Q 446. There are two levers for growth - Product Led and Sales Led. Product Led growth keeps the product in the center while sales led growth depends heavily on success of sales team. Compare the two levers for their advantages and disadvantages. What factors help in deciding in favor of one lever over the other?

 

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Product Led Growth (PLG).

Product led growth leads the user to experience value without hand-holding. This is gaining more importance now than in the past. A company that follows a strategy of PLG would depend on the experience of the customer to acquire and retain its market share. For PLG to be successful, there should be complete alignment between all departments such as Operations, Quality, Production, Procurement, HR, Marketing Sales, R & D, etc. Examples of PLG companies are Tesla, Apple, Zoom, Atlassian, Calendly, Slack, Dropbox.

Sales Led Growth (SLG)

Sales Let Growth is the traditional way of growth. In Sales led growth, there is a need for a salesperson to provide assistance in order for the end-user to have a meaningful outcome. Sales-led growth is less cost-efficient than Product led growth as it has a longer sales cycle and time-to-value. It leads to a lower revenue per employee as the firm needs to have more staff to offer support. As against Product led growth companies that target smaller businesses, Sales led growth targets bigger businesses. It is ideal for products targeting enterprises. In these companies, the users don’t have the incentive to use the product and hence need the support of the salesperson. In the case of Sales led growth, the switching cost is very high, hence the lifetime value is much higher.

Deciding Factors to Choose one over the other

PLG would be suitable for individual, smaller businesses, self-service products, transactional products, free trial, freemium option, online purchase, pricing tier pricing strategy, great user experience, product simplicity, minimum to nil setup, configuration, and training.

A Sales Led Growth is more suitable for enterprises where the product is complex, expensive, and sophisticated and requires human assistance. It is used in places where the user does not either have the incentive, experience or is not proficient in the use of the product. It is also used in immature markets or in markets that are not yet ready for this type of product.

References

https://blog.close.com/product-led-sales-led-marketing-led/#:~:text=The%20first%20difference%20between%20product-led%20and%20sales-led%20is,number%20of%20subscribers%20%28email%20automation%20tools%20like%20Mailchimp%29

https://productled.com/blog/product-led-vs-sales-led/

What is going to drive growth in an organization would depend on the product or the sales team is a big topic, is the product great enough to sell itself or does it need a superior sales team to push it? Well, it really is not that simple so let’s try to begin with the product, is the product great enough that we can sell it by virtue of its own exclusiveness? If the answer is yes, we are in a Product Led Growth model. Let’s look at Whatsapp, Uber, Swiggy and largely we know we started using them since liked the product because we probably tried for free and liked it. So, at that point in time the situation was PLG with low sales techniques. The products itself helps move in the sales funnel and do the work on this own.

However, down the line we also see similar providers adopting sale-led strategies to re-enforce and boost customer reach out. So, in sales led, the efforts in the sales team are higher and the objective is to create better awareness about the product in the market which would include banners, demos, trials, etc., to influence customers. So, let’s say there was a “splash in the pan” with free accounts and trails offers however subscriptions and upgrades to a paid version is not as per expectation, that’s when a sales- led growth would have to be brought-in to attract customers, which would involve awareness building, package designing, bundle benefits for which they are required to pay for.

 

	Advantages	Dis-advantages
Product- Led	·   Usually has a lower customer acquisition cost ·   Quick sales cycles ·   Lower pricing plans ·   Scalable ·   Rapid market penetration due to wider reach with free trials etc ·   Low customer engagement cost	·   Few customers willing to pay ·   Hight cost and effort in serving free ·   Low customer engagement hence easy to lose ·   High drop-out if self-service is low or due to complex pricing (it’s time for ‘Sales Touch’)
Sales- Led	·   High customer engagement during sales cycle ·   Better customer reach ·   Learnings for customers which creates better relationship	·   Longish sales cycle ·   High acquisition cost ·   Low conversion

 

 

While we see most of us relating better to Product Led growth (PLG) model, it is dependent on how we plan growth, while we start off as PLG it is also true there must be a balance with Sales-Led growth (SLG). We need not choose one over the other but more importantly balance out at the right time. 

So in a product led, we have to be very clear on what we offer in the product which has a free use. The options should be critical enough to keep customers curious and yet cannot have the most important feature that doesn’t motivate to move to a paid version or a subscription. Example like TATA1MG Care Plans offers various critical and important services vs a non-member. So for regular users of pharmacy services, it makes sense to upgrade to a Care Plan and also get benefits of heath check-ups which anyways the customer is paying for somewhere, plus receive medicines much faster.

Imagine a product, so incredibly valuable

– It does all the selling by itself.

 

Ever used Zoom? Yes?

So, how did you learn about Zoom?

Advertisement? Banner? Sales email?

 

That’s right, using the product itself got you acquainted to the value it brings, into the “sales” funnel, and then the product did rest of the selling.

 

The most famous product-led success stories like Zoom, Dropbox and Calendly – all witnessed rapid growth, driven by an incredible market fit, stunning product adoption and retention. All that without any sales calls or emails to promote the product.

How’s that? In a world of information overload, people control who they want to hear, see or read. And people – they love it when there’s no selling, no spamming. When it feels like a natural inclination to buy-in, when they see value before they pay; That’s when you’ve made a customer that sticks, and even more – spreads the word.

 

Many organizations have their hopes on PLG, dreaming of becoming the next success product-led growth story. That said, there are quite a few reasons why companies can’t just switch to a product-led growth model, some of these reasons include:

1.     No self-service

2.     No free trial or freemium option

3.     No ability to purchase online

4.     Complex Pricing model

5.     Complex product setup, usage and navigation

 

Perhaps a sales-led approach would be more realistic for such products that fit the aforementioned criterions.

 

Let’s understand what fits where and what works best for your product?

 

PRODUCT- LED GROWTH (PLG)	SALES- LED GROWTH (SLG)
Suitable Candidates for PLG: Interest generated from the bottom of the funnel Instant Value creating products, leading to instant customer impact Product which is easy to understand, evaluate, adopt and integrate in existing workflows Easy to try and buy option Customer is decision maker and the end-user	Suitable Candidates for SLG: Interest generated from the top of the funnel. Product where time to value is long Self-service is not available Suitable for products/ businesses with relatively smaller addressable market Complex product coupled with an enterprise sized client Customer and end-user may be different In initial phases of the product/ category, when your product is not fully established, hand holding customers becomes important.
Advantages of PLG: Wider potential top of the funnel, with more customers who will have access to free-trial and/or freemium model (or if you’re offering free trials) Significantly lower customer acquisition cost (CAC) Instant the customer value and experience Increase customer retention and upsells Shorter sales cycle Higher potential for product virality	Advantage of SLG: Traditional, yet proven and tested model to acquire enterprise customers Increased conversion rate and faster onboarding for complex products Ability to close high Lifetime Value (LTV) customers High level sales-end user engagement ensures easy learning of usage and relevant features. Customer specific customisation of the product/ solution Closer to customer, hence better access to customer feedbacks
Disadvantages of PLG: ·Can only be utilised where product offers trial or freemium model Significant investment in product innovation, design and continuous improvement	Disadvantages of SLG: Enormous investment in Sales and Marketing of the product The customer acquisition model is often leaky The organizational structure hinders product development

 

 

 

SLG+PLG Approach 

Many of the successful product-led businesses have eventually integrated the traditional, tried and tested sales-led approach as they’ve have grown. This integration was essentially instrumental in

·       reaching out to those potential customers can could not have been reached via. product-led approach.

·       customer expansion such as upgrades, renewals, and allow you to target at an enterprise level.

 

Both product-led and sales-led approaches have their prospects, time and place. Understanding when which works best and how to incorporate them together to bring the maximum value and experience to the customer is the key, because in the end, it’s the customer impact that really matters and drives long-term sustainable growth.

 

References: https://productled.com/blog/product-led-vs-sales-led/, https://productled.com/blog/product-led-growth-definition/

 

 

Very good answers by Johanan, Sanchita and Priyanka. 

The winner this time is Priyanka as she has answered each part of the question appropriately with sufficient detail.