers’ issues.
The significant piece of product-led growth is its end users. So for brands either transitioning or starting as product-led, its end users are the main drivers. Creating for your end-users means prioritizing your customers and their needs.
You need to understand their desires, goals, and problems—to develop better solutions for them.
Product-led growth is not something that you can plug in and forget. It requires constant effort, strategizing, and time to achieve results. PLG is not a quick fix for getting more customers—it’s a time-evolving process and needs more alignment with your goals and strategy.
If that’s what PLG is and needs so much time and effort, why should any company bother? The answer is for better, faster, and more conversions.
It gets expensive when you are entirely dependent on marketing and sales activities to drive leads, convert, and retain those customers.
It’s not that you need to pour your money in only one channel but into multiple channels such as search engine ads, social media ads, advertising, and direct sales.
This can add multiple layers of expenses with minimal results. But with product-led growth, you’ll deal with qualified leads that come to you and not you going to them. This saves you tons of extra costs and money you would be spending.
You can also think of this as reducing churn with a product-led approach.
As I already mentioned that because of the PLG approach, your sales team works with better-qualified leads because they know about their engagement and product adoption records.
But also, at the same time, the customer success team needs to keep a tab on customers who are not getting the desired value out of your product.
This will help you convert a considerable customer base steadily and retain them for a substantial amount of time.
Product-led growth is to drive a better user experience. It’s safe for users as they aren’t investing in the product just by seeing a demo.
They are getting value out of it before paying and at every step—starting from user onboarding, and they pay only if they find value in that product. There are no mandatory conditions that if they signed up for your freemium model, they need to subscribe for paid ones.
Sales led is the traditional method in which you knock on every stranger's door to sell your product. Technically, it is your team's responsibility to bring new customers and spark that interest from the top of the sales funnel or TOFU.
From there, a sales developer handles the process of lead qualification, and after that, they pass the details of qualified prospects to the sales team to finally convert the person or close the deal and call it a day.
Then the customer is sent for the onboarding process. This process is traditional, straightforward, and effective.
The only negative point in this process is the absence of customer engagement, and the customer won't come to you. Instead, you'll have to pitch them your product and explain the value it'll bring to their lives.
You don't pitch your freemium model here, and technically if you decide to go with the traditional sales approach, you don't have a freemium model.
So the conversion depends upon your paid model and the way you pitch to your prospects.
As we move forward to the differentiation, I would like to mention that product-led growth is not here to replace sales-led but to help the sales team better.
I am not trying to convince you that product-led is better than sales-led, but just four points that explain the diversity of these two concepts.
This is a significant point of difference between product-led and sales-led approaches. The sales led approach is a lot more expensive than the product-led.
There are three ways with which you can achieve cost-efficient growth by implementing product-led growth:
However, the sales-led approach is more expensive with all the combined advertising and onboarding costs.
People who come across your product and sign up for it automatically move towards a meaningful outcome without any interference from your team.
For example, you have created an email marketing platform for creators, and some people signed up for it.
So they have successfully onboarded themselves and passed their first stage. But once they send the first email to their subscribers, that's when they achieve this meaningful outcome.
Companies with a product-led approach can achieve this through product or conversational bumpers. Whereas sales-led, companies need real people to assist their customers in reaching their first meaningful outcome in the shortest time.
PLG approach is the right strategy for self-served and simple products, which is why they mainly target smaller or medium-sized businesses.
Whereas you can use a full-fledged sales team to convert enterprises. Because when you target enterprise, the buyers generally don't have the time and availability to try their hands on new tools.
With enterprise as an ideal customer, you can increase your lifetime value as these products are normally expensive, and such customers usually stick with the product longer.
The product-led concept is here to fuel up the efforts of the sales or marketing team. The growth of most product-led companies that you witness is by combining the efforts of both sales and marketing teams.
So you need to find a sweet spot between both the teams to balance the efforts and get the most out of product-led growth.
Product-led growth is here to stay, and there is no second opinion about it. But, you need to remove those traditional tactics that don't work anymore. Instead, you'll need to shape your other teams better to claim better things for your business and the customers. Successeve is a dedicated product-led solution, we'll help you get there.