🚀 Product-led growth vs 🤝 Sales-led growth for a B2B SaaS Product

As a B2B SaaS company, choosing the right growth strategy or probably a right distribution model is crucial for the growth and success of the Product. Product-led growth (PLG) and sales-led growth (SLG) are two popular approaches that have their own strengths and benefits, but it’s important to carefully consider which one is the best fit for your product and customer segment. In this blog post, we’ll delve into the key differences between PLG and SLG and discuss how to make the choice between the two for a B2B SaaS product.

While PLG and SLG are both effective strategies for driving growth, they have some key differences that make them better suited for different types of products and target audiences. In B2B SaaS, PLG tends to focus on building a product that is easy to use and understand, with the goal of generating leads and driving sales through self-service channels like free trials and freemium models. On the other hand, SLG relies more on the expertise of a sales team to build relationships with customers and close deals.

In recent years, there has been a trend towards PLG in early stage startups, as it allows companies to reach a wider audience and generate leads without the need for a large sales team. However, both PLG and SLG can be valuable strategies for B2B SaaS companies, depending on the specific needs and goals of the product. In this blog post, we’ll explore the advantages and disadvantages of both approaches and provide a checklist to help B2B SaaS companies make the best choice for their product.

#1: PLG vs SLG: Quick Key differences

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Let’s take a closer look at the main differences between PLG and SLG:

1. Customer acquisition:

• PLG tends to rely on self-service channels like free trials and freemium models to generate leads and drive sales.
• SLG relies more on the expertise of a sales, presales and marketing team to build relationships with customers and close deals.

2. Monetization:

• PLG typically focuses on monetizing the product through upsells and cross-sells after the initial purchase.
• SLG tends to focus on monetizing the product through the initial sale.

3. Customer retention:

• PLG relies on the product itself to keep customers engaged and encourage retention.
• SLG may rely more on customer support and ongoing sales efforts to retain customers.

4. Team structure:

• PLG may require a smaller sales and marketing team, as the product is expected to drive growth on its own.
• SLG requires a larger sales and marketing team to build relationships with customers, make them understand products which are complex and close deals.

5. Growth pattern:

• PLG tends to have a slower, more steady growth pattern.
• SLG may have a more rapid, but potentially less sustainable, growth pattern.

6. Profitability:

• PLG may have a longer path to profitability, as it relies on upsells and cross-sells to drive revenue. The initial ticket size per sale is generally lower
• SLG may have a quicker path to profitability, as it relies on initial sales to drive revenue.

#2: Product-Led Growth: Closer look 👀

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Product-led growth (PLG) is a distribution model for a product that puts the product at the center of sales and marketing efforts. This approach blurs the line between product and distribution, as the distribution of the product is led by its features and capabilities.

So, what does PLG mean for a B2B SaaS product? To start a PLG motion, there are a few key points that should be checked off on the “checklist”:

1. The product should be easy to use and understand without the help of a salesperson.
2. The product should be able to generate leads and drive sales through self-service channels like free trials and freemium models.
3. The product should be able to monetize through upsells and cross-sells after the initial purchase.

To drive PLG, there are a few key levers that a growth team should focus on:

1. Product development: The product should be constantly iterated and improved to keep customers engaged and encourage retention.
2. Marketing: The marketing efforts should focus on driving awareness and adoption of the product through self-service channels.
3. Customer success: The customer success team should be focused on helping customers get the most value out of the product and encouraging upsells and cross-sells.

To build a successful B2B PLG growth team, it’s important to have the right infrastructure and skill sets in place. This may include a product management team to oversee product development, a marketing team to drive awareness and adoption, and a customer success team to support and retain customers.

In a B2B PLG environment, it’s important for the growth team to work closely with marketing, customer success, and sales teams to ensure a cohesive and effective growth strategy. There are many synergies between these teams, but it’s also important to be aware of any potential conflicts and find ways to address them.

PLG: 🚀 The good parts

Let’s dive deeper into the benefits that come with a Product-led growth Model.

1. Reaching a wider audience:

PLG allows companies to reach a wider audience through self-service channels like free trials and freemium models. This allows customers to try out the product before committing to a purchase, which can be especially appealing for B2B SaaS products that may have a higher price point.

2. Generating leads and driving sales:

PLG can generate leads and drive sales through word-of-mouth marketing and getting your raving fans to action — customer referrals. When customers are satisfied with the product, they are more likely to recommend it to others, which can help to drive growth and increase brand awareness.

3. Cost savings:

With PLG, companies can rely on the product to drive more sustainable growth rather than a large sales team. This can result in cost savings and allow companies to allocate more resources towards product development and marketing efforts.

PLG: 😓 The painful parts

Well PLG comes with its own set of drawbacks which are even more important to be looked at

1. Product complexity: PLG relies on the product to drive growth, so it’s important for the product to be easy to use and understand without the help of a salesperson. This can be a challenge for more complex or high-priced products that require more personalized sales and support.
2. Dependence on self-service channels: PLG relies heavily on self-service channels like free trials and freemium models to generate leads and drive sales. While this can be a powerful tool for reaching a wider audience, it also carries some risks. For example, there is a potential for lower customer lifetime value, as customers may not be as invested in the product as they would be if they had gone through a more personalized sales process. Additionally, it can be challenging to constantly iterate and improve the product to meet the needs of a self-serving customer base.
3. Limited control: PLG can give companies less control over the sales process, as customers are expected to self-serve and make purchasing decisions on their own. This can be a challenge for companies

#3: Sales-Led Growth: Closer look 👀

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Sales-led growth (SLG) is a strategy that relies on the expertise of a sales team to build relationships with customers and close deals. This approach offers a number of benefits, including the ability to customize the sales pitch and build relationships with customers. However, it also has some potential drawbacks to consider.

SLG: 🚀 The good parts

1. Customization: SLG allows companies to tailor the sales pitch to the specific needs and interests of the customer. This can be especially useful for more complex products that are hard to explain without a personalized sales process. By taking the time to understand the customer’s needs and interests, companies can create a more compelling sales pitch that addresses their specific pain points and requirements.
2. Relationship-building: SLG allows companies to build relationships with customers through ongoing sales efforts. This can be especially valuable for organizations in markets with long sales cycles, as it allows companies to nurture the relationship over time and increase the likelihood of closing a deal. By building a strong, trusted relationship with customers, companies can create a sense of loyalty and encourage repeat business.

Overall, SLG can be a powerful tool for B2B SaaS companies looking to customize the sales pitch and build stronger relationships with customers. It’s important to carefully consider the benefits of SLG as you evaluate the potential for this approach for your product.

SLG: 😓 The painful parts

1. Larger sales team: SLG requires a larger sales and presales team to build relationships with customers and close deals. This can be a significant investment for companies, especially in the early stages of growth.
2. Higher customer acquisition costs: SLG may have higher customer acquisition costs, as it relies on the expertise of a sales team to close deals.

Overall, SLG can be a valuable strategy for B2B SaaS companies, particularly those with complex products or long sales cycles. To effectively implement SLG, companies will need to invest in hiring and training a sales & presales team to persuade potential customers into purchasing through high-touch efforts.

It’s also important to use insights from sales data and metrics to continuously improve the sales strategy and prioritize value capture metrics like low customer acquisition and retention rates (which speak to marketing and sales effectiveness), a high average transaction value (which indicates success at upselling and cross-selling), and a high lead conversion rate (which indicates effectiveness at closing deals).

#4: Crucial Factors to consider when choosing between PLG and SLG ✅

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Deciding between product-led growth (PLG) and sales-led growth (SLG) for a B2B SaaS product can be a very complex decision. Even if approached with absolute sincerity and passion can still leave the decision makers drained. I could share few points where most of the decision points for you might be found.

Here are some key factors to consider as you evaluate the best approach for your product:

1. Customer segment and Distribution focus: One of the first things to consider is the customer segment and target market for the product. Are you targeting small businesses, enterprises, or a specific industry? Each customer segment has different needs and preferences, and this can influence the best approach for driving growth. For example, PLG may be more effective for products targeting small businesses, as it allows companies to reach a wider audience through self-service channels. SLG may be more effective for products targeting large enterprises, where criteria to close deal might not be just dependent to product, but also on relationship, potential to future growth and trust (or referral via trusted networks).
2. Stage of the company: The stage at which the company is currently can also be a factor in choosing between PLG and SLG. For early stage startups with limited resources, PLG may be more appealing as it allows companies to generate leads and drive sales through self-service channels like free trials and freemium models. For more established companies with a larger customer base, SLG could be more viable having higher appetite to invest, resources to train and ability to scale a sales, presales and marketing team.
3. Product maturity and product-market fit: The maturity of the product and its product-market fit are also important considerations. If the product is well-established and has a strong product-market fit, PLG may be more effective as it allows customers to understand & experience product without human intervention and also help them make purchasing decisions on their own. If the product is still in the early stages of development or is struggling to find its product-market fit, SLG may be more beneficial as it allows companies to work closely with customers to understand their needs and tailor the sales pitch accordingly.
4. Implications on sales: PLG relies on the product to drive growth, so it’s important for the product to be easy to use and understand without the help of a salesperson. This means that the sales process for PLG products tends to be more automated (no human intervention), with customers able to sign up for free trials or freemium versions of the product. SLG, on the other hand, relies on a sales team to aim closure of deals and build deeper relationships with customers. This means that the sales process for SLG products is typically more high-touch, with sales reps working closely with customers to understand their needs and align more to the customer need. In SLG, customer onboarding almost looks like a blend of product and customizations (which eventually if good end up in the base product).
5. Implications on marketing: PLG and SLG have different implications for marketing efforts. With PLG, marketing efforts are typically focused on driving traffic to the product and converting leads into paying customers. This may involve tactics such as content marketing, social media marketing, and search engine optimization. The goal is to attract potential customers to the product and encourage them to sign up for a free trial or freemium version. With SLG, marketing efforts may be more focused on supporting the sales and presales team and providing them with the resources they need to close deals. This could include things like sales enablement materials, lead generation campaigns, and events and webinars. The goal is to provide sales reps with the tools and resources they need to effectively sell the product to potential customers.
6. Changes required in organization structure for PLG vs SLG: Implementing PLG typically requires a different organization structure than what is needed for SLG. With PLG, the product team plays a central role in driving growth, so it’s important for them to be closely aligned with marketing and customer success teams. This may involve restructuring the organization to create a more cross-functional team that can work together to drive growth through the product. With SLG, the sales team plays a central role in driving growth, so it’s important to have a clear sales process in place and to provide the sales team with the resources they need to succeed. This may involve hiring additional sales reps, creating sales enablement materials, and investing in sales training and development.
7. Transparency: Transparency is also an important factor to consider when choosing between PLG and SLG. With PLG, it’s important to be transparent about the product and its capabilities, as customers will be expected to navigate through your product themselves and make decisions. This may involve providing detailed product documentation, demos, and customer support resources. With SLG, it’s important to be transparent about the sales process and to be clear about the value that the product brings to the customer. This may involve providing detailed pricing information, case studies, and demos to help customers understand the benefits of the product.

#5: Layering in Product Led Growth on top of Sales Led Growth — Product-Led Sales 🔥

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While PLG has picked up quite well specially amongst smaller-sized SaaS players, but, for some B2B SaaS companies, it may not be feasible or desirable to fully embrace PLG and instead opt for a hybrid approach that combines PLG with sales-led growth (SLG). This could even be treated as a beginning of transition towards PLG from SLG.

Product-led sales is a hybrid approach that combines elements of both product-led growth (PLG) and sales-led growth (SLG). In this approach, the product is used to drive growth and attract potential customers, while a sales team is also in place to help close deals and build relationships with customers.

One way to think about product-led sales is as a “bridge” or a transient stage while transitioning from SLG to PLG. The product serves as the primary driver of growth, while the sales team provides support and helps to close deals. This can be an effective way to take advantage of the benefits of both approaches and create a more holistic growth strategy.

There are several ways that B2B SaaS companies can support the transition to product-led sales and effectively blend PLG and SLG. Below are few examples:

Asking segmentation questions in the product onboarding and offering based on that specific onboarding journey: By asking segmentation questions during onboarding, companies can better understand the needs and preferences of the customer and offer a more personalized experience.

Offering different levels of support and guidance Sales Qualified Lead (SQL) and Product Qualified Lead(PQL): Companies can offer different levels of support and guidance based on the needs and preferences of the customer. This can include everything from self-service resources to more personalized support from a sales rep.

Having two types of call-to-action buttons on the website for specific customer profiles: By offering different call-to-action buttons based on the customer profile, companies can better tailor the sales experience to the needs of the customer.

The benefits of product-led sales are clear:

1. Product focus: With product-led sales, the focus is on building a product that delivers value to users, rather than simply checking off enterprise-specific feature lists. This can lead to a more compelling and differentiated product that stands out in the market.
2. Growth model: Product-led sales unlocks the potential for PLG by providing a larger pool of users to draw from. This can help drive faster and more sustainable growth.
3. Sales cycles: Product-led sales can also shorten sales cycles, as the product does much of the selling for you. This can lead to more efficient and effective sales processes. While sales team only enters at specific stage and for specific instances, it’s easier even for smaller sales teams to close deals.
4. Competitive advantage: Product-led sales can also give companies a competitive advantage, as it allows them to “trojan horse” their way into accounts by starting with smaller, less risky users and then working their way up to decision-makers. The formula stays clear, smaller quicker entries and larger upselling.
5. Persona: With product-led sales, the user becomes the decision-maker, while the buyer plays an important and necessary assist role. This shifts the focus from enterprise checklists to user value, which can lead to more compelling and effective sales conversations.

Conclusion

When it comes to driving growth for a B2B SaaS product, there are several approaches to consider: product-led growth (PLG), sales-led growth (SLG), and the hybrid product-led sales (PLS) approach.

PLG is centered around the product. SLG, on the other hand, is centered around the sales team and involves a more personalized sales process. PLS is a hybrid approach that combines elements of both PLG and SLG, with the product still serving as the primary driver of growth and a sales team providing support and helping to close deals.

Ultimately, the right approach for a B2B SaaS product will depend on a variety of factors, including the target customer , the complexity of the product, and the resources available. It’s important to carefully consider these factors and choose the approach that best aligns with the needs and goals of the product and the company.

In conclusion, while PLG, SLG, and PLS all have their own advantages and disadvantages, it’s important for B2B SaaS companies to choose the approach that is best suited to their product and their goals. If you are a company aspiring to transition your growth model, I’d be Happy if this article helps in the slightest possible way to make your transition smoother.

Strength and growth come only through continuous effort and struggle. ~ Napoleon Hill

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