Be a Pendulum, Not a Switch
Swing toward success by striking the perfect balance between sales, product, and marketing with a flexible go to market strategy.
A pendulum is a device made of a weight suspended from a pivot so that it can swing freely. It is subject to a restoring force due to gravity that will accelerate it back toward equilibrium. Unlike a pendulum, a switch is defined as
a device for making and breaking the connection in an electric circuit.
an act of adopting one policy or way of life, or choosing one type of item, in place of another, a change, especially a radical one.
In a world where technology products and digital marketing dominate the market, finding the perfect balance becomes crucial. It's all too easy to succumb to the temptation of the on-off switch mentality, constantly toggling between aggressive sales tactics and passive product-led growth. But as the pendulum swings, it's clear that a sustainable path lies in striking the perfect equilibrium between buyer behavior and go-to-market strategies. In this blog post, we'll explore how harnessing the power of the pendulum can unlock the potential for success in the ever-evolving world of technology products. From self-service options to generative AI, we'll uncover the secrets to achieving product-led growth while maintaining a sales-led approach, ultimately leading to sustainable growth. So, keep your eye on the pendulum and let's dive in!
Product-led growth (PLG) offers several key benefits that contribute to a business's success. First and foremost, it places the product at the center of the organization's growth strategy. This approach allows customers to derive value from the product before making a purchase, effectively reducing the sales cycle and increasing conversion rates. Additionally, PLG fosters a deep understanding of customer needs and behavior, enabling businesses to continually enhance their offerings based on user feedback and usage patterns. This iterative cycle of improvement leads to higher-quality products that resonate with the market, ultimately driving customer satisfaction and loyalty. Furthermore, product-led companies often achieve more efficient and sustainable growth, as the cost of acquiring a new customer (CAC) usually decreases when customers can try the product before buying. In sum, employing a product-led growth approach can result in improved product quality, enhanced customer relationships, and positive business outcomes.
On the other side of the pendulum swing, a sales-led growth strategy also provides significant benefits. It starts with the ability to build personal relationships with potential customers. In the sales-led model, the sales team actively reaches out to clients, providing them with personalized demos and presentations. This approach allows for a high-touch customer experience, ensuring that customers fully understand the product’s value proposition. Moreover, a sales-led strategy facilitates larger deal sizes. Since the sales team is usually dealing with decision-makers, the chances of securing bigger contracts increase. This method also allows for a more tailored solution, where the sales team can identify the unique needs of potential customers and adapt the product or solution accordingly. Finally, the sales-led model often works well for complex products, where the value proposition might require more explanation or where there is a significant learning curve. In such cases, the sales team can effectively guide the customer through the process, increasing the likelihood of a successful sale. Together, these benefits show why the sales-led approach remains a viable strategy for many companies.
Customer Acquisition Cost (CAC)
PLG: Lower CAC as customers get to try the product before buying, reducing the need for costly sales efforts. The Pacific Crest SaaS Survey (2016) states that companies with a product-led growth strategy have a 30% lower CAC.
SLG: Higher CAC as it requires active efforts from sales team to reach out and build personal relationships. The Bridge Group (2020) reported an average CAC of $43,000 for sales-led SaaS companies.
Personalization
PLG: Less personal as it relies on the customer’s initiative to explore and understand the product. The OpenView (2019) report shows that only 23% of users feel they receive personalized treatment in a product-led model.
SLG: More personal due to active engagement from the sales team. The Salesforce (2020) State of Sales report indicates that 79% of business buyers say it's absolutely vital to interact with a salesperson who is a trusted advisor.
Deal Size
PLG: Generally smaller deal sizes as customers often start with a free version or smaller package. The ProfitWell (2018) report found that product-led companies’ average revenue per user (ARPU) is 15% lower than sales-led companies.
SLG: Larger deal sizes as sales team deals with decision-makers directly, enabling bigger contracts. According to The Bridge Group (2020), sales-led companies secured 38% larger deals on average.
Complex Products
PLG: Better suited for simpler products or where the value proposition is clear. A Gainsight survey (2019) found that 80% of product-led companies are in the lower complexity category.
SLG: More effective for complex products where more explanation or guidance is needed. A Gartner (2019) report states that 74% of business buyers choose sales-led companies when buying complex products.
In summary, the choice between a product-led growth (PLG) model and a sales-led model depends largely on the business type, target customer, and product complexity. PLG models thrive with simpler products, offering autonomy to the customers and often leading to smaller initial deal sizes. A prime example is Slack, which became a massive success by prioritizing user experience and offering a free version of their product. Conversely, sales-led models are advantageous for complex offerings, as they provide personalized customer interaction and guidance, leading to larger deals, as exemplified by Salesforce.
Combining both models can lead to optimal outcomes, as they balance customer autonomy with personalized guidance. An example of a recent startup success in this realm is Mixpanel. They started with a PLG model but incorporated a sales-led approach as they scaled and started dealing with larger customers. This hybrid model resulted in Mixpanel's successful exit with a valuation exceeding $865 million.
In conclusion, while the PLG model can generate rapid user growth and lower customer acquisition costs (CAC), the sales-led approach can ensure larger deal sizes and a more personalized customer experience. Adopting a hybrid model might be the key to both rapid growth and long-term sustainability.