Product-Led Fundamentals

The Battle of the Business Models: Sales-Led vs. Product-Led

Sales-led or product-led? See a full comparison of the two models - and how to get the best of both motions.

Stephen Moock

October 25, 2022
·
 min read

There’s a lot of buzz over the Product-Led Growth (PLG) model. The SaaS world was dominated by traditional sales-led organizations for several decades, but now nearly 60% of SaaS companies use PLG motions. And for good reason: product-led companies are twice as likely to generate 100%+ YOY growth rates. 

Chart by Todd Gardner

So which acquisition model should SaaS companies adopt: product-led or sales-led? In reality, companies don’t have to pick one or the other, as these two strategies can complement each other to deliver the ideal buyer experience.. 

But before discussing this hybrid approach to SaaS growth, let's compare and contrast two models.

What is sales-led growth?

If you have ever been browsing the website of a SaaS company and tried to sign up for the product, only to be met with a demo request or lead capture form, you have experienced a traditional sales-led growth funnel.

This motion focuses on closing large deals through weeks or months-long sales cycles with executive buyers (a tactic known as ‘top-down’ selling). The cost of long deal cycles and high-touch sales processes is justified by a sizable upfront contract from the buyer.

The sales-led motion uses your sales processes to move prospects along the funnel. Marketing fills the sales funnels with potential leads, sales teams filter this list to identify prospects, and they hop on a demo. After an extended sales cycle, a contract leads to implementation, and the onboarding experience can begin. Product experiences happen at the end of the sales cycle.

What is product-led growth?

PLG begins by having the end user experience immediate product value (this is a ‘bottom-up approach’). This model plays the long game by generating land and expand revenue. Deal sizes start out small – maybe even on a credit card – and grow overtime.

PLG involves using your product to drive user acquisition and revenue growth. A free trial or freemium plan starts the customer journey, letting users find value in the product's features and invite friends or colleagues. A Product-Led Sales team accelerates deals from top users and loops in executive buyers for revenue expansion.

Product-led vs sales-led: What's the difference?

The model you choose impacts your product, customer experience, and sales process. Let’s look at some differences in their GTM approach.

Showing vs. telling

PLG strategies rely on the user experience to move accounts through the sales funnel. Product usage lets users discover value for themselves without the need for human interaction.

In contrast, users don’t experience a product sold by traditional sales processes until after the deal is done. When a lead enters the sales funnel, salespeople focus on explaining the product's value to decision-makers who may see nothing more than a demo.

Self-serve vs. sales funnel

Many PLG SaaS users never talk to sales. With thousands of users, it’s impossible for all of them to get one-on-one attention. Many of them learn from documentation, forums, and communities. With lower pricing tiers, they may also pay through credit cards.

A sales-led motion requires a completely hands-on approach at every stage of the process. A contract is the ultimate goal, which requires an extended process of education and relationship development at all levels of the prospect's organization.

Helping vs selling

PLG salespeople take a consultative approach to user engagement. The goal is for people to experience as much value as possible. Engaged users become evangelists driving expansion within their company. Once sales contacts a buyer, the use case is easy to explain because their employees already benefit from the product.

In our conversation with the New Business Lead at Plaid, we’re seeing Product-Led Sales teams emphasize the motto 'Always Be Helping' – a fun play on the old sales adage ABC: Always Be Closing.

Product qualified vs marketing qualified leads

In PLG, product usage and customer fit data determine which users are defined as Product Qualified Leads (PQLs). These PQLs appear deep in the sales funnel after experiencing the product's value for themselves. As a result, PQLs require less convincing and are highly motivated to advance to the next stage.

On the other hand, Marketing Qualified Leads (MQLs) get generated at the top of the funnel. Their product-fit is uncertain, leaving it to sales to decide which leads are genuine prospects who could become paying customers.

The future of sales-led vs product-bed businesses

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).

Adding sales-led motions to product-led businesses

Product-led companies need sales teams. That’s why 75% of PLG companies have salespeople contact freemium accounts (source: Redpoint Ventures). 

For the mid-market segment, salespeople help monetize users and typically increase freemium conversion by 3x (source: Redpoint Ventures). Having a product open to a large volume of free trial signups increases market reach, but sales teams work to keep this volume of customers engaged and retained.

For enterprise tiers, reps focus on PQLs to drive expansion within the account and generate organizational buy-in to convince enterprise buyers to sign a company-wide deal. They also meet the needs of large enterprise accounts that require custom pricing and support. Especially for these larger customers, products can’t just sell themselves.

Adding product-led motions to sales-led businesses

Traditionally sales-led companies can adopt a product-led motion to attract new users they wouldn’t otherwise have reached. It helps to generate demand from the bottom up, and can complement or replace the experience of traditional lead magnets.

Ideally, your SaaS platform is flexible enough that you can create a PLG offer. Try creating a lighter version of a more complex product that people can use on a freemium or free trial basis. Streamline the onboarding experience to quickly deliver quick time-to-value. You can always add back sales motions to convert PQLs to enterprise customers.

Get the best of both motions with Product-Led Sales

In the end, sales-led and product-led are not mutually exclusive. You can get the best of both motions by adopting a hybrid approach known as Product-Led Sales. Plenty of top companies ranging from Asana to Dropbox have explored the spectrum between product-led and sales-led. This allows them to reach multiple market segments.

Source: SaaStr.com, Chargify

The future of SaaS is not a sales-led vs. product-led competition. Successful SaaS companies will adopt a hybrid approach that complements their core business with other ways to reach more customers. Companies that start with a product-led model and add one to a traditional sales-led model share a need to get more valuable insights from their PLG business.

Calixa bridges data silos to bring customer and product data together. PLG teams get the insights they need to identify PQLs, convert users, and accelerate growth. Watch this demo below to learn more.

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Product-Led Fundamentals

The Battle of the Business Models: Sales-Led vs. Product-Led

Stephen Moock
|
Head of Sales and Success
|
Calixa

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October 25, 2022
ReadTime

There’s a lot of buzz over the Product-Led Growth (PLG) model. The SaaS world was dominated by traditional sales-led organizations for several decades, but now nearly 60% of SaaS companies use PLG motions. And for good reason: product-led companies are twice as likely to generate 100%+ YOY growth rates. 

Chart by Todd Gardner

So which acquisition model should SaaS companies adopt: product-led or sales-led? In reality, companies don’t have to pick one or the other, as these two strategies can complement each other to deliver the ideal buyer experience.. 

But before discussing this hybrid approach to SaaS growth, let's compare and contrast two models.

What is sales-led growth?

If you have ever been browsing the website of a SaaS company and tried to sign up for the product, only to be met with a demo request or lead capture form, you have experienced a traditional sales-led growth funnel.

This motion focuses on closing large deals through weeks or months-long sales cycles with executive buyers (a tactic known as ‘top-down’ selling). The cost of long deal cycles and high-touch sales processes is justified by a sizable upfront contract from the buyer.

The sales-led motion uses your sales processes to move prospects along the funnel. Marketing fills the sales funnels with potential leads, sales teams filter this list to identify prospects, and they hop on a demo. After an extended sales cycle, a contract leads to implementation, and the onboarding experience can begin. Product experiences happen at the end of the sales cycle.

What is product-led growth?

PLG begins by having the end user experience immediate product value (this is a ‘bottom-up approach’). This model plays the long game by generating land and expand revenue. Deal sizes start out small – maybe even on a credit card – and grow overtime.

PLG involves using your product to drive user acquisition and revenue growth. A free trial or freemium plan starts the customer journey, letting users find value in the product's features and invite friends or colleagues. A Product-Led Sales team accelerates deals from top users and loops in executive buyers for revenue expansion.

Product-led vs sales-led: What's the difference?

The model you choose impacts your product, customer experience, and sales process. Let’s look at some differences in their GTM approach.

Showing vs. telling

PLG strategies rely on the user experience to move accounts through the sales funnel. Product usage lets users discover value for themselves without the need for human interaction.

In contrast, users don’t experience a product sold by traditional sales processes until after the deal is done. When a lead enters the sales funnel, salespeople focus on explaining the product's value to decision-makers who may see nothing more than a demo.

Self-serve vs. sales funnel

Many PLG SaaS users never talk to sales. With thousands of users, it’s impossible for all of them to get one-on-one attention. Many of them learn from documentation, forums, and communities. With lower pricing tiers, they may also pay through credit cards.

A sales-led motion requires a completely hands-on approach at every stage of the process. A contract is the ultimate goal, which requires an extended process of education and relationship development at all levels of the prospect's organization.

Helping vs selling

PLG salespeople take a consultative approach to user engagement. The goal is for people to experience as much value as possible. Engaged users become evangelists driving expansion within their company. Once sales contacts a buyer, the use case is easy to explain because their employees already benefit from the product.

In our conversation with the New Business Lead at Plaid, we’re seeing Product-Led Sales teams emphasize the motto 'Always Be Helping' – a fun play on the old sales adage ABC: Always Be Closing.

Product qualified vs marketing qualified leads

In PLG, product usage and customer fit data determine which users are defined as Product Qualified Leads (PQLs). These PQLs appear deep in the sales funnel after experiencing the product's value for themselves. As a result, PQLs require less convincing and are highly motivated to advance to the next stage.

On the other hand, Marketing Qualified Leads (MQLs) get generated at the top of the funnel. Their product-fit is uncertain, leaving it to sales to decide which leads are genuine prospects who could become paying customers.

The future of sales-led vs product-bed businesses

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).

Adding sales-led motions to product-led businesses

Product-led companies need sales teams. That’s why 75% of PLG companies have salespeople contact freemium accounts (source: Redpoint Ventures). 

For the mid-market segment, salespeople help monetize users and typically increase freemium conversion by 3x (source: Redpoint Ventures). Having a product open to a large volume of free trial signups increases market reach, but sales teams work to keep this volume of customers engaged and retained.

For enterprise tiers, reps focus on PQLs to drive expansion within the account and generate organizational buy-in to convince enterprise buyers to sign a company-wide deal. They also meet the needs of large enterprise accounts that require custom pricing and support. Especially for these larger customers, products can’t just sell themselves.

Adding product-led motions to sales-led businesses

Traditionally sales-led companies can adopt a product-led motion to attract new users they wouldn’t otherwise have reached. It helps to generate demand from the bottom up, and can complement or replace the experience of traditional lead magnets.

Ideally, your SaaS platform is flexible enough that you can create a PLG offer. Try creating a lighter version of a more complex product that people can use on a freemium or free trial basis. Streamline the onboarding experience to quickly deliver quick time-to-value. You can always add back sales motions to convert PQLs to enterprise customers.

Get the best of both motions with Product-Led Sales

In the end, sales-led and product-led are not mutually exclusive. You can get the best of both motions by adopting a hybrid approach known as Product-Led Sales. Plenty of top companies ranging from Asana to Dropbox have explored the spectrum between product-led and sales-led. This allows them to reach multiple market segments.

Source: SaaStr.com, Chargify

The future of SaaS is not a sales-led vs. product-led competition. Successful SaaS companies will adopt a hybrid approach that complements their core business with other ways to reach more customers. Companies that start with a product-led model and add one to a traditional sales-led model share a need to get more valuable insights from their PLG business.

Calixa bridges data silos to bring customer and product data together. PLG teams get the insights they need to identify PQLs, convert users, and accelerate growth. Watch this demo below to learn more.