Product-Led vs Sales-Led: What’s the Difference, and Which One Is Right for You?
Product-led vs sales-led growth? This is a decision you and your product team will have to make at some point in your go-to-market strategy to drive growth.
Choosing the right growth strategy is important for all SaaS companies because it plays a role in how successful your company will be. It lets you shape your product, customer experiences, and sales process in the very best way.
In this blog post, you’ll learn an honest opinion about both growth strategies. As well as how to pick the right one for your business and implement it too.
Let’s get started!
- A product-led growth involves using your product to drive business and revenue growth.
- Sales-led growth, on the other hand, uses your sales processes to move customers along the funnel.
- The major difference between both strategies is in the business processes.
- While product-led growth offers customers a self-service model to experience and learn the product for themselves, sales-led companies provide 1-on-1 assistance to guide all sales-qualified leads through every stage of their journey.
- They are, however, both relevant growth models with varying benefits.
- Product-led companies, for example, use free trials and a freemium model to get customers to experience their perceived value.
- This widens your top-of-the-funnel acquisition and results in product qualified leads who fall in love with your product early, and are more likely to convert.
- Sales-led however, is a great choice for software companies that are more complex and target enterprise organizations.
- Customer success under a product-led growth approach depends on your product experience which must be as contextual and engaging as possible.
- The lack of human guidance in this model means your product must be able to convert customers easily.
- This is where segmenting all users based on characteristics or job titles comes in. With this, you can create a personalized onboarding flow relevant to each user’s journey.
- Onboarding checklists can also serve as a guide to help users reach the activation stage immediately.
- Collecting feedback from users including those in the trial stage is important too. This gives you insight into areas of your product flow or the customer experience that need to be worked on to increase adoption and conversions.
- With a tool like Userpilot, you can easily build these contextual experiences into your product to increase user engagement and conversions.
What is product-led growth in SaaS?
Product-led growth is a growth strategy that centers your product as the driving force for customer acquisition, retention, and monetization. This involves using your product experience to move customers further down the growth funnel.
In this case, product-led sales driven by your product team and product experiences are majorly responsible for how well or not your company will do.
What is sales-led growth in SaaS?
Sales-led growth is a strategy that uses a sales rep or your sales team and their processes to drive conversions and business growth. In a sales-led company, the sales team is the driving force for acquisition, retention, and other stages of the customer funnel.
This follows the traditional marketing funnel where leads are qualified into marketing-qualified leads and then sales-qualified leads. These sales-qualified leads are then passed to your sales team to nurture and convert.
Product-led vs sales-led: What’s the difference?
Now you know both approaches have different driving forces behind them, here are some other major differences.
The product-led business model encourages users to learn the product by themselves to achieve their goals.
Using a mix of contextual product experiences and access to resource guides, users in a product-led company enjoy a self-service experience. This is unlike the sales-led approach where customers are assigned sales reps who guide them through every stage of their journey.
The reduced presence of human assistance in product-led makes it easier for customers to drop out of your sales funnel if they don’t get immediate value.
So the success of this model lies in your product team to create experiences that lead customers to their aha moments quickly. Whereas in sales-led, it is the responsibility of your sales teams to ensure customers see the value and convert.
Lastly, while the customer journey under product-led starts with signing up for free trials or freemium accounts, sales-led usually starts with customers requesting personalized demos.
This is indicative of their different sales cycles and also the types of companies they target.
Where product-led growth focuses on small businesses and has a shorter sales cycle, sales-led is used for more complex products with longer sales periods.
Product-led vs sales-led: Which one is right for you?
To determine which growth model is best for your SaaS company, there are several factors you must consider. These include your target audience, pricing model, and ease of use of your product.
If your product targets small businesses and is one that anyone can easily learn to use, a product-led approach is a better choice for you.
Sales-led on the other hand works best when you have a complex product targeting larger companies. These companies may not have the time to sign up for several free trials to learn how your product works. So sales reps and account executives guarantee customer success by guiding and helping them through the buying process and also with installation (if required).
Another way to determine which growth model is a better option is by looking at your price model.
If you practice a freemium model which allows potential customers to test your product for free and for a limited amount of time, a product-led system that encourages them to become paying customers is a good option.
If on the other hand, your product’s pricing is more complex and dependent on several factors, the sales-led strategy may be better for you.
What are the benefits of product-led growth?
Several popular SaaS businesses like Dropbox and Slack use a product-led growth model for their business. What benefits do these product-led companies enjoy from this strategy?
Here are some:
Wider top of the funnel (TOFU)
Product-led strategies typically allow customers to experience your product through a free trial or freemium package. They use landing page CTAs that ask visitors to start a free trial. This attracts a large number of prospects to your product, widening your top-of-the-funnel acquisition rate.
This means you are more likely to easily attract and onboard more customers than any of the other SaaS growth strategies because you offer the least risk and most benefit to them.
But a high acquisition rate doesn’t mean high retention as your product needs to be engaging enough to keep a large chunk of these sign-ups loyal to you.
Lower customer acquisition cost (CAC)
Since product-led companies practice a freemium or free trial model, their customer acquisition costs are relatively lower than most marketing-led companies. This is because the cost of using different marketing channels to attract, nurture, and convert users keep increasing each year. Meanwhile, these channels have become saturated and competitive space, plus customers claim to not like being sold to.
In product-led companies, the freemium pricing model reduces the customer acquisition cost by serving as an acquisition strategy. Allowing customers to try out your product for free works better in converting them to users. It’s also relatively cheaper than having your marketing team experiment with and track several marketing strategies.
Higher retention rate
Giving customers easy access to experience your product helps them quickly discover your value. Once they see your product as a valuable solution, the chance of customer retention becomes higher. Especially when compared with only telling them about your product’s value without giving them an experience.
Also, because your product is the driving force behind growth in this model, your focus will constantly be on ways to make it better. This focus on building the best product and experience for your users increases their retention rates.
What are the benefits of sales-led growth?
Sales-led growth also has numerous benefits which makes it a good choice for some companies. Some of these benefits include:
Less friction during onboarding
In sales-led companies, customers have a sales representative or member of your sales team to walk them through your product. These reps tell them what your product is about and show them how to use it.
Unlike in product-led where customers go through the onboarding process following product cues, the sales-led model provides human guidance. This eliminates any friction or churning chances users may face in-product. It makes user onboarding smoother and increases the chances of adopting your product.
Target enterprise organizations
A sales-led approach lets you target enterprise-level organizations.
These types of companies usually employ software that is more advanced and requires expertise to implement. So if your product fits this description, using a sales-led model could help you better reach and convert such enterprise companies.
Collect insightful customer feedback
Customer feedback is important to improve your sales processes and product experience. When using the sales-led approach, the feedback you collect can be more insightful as you are doing it face to face usually.
This is something that could help you optimize sales strategies so you can retain existing customers and also attract more customers.
How to use the product-led approach to convert more users?
The success of the product-led growth approach lies in great product experiences that help users find immediate and consistent value.
So how can you do this?
Here are some key experiences you can build in your product to increase the trial to paid conversion rates.
Segment users with welcome screens and provide personalized onboarding
You likely have different types of customers who use your product for different things.
Giving every one of them the same product tour/experience will only result in poor product engagement and conversions. This is why good product managers use customer segmentation.
Segmentation is a very powerful tool in product marketing that helps you provide the best and most relevant experiences to your users. This makes the onboarding process more personalized for each customer’s use case. You can group customers based on their jobs to be done or behavioral patterns so they quickly discover your product’s perceived value.
Use a welcome screen and add a micro survey on it, asking users what’s their main goal with the product.
Then use the data to a provide personalized onboarding path for each, guiding them to engage with specific parts of your product that are relevant for their use case.
Use interactive walkthroughs instead of long product tours
When learning how to drive, your driving instructor doesn’t just show you the car parts.
You also have to get behind the wheel and drive. That’s the difference between product tours and interactive walkthroughs.
Product tours simply show your users around your product, which is fine.
But interactive walkthroughs show them how to use these different parts of your product, which is better. Getting users to practically learn about your product while experiencing it increases their chances of reaching their aha moments and achieving feature adoption, quickly.
Use checklists to drive users to the activation point
Checklists are a necessary tool used to help customers reach the activation stage faster.
Using a tool like Userpilot, you can create onboarding checklists that guide customers on how to use your product to get instant value.
These checklists show them a list of important tasks they must perform to get the actual value. It serves as a helpful guide to new customers instead of leaving them to wander the product themselves.
Ask for feedback during the trial period
Customer feedback is important to help you improve your product usage and conversion rates. Collecting feedback from every user who enters your sales funnel especially in the trial phase could help you optimize your conversion process.
With Userpilot, you can build these micro surveys into your product.
Don’t wait for the trial to be over. Remind users they are running out of time and ask them a simple question:
What’s stopping you from upgrading your account today?
Give them a few options, based on the most common reasons users churn or abandon a trial. Then automate responses to each, offering solutions that could increase the trial to paid conversion rate.
Maybe offering a trial extension could really come in handy to some users.
A sure sign of the product-led era is the number of popular SaaS businesses currently using this model to grow their businesses. Regardless of its popularity, product-led growth doesn’t exist to replace sales-led or marketing-led strategies.
Each strategy has its place and benefits, you only need to decide on which works best for your type of audience and product. You may also choose to adopt a product-driven and sales-assisted strategy like Userpilot.
Want to build product experiences code-free? Book a demo call with our team and get started!