If developing a go-to-market strategy was easy, we’d all be winners.
Everyone would be a founder.
Every startup would become a unicorn. 🦄
That isn’t the world we live in. Strategy is hard, execution even harder. 👷
Plenty of strategy thought pieces will tell you to figure out where you are, where you want to be, and decide how to get there.
But a solid growth strategy is just as much about what *not* to do.
Maybe you’re a startup getting your SaaS business off the ground. You know where you want to be next year.
You need to know which is the right and wrong path for your SaaS journey to follow.
This article helps you avoid the wrong path and choose a growth strategy that best aligns with your business.
What is “Growth” anyway? 📈
In my last post, I introduced the fundamentals of product-led vs sales-led growth.
I made the case that these go-to-market strategies can live together in the same company:
It’s easy to draw a hard line between the two sales models, but there really isn’t any competition. Many product-led startups later add sales-led motions to bring in enterprise customers (move upmarket). At the same time, traditional sales-led corporations adopt product-led strategies to capture SMB sales volume (move downmarket).
But that’s only true for product-led companies and sales-led companies that have already nailed their core strategy. Adding the new sales motion takes their growth to new heights.
At first, SaaS businesses must make the hard choice between one or the other.
Trying to be a little product-led *and* a little sales-led only creates a lot of failure.
Your SaaS strategy has got to be laser-focused on growth—how will you get more customers, and how will you get more revenue?
Build your go-to-market strategy around these 3 functions of growth:
1. Acquire: Get people to your product.
2. Engage: Make them successful.
3. Monetize: Turn them into paying customers.
Each growth strategy executes these functions differently—that’s why you must commit to one. Otherwise, you’ll spread scarce resources too thin.
So, let’s review each option and see how they acquire, engage, and monetize customers.
What is product-led growth?
Product-led growth (PLG) is a growth model where product usage drives customer acquisition, retention, and expansion.
Companies with a product-led strategy like Slack, Notion and Figma tend to grow faster than their non-PLG peers. A big advantage of PLG strategies is cost. 💰
You’re already committed to your development costs, so be smart about it. 🎓
Design the product to bring users in, deliver value, and make it easy to subscribe.
Lower customer acquisition costs (CAC) let you rapidly scale your customer base and revenue growth.
Let’s look at how PLG affect the 3 phases of your revenue funnel.
How PLG impacts your revenue funnel
By using your product, customers share its value with other potential customers (external) or with colleagues (internal). Some products like Typeform create awareness of the product's value when Typeform users share it around and respondents reply to a survey, which generates new acquisitions.
Easy discoverability, demos, and other engagements let end users appreciate the product’s value on their own. Most often with PLG companies, users perceived appreciation of the product increase as they use it.
For example, I find Notion more useful once I have set a few templates to share with my colleagues to contribute on.
Don’t know how to engage your users into revenue conversations?
Calixa helps your GTM team engage with users and accounts by generating actionable insights into their product usage.
For instance, by building playbooks that support accounts in their journey towards new milestones in your product 👇
Once users have reached certain milestones in your product or are tempted to try more complex features, your product has self-converting experiences that let’s people become customers on their own.
Ongoing engagement reduces churn and boosts retention.For example, Hellosign prompts users who've been sending out more than 3 documents per month to upgrade to unlock more.
Making sales more effective helps them make more money and drives revenue growth.
The great thing about PLG is that everything is self-service. End users make all the decisions and convince themselves to move through the sales cycle.
Who should not use PLG?
A product-led growth motion might be the wrong choice if you answer “no” to any of these questions:
Can you go around decision makers?
If a customer’s purchases require buy-in from multiple decision-makers, then you need a sales team. Decision makers will rarely start playing around with products on their own as they evaluate a decision for new software.
They might, in which case you can consider a sales-assisted PLG motion.
Can people start using your product instantly?
PLG requires simplicity to get high-volume signups, rapid time to value, and self-service conversions.
End users can’t self-serve an integration project. People can’t need extensive training before using the product.
You need a sales team to make deployments happen.
Does your pricing model shorten the sales cycle?
PLG strategies compress the sales cycle:
- Read the website, create an account.
- Experience the product, pay for its value.
Low-stakes pricing makes that possible. Free signups are easy. Plans at $10/month make conversions easy. We even start seeing self-serve conversions for thousands of dollars.
But one million dollars?
The people who make million-dollar decisions don’t sign up on your website. 🧐
Product design won’t close the deal. There are exceptions, and we see more and more big ticket conversions self-serve, but for certain deal sizes, you need a salesperson!
Fortunately, there are plenty of ways PLG can drive success.
How Jasper grew to $75M with Product-Led Growth
Jasper generates compelling marketing copy with AI. Let’s look at how they adopted the 3 functions of product-led growth 👇
Jasper’s marketing team are geniuses when it comes to creating a viral community. They use their own product to create thousands of relatable social media posts.
Their product also has a “share recipe” prompts which fosters social shares by their existing users to the community and beyond.
Templates for specific use cases deliver value quickly. Resources like instructional videos and an active Facebook community keep Jasper users engaged.
Jasper users can get ramped up and successful within minutes, thanks to Jasper’s own content and “recipes” shared by their customers.
Five days is enough for end users to continue with a paid subscription. When users become advocates, they bring in more users and larger business accounts.
Jasper’s product-led growth strategy has paid off with 70K+ paying subscribers, a $1.5 billion valuation, and $75 million in revenue.
Jasper-like success is what happens when your PLG motion works great on all 3 of the growth pillars mentioned above!
You might face some “blockers keeping you from leveraging the strengths of PLG. Let’s evaluate if sales-led growth is ripe for your business 👇
What is sales-led growth?
It may be old school, but sales-led growth (SLG) still works. This classic approach puts sales front and center.
Product matters, but it isn’t what drives sales-led growth.
In many cases, end-user onboarding happens after the contract is signed.
It isn’t the user experience that gets you to “yes.” It’s how well salespeople convince decision-makers.
Here’s what that looks like.
How SLG impacts your revenue funnel
1. Acquire: Marketing campaigns, outbound calls, and other programs generate qualified leads for the sales team.
2. Engage: Salespeople meet with influencers within the account to explain how the product works and enhances their operations.
3. Monetize: Salespeople close the deal by convincing decision-makers that their relationship will improve the customer’s business.
Who should not use SLG?
SaaS companies need to think twice before jumping into the SLG pool—especially if you answer “yes” to any of these questions:
Will you spend more on your sales team than you get from your customers?
Paying six figures for good salespeople won’t make sense if each deal brings in a few hundred dollars a year.
High revenue on low-priced sales requires scale. Salespeople don’t scale. 🚀
You need the hands-off, self-service approach that PLG delivers.
Is your product modular enough to create a simplified offering?
Large, monolithic software companies must take the sales-assisted approach.
Their products are too complex for a try-before-you-buy customer experience.
If your product design lets you package freemium and paid subscription tiers, you might be better off going product-led.
Do established SLG players dominate the market?
Established SLG companies already have strong relationships and reputations in the market.
As a new entrant, you don’t. That leaves you fighting on your competitors’ turf—and by their rules.
PLG companies can change the rules by entering an SLG-dominated market.
SLG sales cycles take time to close, but PLG lands you a grassroots foothold you can exploit faster.
How Snowflake crushed through an IPO with a sales-led approach
Snowflake goes head-to-head with Amazon, Google, and Microsoft to deliver enterprise-quality data clouds that eliminate siloes and create analytics solutions
While Snowflake has elements of the product-led motion, the company’s enterprise focus demands a sales-led strategy:
Snowflake targets vertical markets such as finance or media with marketing campaigns. Analysts filter the results to identify marketing-qualified leads.
Sales teams work with their leads to build relationships within the account. Along the way, they demonstrate the product’s value to influencers and decision-makers
Closing the deal is just the beginning. Sales teams work their relationships to expand customers’ data cloud usage. Network effects drive growth by bringing in the customer’s suppliers and partners.
Snowflake’s 2020 IPO launched at $120 per share, ending the day near $254 and a $70 billion market cap.
PLG and SLG together?
Successful companies like Gitlab and HubSpot started with traditional “top-down” revenue strategies and later transitioned to adding PLG.
Even Snowflake recently added a PLG offering!
The reason why: If you’re PLG at scale and don’t have an enterprise sales motion, you’re probably leaving big revenue opportunities on the table. Slack and Miro are good examples of initial PLG motions with increasing sales headcount.
The same goes the other way. If you started SLG but can make your product work self-serve, you might be leaving smaller opportunities on the table. Just like Snowflake, who’s trying to expand its customer base to smaller clients.
Picking your initial strategy
Conclusion: Product-led vs sales-led growth
When your business is a better fit for product-led growth models, you make the most of your development spend.
Your product does the heavy lifting of acquiring, engaging, and monetizing customers. 💪
You can focus on developing user experiences that surprise and delight. 🥰
You get an advantage over slower, more established sales-led competitors. 🏎️
Calixa’s integrations with popular services like Salesforce and HubSpot unite your customer and product information into a single interface to help drive SaaS companies’ product-led growth strategy.
Get a demo or try it for free to see how Calixa helps you acquire, engage, and monetize for growth!