Product-Led Organic Growth, Including Increased Operating Leverage, Is the Key

Traditional selling& marketing cost is no more competitive in modern business landscape

We can see a critical shift in modern business strategy. Traditional selling and marketing strategies—where customer acquisition is driven by high spend on advertising and sales efforts—are increasingly less effective. In modern business, product-led organic earnings growth with operating leverage is the most important. This trend suggests that companies focusing on enhancing their product offerings and customer experiences, in line with the law of scale, can achieve sustainable growth with lower acquisition costs. Organic growth driven by product excellence often leads to better customer retention, higher lifetime value, and a self-reinforcing growth cycle in which the product itself becomes its best marketer.

Rising Costs and Diminishing Returns of traditional selling

• High Acquisition Costs: Heavy spending on ads and sales teams often results in high customer acquisition costs. As competition intensifies, these costs continue to climb, reducing overall profitability.
• Inefficient Scaling for even existing customer base: Traditional methods usually have a steep cost curve. Each new customer requires additional spending, which doesn't always scale well with revenue.

The Power of Product-Led Growth

• Organic Adoption: With a focus on building an exceptional product in line with the law of scale, companies can generate growth organically. Users become the best advocates when the product truly meets their needs, driving word-of-mouth referrals.
• Lower Marginal Costs: Once a high-quality product is in place, acquiring an additional user often involves minimal incremental costs. This results in better operating leverage, where increased revenue significantly boosts margins.
• Sustainable Growth: A product that sells itself reduces the dependency on costly marketing channels. Over time, as the product matures, customer retention improves and organic growth creates a self-sustaining cycle.

Operating Leverage

• Economies of Scale: As more users adopt the product, fixed costs (like development and infrastructure) are spread over a larger revenue base. This means that while initial investments might be high, each additional customer increases profitability at a much faster rate.
• Focus on Value Creation: Companies can reinvest savings from lower customer acquisition costs into further product improvements and innovation, creating a virtuous cycle of enhanced customer value and loyalty.

Is spending in selling really matters?

While some may claim that marketing and sales efforts are still important—especially during early market entry—I do not support this claim because a well-positioned product naturally drives engagement and conversion, reducing reliance on expensive campaigns even if the product version is somewhat immature and not fully refined (consider the first version of the iPhone in 2007, which was released before the iPhone App Store in 2008).

Long-Term Resilience: enduring recession test

Businesses that build their growth on strong product fundamentals at scale are better positioned to weather market fluctuations. Their organic growth, backed by strong operating leverage, often leads to more resilient financial performance over time.

In summary, modern businesses are realizing that shifting focus from heavy selling and marketing expenditures toward a product-led approach not only reduces customer acquisition costs but also amplifies growth through operating leverage. This law of scale strategy ultimately leads to more sustainable and scalable earnings.