Product-Led vs. Sales-Led Growth: How to strike a balance

The Dock Team
Published
December 4, 2023
Updated
December 19, 2023
TABLE OF CONTENTs
TABLE OF CONTENT

Product-led growth is all the rage. The product-led strategy jives well with the low-touch, self-serve way that most of us prefer to buy software. 

But as much as everyone would love to have a product that sells itself, it’s not right for every business. Some products just need a human in the mix to remove potential buying obstacles.

And realistically, the choice between being product- or sales-led isn’t an either/or decision. 

Sales motions exist on a spectrum—with a pure product-led motion on one end and a pure sales-led process at the other. 

Figuring out what’s right for your business is going to take a deep understanding of your customers, and some rigorous experimentation. But this guide will share some actionable advice to speed along your discovery journey.

Product-led vs. sales-led growth

Let’s get clear on definitions: 

Product-led growth (PLG) is a business model and go-to-market strategy where the product itself is the growth engine responsible for customer acquisition, conversion, and retention. 

PLG businesses offer users a free version of their product (either a free trial for new customers or a forever-free version, also known as a freemium model). The user can then upgrade to a paid version if they want to add users to a team or access more features. 

Some noteworthy examples of PLG companies include Dropbox, Calendly, Canva, and Slack

Sales-led growth is a growth strategy where a Sales team helps prospects through the sales cycle from first interaction to purchase. In a sales-led business, sales reps build relationships with target accounts and then use those relationships to convert leads into paying customers. 

The key difference between PLG and the sales-led approach is how familiar the buyer is with the product: 

  • In a PLG model, end-users have already started using the product—the goal is to get users to start paying for it or expand their accounts. 
  • In a sales-led model, end-users are less familiar with the product, and the goal during the sales process is to educate them on why they should buy and use it. 

In recent years, the product-led approach has grown in popularity, in both the B2B SaaS and B2C sectors. A 2022 survey by Gainsight found that more than half of their respondents (58%) had already implemented a PLG motion. 

However, the sales-led movement is here to stay, especially for enterprise software. Famous sales-led companies include Salesforce, Microsoft, and Oracle.  

The PLG spectrum 

People tend to talk about PLG and sales-led businesses as if you have to be one or the other. But, as Pocus co-founder Alexa Grabell told us recently on our show, Grow & Tell

“PLG is a spectrum.” 

At one end of the spectrum, you have a product that is completely self-serve, and your company has no Sales team at all. 

At the other end of the spectrum, you have no free trial, and your entire customer journey is driven by a Sales team. 

Where your company falls on the PLG spectrum will depend heavily on your product and your target market. In Alexa’s words: 

“People become obsessed with being one or the other. But the reality is, you need to build what is most impactful, valuable, and efficient for what you’re selling and who the buyers are.” 

Here's Alexa talking more about the PLG vs. sales-led on Grow & Tell:

Of course, the choice between PLG and sales-led isn’t a permanent decision. 

While product-led companies might start with a 100% self-serve product and no Sales team, the reality is that every PLG company eventually adds top-down sales. Slack, Twilio, Github, Dropbox, Zapier, Atlassian — they’ve all got a sales team.  

The question isn’t whether you’ll add sales. It’s about when you add sales, and what your Sales team will do when they get there. 

Product-led vs. sales-led: How do you choose? 

If you’re a business owner, then there are two different choices you need to make: 

  • Should you start as PLG or start as a sales-led business? 
  • If you’re already PLG, when is the right time to add sales? 

Let’s unpack that a bit: 

Should you start with a self-serve product? 

If you’ve got a brand-new business and you’re wondering whether to embrace PLG from the start, here’s how to frame the decision: 

1. Can your users get to value without help? 

The PLG model only works if your product is easy to use and delivers value right from the start. If users can’t get much value out of your product by themselves, then a PLG model does not make sense. 

This also assumes that your product is valuable for individual users. For instance, you can get a lot of value out of a product like Calendly all by yourself—you don’t need other people to be using it for it to be a helpful addition to your personal tech stack. So Calendly makes sense as a PLG product. 

On the flip side, our CEO Alex Kracov explains that Lattice, an HR platform, doesn’t make sense as a PLG: “No employee is going to sign up for Lattice and be like, ‘I want to run a performance review by myself.’” 

The value that people get from Lattice is when they’re using it at a company level. They aren’t going to arrive at an “Aha!” moment without help from a top-down Sales team.

2. Do you offer users something truly new? 

You can only make headway with a PLG product if enough people voluntarily start using it. 

Peter Kazanjy, author of start-up sales guide Founding Sales, argues that to use a PLG model, you will therefore need a product that is totally different from what your target market already has available. 

Otherwise, they’ll just continue using the tool that is familiar and easy. 

So, you should consider starting off as a PLG if: 

  1. You offer a fully differentiated product.

    If you’re creating a new category, you should find it easier to get bottom-up market traction. 

    For instance, Calendly introduced the idea of sharing a public calendar so people could book time slots. It works well as a PLG because a) it was a new concept, b) it delivers immediate value with no need for a network effect, and c) it’s easy and intuitive to use. 
  1. You offer something dramatically better.

    People will use their own preferred solution if it offers a much better user experience, regardless of what software their employers have laid on for them. 

    Zoom is a good example of this—they “won the pandemic” because they offered a slicker interface and a more stable product than market incumbents Skype and Microsoft Teams, and word got around. 
  1. You target market entrants.

    If your product is not market-creating, or even the best solution out there, you can still make a PLG model work if you target a different segment. 

    For instance, by targeting people setting up their first e-commerce shop, Shopify was able to use a PLG model to take on established brands like Yahoo! Stores. 

📺 Get more founder-led sales tips from Peter on the Grow & Tell podcast

When is it the right time to add sales? 

Of course, adding a top-down sales motion to a PLG business will come down to your product, your market, and your preferences, but there are a few rules of thumb you can use as a guide. It might be the right time to add sales to your PLG if: 

Your PLG sales funnel is working well and you’re ready to move upmarket.

According to venture capital firm Andreessen Horowitz, the first sign that it’s time to add top-down sales is when you’ve passed $20M to $30M ARR in bottom-up-driven sales. That’s when Twilio, Github, and SendGrid made the leap. 

Source: a16z.com

While that specific number might be up for debate, it makes sense to think about adding in a sales team to help take your product upmarket, once you’ve got your product-led strategy working well. B2B buyers have more complex buying processes that can benefit from support from a sales rep. 

The numbers add up.

Venture capitalist Tomasz Tunguz points out that it only makes sense to add a Sales team if you’re going to be charging enough for your software to make it worthwhile: 

“Let’s take the example of an inside sales account executive with a $500k annual quota. At a $500 price point… that AE would need to sell 1000 customers per year, 83 per month, 4.2 per working day. There are some amazingly productive salespeople, but those velocity figures are stratospheric—and unrealistic.” 

If your average customer value (ACV) is at the higher end (Tunguz suggests $3000+ as a benchmark), then a Sales team likely makes sense. If your prices are lower, then you might want to stick with pure PLG for now. 

Your customers want to talk to a Sales team. 

For Pete Prowitt, the Head of Revenue at Stytch, bringing a top-down Sales team into a PLG company comes down to buyer enablement

“Whenever faced with the decision of 'Is it better for this to be product-led, or is it better for this to be sales-led?' I try to go back into that ‘designing for buying’ mindset and figure out: 

  • If I were buying the software, what would the experience be that I wanted? 
  • Is this the right point for a sales rep to jump in and intervene? 
  • Is this something where I actually want to do a little bit of exploration to get smart and to figure out how far I can take this on my own?” 

📺 Hear more from Pete talking about product-led hypergrowth on the Grow & Tell podcast. 

If your customers are running into roadblocks on the way to purchase, then it might well make sense to add a sales function. In fact, a survey by Redpoint found that salespeople increase free to paid conversion by 3.5x.

And of course, some customers simply prefer to talk to another human being—and some would much rather figure things out on their own. 

To quote Alexa from Pocus again here: 

“If you’re selling to salespeople or selling to HR people… it sometimes can be hard to be product-led, the reason being that those types of personas love talking to people. 

But, if you're selling to a product manager, they’re probably going to want to hack it together by reading documentation on their own. 

So it really depends on your ICP as well.”

@grow_and_tell Alexa Grabell, CEO & Co-Founder of Pocus, doesn't believe that all PLG companies should look the same, especially when hiring salespeople. Here's why she chose to hire a salesperson (even though Pocus is a PLG company) #productled #sales #growthstrategy #business #entrepreneur #startup ♬ original sound - Grow & Tell

When is it the right time to add a product-led motion? 

OK, so we’ve talked about adding a sales team — but how about going in the opposite direction? 

Marie Gassée led the launch of Box’s product-led motion. We asked her recently when sales-led companies should add PLG, and she was pretty blunt: 

“Do it now. It’s so horrible to do it later. Just do it now when you’re Series A and have 100 employees.” 
@grow_and_tell Marie's advice for startup teams looking into PLG? Do it now. Don't wait until you have years of legacy processes to start implementing structure. #entrepreneurship #startup #growthstrategy #b2b #productled #management ♬ original sound - Grow & Tell

If you plan on adding a PLG motion to your sales-led business at some point, then the sooner the better. That way, you can build the data infrastructure you’ll need right from the start. 

“It’s going to be so much less painful to get some sort of structure now, rather than doing it in two years when you have to unwind a bunch of legacy crap,” says Marie. 

If you’ve already passed that point, then Marie advises you to look at where your revenue is coming from. For example, Box was strategically focused on the enterprise market — but when they looked at the customer base, they noticed a lot of revenue coming from SMBs. 

Adding in a product-led motion was therefore the natural result of noticing a large and growing down-market customer base, and then developing a self-serve approach to better meet their needs. 

📺 Hear more from Marie about leading growth at Box, Confluent, and Column on the Grow & Tell podcast. 

Combining PLG and SLG: The sales-assist

Product-led sales look pretty different from a traditional B2B sales model. 

Instead of the typical AE role, you’re creating what OpenView called, “the hottest PLG sales role: sales-assist.” 

The sales-assist role (also known as an onboarding specialist, enterprise advocate, or customer success coach) sits somewhere between sales and customer success. Their job is to educate and facilitate the buying experience for someone who is already at least somewhat familiar with the product. 

Here are some tips for layering a sales-assist into your PLG business: 

Talk to your users 

Zapier decided to add a sales-assist role to help expand into the enterprise market. 

Before building out a full team, Zapier hired a single sales rep who spent time talking to enterprise buyers and understanding their challenges with the purchase process and why they weren’t selling enterprise licenses—even though they hadn’t gated the pricing or purchase process. 

They discovered that B2B buyers often couldn’t self-serve their purchases, because:

  • a) they had to navigate complex permissions structures,
  • b) they couldn’t put a purchase that size on a credit card, and 
  • c) they wanted to make sure they’d get human support on implementation

Zapier was then able to add in a sales-assist team who would focus specifically on helping enterprise customers with those specific issues.

Act as educators first, salespeople second 

The role of sales assist is different from that of a traditional salesperson because your users have already learned the value of your product by the time they meet them. 

Alexa Grabell explains that as a result, “The sellers in a PLG business tend to lead with value, and lead with ‘How can I help you get more value out of the product?’ Rather than traditional sales businesses saying, ‘This is what our product does. There's this hypothetical value that you can get. We're going to show it to you after you purchase.’"

The discovery conversation shifts from understanding the prospect’s generic pain points to understanding how and why the prospect is already using your product, and where they could be getting more value out of it. 

When François Dufour built out the sales-assist role at Twilio, the challenge was to hand over a lead from a purely self-service purchasing experience to talking to an AE. Their market is highly technical, and their leads didn’t want to suddenly be forced into a sales conversation. 

Instead, François says, “What worked is having a team in the middle that we call technical business development reps, who really understand how to help a developer on their way.” 

They were there to ask things like, ‘Hey, can I help you get unstuck? Can I send you the right docs? Can I offer you the right discount to extend your trial?’” 

The role of sales in a PLG is not just to sell, but to help users get more value from the product—and, in time, create fervent buyer champions

Listen to more of François’s interview on Grow & Tell

Leverage existing user data 

Product-led sales is a consultative process, and requires a deep understanding of the prospect’s organization and current behaviors with your product. 

All of that takes data, says Alexa: 

“The seller in a PLG business […] tends to be way more data-driven. They are looking at, ‘Who are the existing users on our product, and how can I use the information on how they are engaging with the product to inform how I want to reach out to them, to be way more personalized?’” 

Product-led sales teams should leverage their educational conversations to learn more about their customers, suggests François. 

“It’s really a quid pro quo. I'm going to help you, and in the process, I'm going to find some information about your use case, maybe your budget, and who else you'd like us to talk to in the organization to give you the license and the freedom to use our service more.” 

The sales team then becomes an ally to the end user—someone who can help you make the case internally to invest more in this tool that is so valuable to you. 

Tools for the sales-assist function

If you’re adding a sales-assist function to your PLG, they’re going to need a different toolkit from a traditional sales team. Here are a few tools you might want to consider: 

Product-led digital sales room 

The main job of a product-led sales team is to showcase the value that the prospect’s free users are already getting from your product. 

Instead of sending a bunch of product usage stats in an email, however, consider a digital sales room. A DSR is a shared workspace that lets you showcase relevant information for your prospects, all with a single link. 

This helps put your upgrade conversation in context. You can add all the information about their product usage, plus case studies that relate to their specific use cases, and your recommendations for upgrade options. 

It makes it easier for them to see the case for upgrading, and then move quickly from decision to purchase, all in the same workspace. 

Product usage data platform 

If you want to add a sales-led motion to your PLG, you need to be able to identify your product-qualified leads. Those are the people who experience value from your product, match your ideal customer profile, and are using your product in ways that suggest they’d be interested in purchasing. 

To spot your PQLs, you need solid data about exactly how your users are engaging with your product. 

A few options for gathering that product use data: 

Demo software 

For PLG sales, a great demo is crucial for converting users into customers. Here are a few options: 

  • Loom - for recorded demos and personalized videos to add to your digital sales room
  • Livestorm - for live group demos 
  • Reprise - for interactive demos 

Whether you’re product-led or sales-led, Dock can help

Dock works for both product-led and sales-led motions—and everything in between. 

  • Product-led companies can use Dock’s personalizable sales rooms to communicate the value users are already getting from the product, and make the bottom-up sale.
  • Sales-led companies can use Dock as a digital sales room to collaborate with the buyer champion and simplify the buying experience for your prospects. 

Dock is free to try for up to five customer workspaces. To learn more, get a demo from our sales team or get started for free here.

The Dock Team