Key Takeaways:
- Sales-led growth is a traditional approach to marketing and sales, wherein a sales team nurtures the lead into a sale, onboards new customers, and actively maintains customer satisfaction and retention.
- Product-led growth is a modern approach wherein the product sells itself by allowing the customer to use, learn, and purchase the product without having to interact with the marketing and sales team.
- Both SLG and PLG methods can be used together for optimal business growth outcomes.
Most marketing professionals, sales directors, and business owners have heard of sales-led growth (SLG) and product-led growth (PLG) strategies. However, you may wonder what the difference is and which approach to marketing and sales is best for your SaaS product.
Depending on your company’s size and your product’s complexity, traditional sales-led growth may be better for various reasons. However, modern sales and marketing techniques are successfully blending the two.
In this article, we explore the differences between SLG and PLG, and why one may be better than the other for SaaS products. We also examine how to combine the two methods, why you should, and how your team can make a difference in your bottom line.
What Is Sales-Led Growth?
SLG tactics include content marketing, search engine optimization, paid lead generation advertising, email marketing, and direct sales through calls, email, and text messaging.
Sales-led growth uses your sales team, rather than the product, to gain and retain customers.
Sales and customer success representatives actively sell products and assist customers so that they succeed in using the software to their best advantage; this drives business growth.
Customer success representatives and business development specialists maintain relationships. If a customer struggles with the software, needs added features or integrations, or wants to cancel (but perhaps just needs a break), their service rep can help, leading to lower churn rates.
What is Product-led Growth?
PLG is a business model in which the product drives customer acquisition and retention. That means that the customer can use the product free of charge for a limited time or obtain a freemium account (“forever free” – typically with just the basics) and test drive the software.
By using the product in a unique environment, customers can learn all its features, understand its value, and see firsthand how it can drive profit margins.
In the product-led growth model, the customer rarely needs to interact with the sales and marketing team.
From development and engineering to marketing and sales, PLG creates company-wide alignment around the SaaS product, making it the most sustainable, scalable business growth source.
Buyers seemingly want to self-learn and explore. One 2022 study from Considered Content showed that over 50% of buyers prefer to buy without interacting with anyone.
What Are the Critical Differences Between PLG and SLG?
There are a few key distinctions between product-led growth and sales-led growth. Depending on the complexity of your software product, your target market, and the size of your company, one may be better than the other for your go-to-market plan. However, many newer software companies are discovering that a combined method of the two models is best.
Product-led growth
A product-led growth strategy uses the product to drive business and revenue.
Product-led growth uses free trials and sometimes a freemium model to attract customers and allow them to experience the product’s value. However, customer success and retention depend on product experience and, quite often, competitive pricing.
While product-led sales may lead to more customers, the lack of human guidance in this model means your product must be able to convert and keep customers.
Sales-led growth
With SLG, no one expects the product to sell itself; a sale rep guides the process.
Sales teams nurture prospects into leads and then on to customers. Once converted, an account executive preserves and maintains the customer relationship by becoming their go-to contact for further assistance they may need.
The sales process boosts success because the salesperson can customize the demo or product to each customer’s situation, addressing individual pain points.
SLG is a good option for SaaS companies with complex products.
Departments and people contribute to the overall goal of winning users and business growth.
The most significant advantage of the SLG approach is that it can lead to higher annual contract values (ACV). That’s because sales representatives can offer custom packages to larger companies by incorporating unique features and integrations. Thus, a SaaS business can profit with a few large accounts, even with a lower customer count.
The following are some other benefits of the SLG approach:
- Pricing: SLG allows you to adjust pricing, charging customers according to their needs and keeping rates private to the general public.
- Momentum: Sales teams can implement tactics like cold calling, text messaging, and email to generate and nurture leads, while marketing strategies such as SEO or paid advertising take more time to become effective.
- Retention: The sales rep or account manager can work with the client to customize the software to meet their needs, resulting in a more personal relationship and lower churn.
The Best of Both Worlds: SLG and PLG Combined
Tech and service providers (TSPs) are starting to create new growth strategies by mixing product-led and old-school sales-led methods. That’s because business owners often prefer to learn independently and not have to talk to a salesperson. Still, they appreciate the benefits of having an account manager or success rep to help them tweak the features to address their needs.
You can combine the two methods by implementing traditional SLG practices, such as customer relationship management and newer PLG techniques.
- Content marketing, SEO, and paid advertising for lead generation
- Sales funnels that include email marketing and text messaging
- Lead with the product by offering freemium accounts or free trials
- Sales reps are available for upgrades, customizations, integrations, and larger enterprises with more robust needs
- Customer relationship management helps retention, reducing churn
SLG or PLG: Which Way Is Better?
You can use the traditional sales-led growth and the more modern approach of product-led growth alone or combined. While each model has significant differences and benefits, many of the hottest products on the market (including Zoom, Slack, and Hubspot, to name a few) lead with their products but include many traditional SLG practices in their sales and marketing strategies.
