Product Led Growth vs Sales Led Growth: Taking the best from both worlds

Traditionally software companies grew using a sales led strategy, with teams of sales development representatives generating opportunities then account executives closing deals. More recently companies have started utilising product led approaches either with or without a sales team. Neither sales or product led strategies are inherently better in general, but some strategies are more suitable in different situations.

This article outlines different growth strategies, compares and contrasts the benefits and disadvantages of each alongside some metrics from our own experience, and provides some suggestions on how to implement the best parts to maximize the effectiveness of your own go to market strategy.

What is Product Led Growth?

Product Led Growth centres on the product as the main driver of customer acquisition and will almost always have users using the product in some capacity before buying. In a “pure” product led growth strategy there will be no salespeople i.e. think of subscribing to a Canva subscription.

Benefits

• Lower cost of acquisition, no need to spend time or money on sales people to make calls, take meetings etc which can make lower price points profitable.
• It is possible to close customers without any human interaction, resulting in the possibility for an extremely scalable business model.
• Consistent messaging, there is no chance for sales people going off script.
• There is a strong incentive to consistently develop product experience, as this a major lever to help you close additional sales.

Disadvantages

• Expensive and time consuming to get working as multiple pieces need to be in place:
  
  • Need to have a good inbound marketing funnel to not require humans to perform prospecting
  • Potential customer needs to be able to work out how to use your product without having an onboarding call
  • The product needs to solve an underlying problem customer is having
  • The purchasing process needs to be simple and timed in such a way that the customer has had some time to use the product but not offer too much for free.
• Getting feedback from customers, especially qualitative, becomes very difficult especially with only a few initial users. There are many products out there that let you get a detailed view of what customers are doing inside your product (i.e. PostHog) but regardless of all the features available like heatmaps, screen recordings etc they cannot explain the thought process of what is going through the head of your customer.

Example Companies

‍Stripe, Canva, Slack

What is Sales Led Growth?

Sales Led Growth involves following a traditional growth strategy that utilizes a sales team to drive customer acquisition. This approach is typically used to close “big” enterprise deals with long sales cycles and complicated purchasing processes.

Benefits

• Easier to get started as less upfront investment, you just need an email account or phone number to get in touch with potential prospects and make a sale
• Qualitative feedback from leads on what they are trying to achieve and feedback on the product comes naturally through the process of selling
• Selling to enterprises becomes much easier as you can handle more complex sales processes and buying committees.
• Easier to personalize offering, i.e. can focus on different aspects in the meetings based on what the prospect is saying
• Certain products, for example those with complicated sales processes touching many stakeholders and/or complicated onboarding processes like SAP can only be sold in this manner.

Disadvantages

• You need a large deal size in terms of revenue to cover the time invested by your sales staff, chasing smaller deals is not economically sensible.
• Lead acquisition will either consist of some mix of cold calling, emailing or direct messaging via platforms like LinkedIn or events like conferences which can be difficult and expensive to scale.
• Having to hire sales people and train them which is neither fast nor cheap, the usual quoted time for a sales representative to become a productive seller is around three months or more.

Example Companies‍

SAP, Oracle

What is Product Led Sales?

Product Led Sales is a hybrid model, which uses self-serve users as the primary input to the sales funnel. This would usually consist of a product led go to market strategy with a sales team taking meetings and nurturing the higher value leads to close. This can be done for a variety of reasons, either to increase deal sizes at more established companies or with early stage companies “Doing things that don’t scale” to acquire their first few customers.

Benefits

• The lead is qualified through usage of the self-serve product, so they are usually much more educated than a cold prospect in a call.
• Can personalize pitch based on problems they are already solving from their trial of the product and highlight potential features that may help them do it more effectively.
• Easier to close large enterprise deals using sales team while allowing smaller prospects to go through self-serve experience.
• While building out PLG product experience sales team can help work around rougher edges to the product experience manually i.e. sending customer invoices manually instead of building a full Stripe integration.

Disadvantages

• Needs upfront investment like PLG to get the self-serve model up and running to acquire leads which is time consuming and expensive, that said having sales resources can help manually perform some tasks in the customer acquisition process for example billing reducing the upfront investment required to close your first customer.
• In addition to making the investment to build a PLG system, you need to build a sales function and associated processes as well.
• Processes, tooling and desired sales rep traits will be different to companies with a pure SLG go to market strategy which needs to be taken into account when hiring. For example cold calling skills are probably not as much of a priority compared to a much more detailed understanding of the product and customer problems.

Example Companies

‍AWS, Hubspot, Microsoft

Product-Led vs Sales-Led Metrics at HowdyGo

Currently at HowdyGo we use a hybrid product led growth & sales strategy allowing the prospect to self select, either signing up for our self-serve product or to move into the PLS funnel through booking a call. This provides us with some interesting metrics about which kind of customers choose to go into each type of funnel and how they differ.

Revenue per account

Average deal size is 5x larger if using SLG or PLS compared to pure PLG

Why:

• Companies that tend to purchase software via calls will generally have a larger problem to solve and thus HowdyGo will provide greater value

Win Rate

PLS has 10x higher conversion rate then PLG and 3x higher then SLG

Why:

• Booking a call takes a lot more effort than quickly signing up for a product and indicates a much stronger to signal to buy
• Leads self qualify using the product and will leave if it doesn’t solve their problem for either PLG or PLS

Churn

PLG customers have a 2.5x lower churn rate compared to those acquired using SLG and 1.5x lower than PLS.

Why: 

• The SLG customer segment has a bias towards earlier customers which have had more time to churn and a much rougher initial product experience.
• Early on we were still experimenting with our Ideal Customer Profile (ICP) which meant even if a customer started paying us, we still might’ve not been the right tool to fix their problem or a good fit
• PLG customers have usually self qualified earlier in the funnel thanks to a two week free trial before buying so are less likely to drop off afterwards.

Sales Cycle

PLS Sales cycle is 2x longer than PLG, SLG is 2x longer again

Why:

• More steps to complete with PLS/SLG deals i.e. calls, security audits/questionnaires, legal signoffs and purchasing approvals due to larger deal size.
• Having a 14 day free trial of product will generally mean a PLG prospect will close quite quickly if they are actively using HowdyGo.
• SLG prospects seem more likely to come back after a length of time, probably due to the relationship built during the previous sales process.

Time to Market

Our first pure PLG customer took ~6 months after our first customer, PLS was ~3 months. We closed our first SLG customer within our first month of operation.

Why:

• Closing SLG customers requires much less investment when first starting and can use a personalized touch to avoid rough edges like not having Stripe integrated.
• Need to find a replicable acquisition channel, with enough volume to acquire customers given typical conversion rates from free trial to paid.
• PLG requires great documentation and onboarding to get customers to close on top of a great product experience, all which require quite a bit of upfront investment.
• PLS does allow you to “smooth” over some of the rougher edges of your PLG funnel in the early stages, explaining why we managed to close a PLS customer before closing our first PLG.

How to take the best from both worlds

Like any strategy, using the best tools for your particular market and product makes the most sense. Obviously implementing a full PLG strategy requires a lot of investment but there are a lot of aspects of product led you could apply to your sales led go-to-market strategy.

Ensure prospects can try your product before a call

• Problem: With a typical SLG strategy it might be impossible to construct a self-serve experience of your product, this could be for a variety of reasons either legal, financial or something else entirely.
• PLG Example: Flagsmith has a demo of their product with an overview to show the “aha” moment of enabling a feature flag in your app.
• Possible Action: Create a HowdyGo interactive product demo and embed it on your landing page so prospects can get a feel of what using your product is like and how it would solve their problem.

Create better documentation to allow for self-onboarding

• Problem: Getting more customers onboarded to many sales led products usually requires onboarding/training which is time consuming and can be difficult to scale.
• PLG Example: HIVO has documentation pages in GitBook with HowdyGo interactive demos embedded in showing certain processes like adding a product.
• Possible Action: Created documentation to allow customers to self-serve more aspects of their onboarding experience as well as help reduce the number of customer support requests.

Demonstrate the value of features when upselling

• Problem: Sales representatives are often incentivized to close new business while upselling existing customers is often moved to a customer success or support function who often have many competing priorities.‍
• PLG Example: Here at HowdyGo we have demos to demonstrate how features work that are only accessible on higher tier plans like the ability to add video bubbles.
• ‍Possible action: Create interactive demos of more advanced features and either make them visible in app to customers not able to access them or allow your support team to send them to customers when updating them on new features of the product.

Understand how your customers are using your product, without talking to them

• Problem: In a sales led company, throughout the sales process your sales representatives will receive feedback from prospects and customers at multiple touch points and can get some insight on what problem they are trying to solve and objections to using your tool to try and determine if they will progress to a purchasing decision.
• PLG Example: Here at HowdyGo we use PostHog for heat mapping, session tracking, referral and event tracking to work out if a user is likely to purchase and how they found out about us. There are also a lot of other tools designed for use by product led teams that could be useful.
• Possible Action: Deploying a product analytics tool like PostHog is extremely useful to understand how users are using your product without having to talk to them.

Conclusion

Any go to market strategy must make sense for your product and customers. That said, there are a lot of lessons you can learn from any strategy and apply to your own situation.

In the early stages of a startup it is important to test selling your product via sales-led growth early on to ensure there is some form of product market fit before going through the time consuming process of building a self-serve flow. Time should be spent understanding and solving customer needs, not building self-serve flows for your product.

On the other hand if you are an established company with a high cost or time for customer acquisition, implementing aspects of product led growth like prospects seeing your product before buying, onboarding assets and documentation as well as improved tooling can be a useful starting point to test if a self-serve flow would be useful before building one. Apart from the required investment in product-led initiatives there is no real drawback, the revenue per account was unchanged but we managed to improve our win rates, decrease time to close and churn compared to a pure sales led approach.