Some of the most famous SaaS companies started their journey with zero sales representatives, relying entirely on a product-led rather than a sales-led strategy to increase their customer base and grow their revenue.
And, for a long time, this strategy was extremely successful, resulting in supercharged growth, a loyal base of customers and advocates, and a product that truly delivers a world-class experience.
Today, many of these companies have now added a sales team. This begs the question — in the product-led vs sales-led growth debate, which strategy really delivers the growth gains SaaS businesses are aiming for?
Product-led vs. sales-led growth at a glance
In a product-led growth strategy, the product itself is the main vehicle for growth and retention. Every department in the business, including marketing, customer service, and content will be optimizing campaigns and activities towards specific product actions that are proven to bring the customer closer to conversion.
A product-led growth strategy relies on the organization having either a free trial or freemium product available. Customers will sign up on their own and, guided by tools like a customer onboarding experience, resources hub, automated marketing messages, chatbots, or a community of practice, will discover the value of your product in their organization and decide to become a paying customer.
A sales-led growth strategy relies on a sales team to go out and find leads, service product demo requests, and contract partners.
In between these two extremes is a different approach that is rapidly becoming the norm — product-led sales, a blended model that brings the best of both worlds into one powerful strategy for growth.
What is product-led sales?
Product-led sales is a model where sales and product are strategic growth partners. Essentially the company will have product-led growth strategies, like free trials or a freemium product, in place alongside a sales team who can jump in when needed and take enterprise-level plans to the finish line.
With a customer data platform in place, sales teams will be able to identify leads that have already experienced their ‘aha’ moment and will be more likely to invest. These leads are referred to as product-qualified leads, and they can accelerate the funnel and reduce friction in the sales cycle.
A step-by-step guide to mastering product-led growth
Put yourself in your buyer’s shoes and it quickly becomes clear how a show AND tell strategy like product-led sales can be beneficial. Customers are able to get into your product and experience it for themselves and benefit from a little hand-holding from a sales team when it comes time to expand usage or negotiate terms on enterprise-level plans.
As much as this is a customer-centric strategy, there are numerous benefits to SaaS companies that implement it.
According to ProfitWell, CACs have increased by over 55% in the last five years. A product-led sales strategy reduces CACs by lowering the barrier to entry for customers and allowing sales teams to stay lean.
Higher LTV with revenue diversity
By implementing both product-led strategies and a sales team, your SaaS business will be better equipped to bring in those high LTV enterprise-level customers, while maintaining the revenue diversity that comes with a product-led model.
In a traditional sales-led operation, it was common for a small number of big customers to be the main drivers of your Annual Recurring Revenue, which made losing just one of them incredibly risky. When sales teams are able to focus on these big fish while the product itself sells to the smaller fish, you’ll have a larger pool of customers and the idea of losing just one won’t keep you up at night.
Build a better product
When the product itself is doing the selling, customer feedback is taken on board quickly and innovation becomes top priority for the entire business. Every team is focused on improving the product, bringing different perspectives and solutions to ultimately build a product that is world-class. As SaaS explodes and competition grows fiercer by the minute, a great product is absolutely paramount to success.
No one knows your customer’s business like they do, so even the best sales team could easily skip over a use case, feature, or benefit of the product that the customer sees instantly. This kind of self-discovery is powerful — when we feel as though we’ve reached our own ‘aha’ moment, we are more attached to the outcome and willing to buy-in.
This reduces friction in the sales cycle, saves your team valuable time, and is more likely to create customers who are both loyalists and advocates.
For these reasons and more, product-led sales is becoming the dominant strategy for SaaS businesses. In fact, data from PeerSignal shows that, of 473 SaaS companies documented, 387 are utilizing product-led sales in their go-to-market strategy, 81 product-led growth, and just 5 sales-led growth, showing that the debate between which strategy is more effective could be moot - the best approach might be a combination of both.