Why Are SaaS Companies Turning Their Back to Sales Led Growth and Adopting Product Led Growth (PLG) Strategies?

Welcome to the?Age of Connected Work! Welcome to the?Product Led Growth?World!

The most successful SaaS companies are being Product Led only. If you’re not looking at both your buyers and users segments, you aren’t in the game. The customer journey is moving away from being sales driven to being product-led and with that shift comes a whole new reality of sales.

The world of technology has changed. The new reality for technology purchases is not about process, but about the need for flexibility and responsiveness to meet the changing needs of the business. Rather than taking six months to plan and buy a single product, enterprises are now making hundreds of smaller purchases every year as they search for new ways to improve customer engagement and productivity in their businesses.

Software is now much more than a tool: it’s become a fundamental utility powering our working lives. This shift has changed how we think about software, with exciting new possibilities for its usage and adoption.

The difference between?product-led and sales-led?lies in their approach to business. Product-led companies focus on the value of their product, while sales-led companies focus more on creating a compelling pitch for why a customer needs their service or product.

Until recently, most of the SaaS companies hawked their wares like door-to-door salesmen. They used video and landing pages to capture leads, emailed prospects for 30 days or more to try and get a meeting, and then closed deals with phone calls or demos.

If you work in a company that relies on large amounts of sales pipelines, then you know how painful it is to have failed parts in the process. Especially if those parts involve marketing and sales. The processes are rigid, and structural changes can take months or years to implement. Not only that, but they can cause serious delays in generating revenue because when one area of the pipeline breaks down, the whole thing comes to a halt.

As popular as it has become, Product-led-growth (PLG)?is still a relatively new concept.

At its core PLG is simply: a software product or service that allows a user to start using the product or service in a self-service fashion.

It’s a Go-To-Market strategy that relies on the product itself as the primary driver of customer acquisition, conversion, retention and expansion.

PLG is a business methodology where every team including sales, marketing, engineering, finance etc. focuses on the product to ensure customers achieve their business objectives faster as it is designed with the end users in the driver's seat.

It sounds great. Putting customers first, having a killer product that fuels growth, everyone in the organization rallying around a common goal.

Why Do Investors like PLG SaaS?

PLG SaaS companies are set to disrupt their top-down counterparts. This is because of their innate benefits and superior growth potential, which enables them to grow faster than those at the top of traditional hierarchy. PLG SaaS companies have an advantage in that they do not suffer from the pitfalls of being a subsidised product (in terms of customer experience), yet still create strong network effects between distributors and end customers. This means best-in-class PLG SaaS products have the potential to become mission-critical tools at an enterprise and industry level.

Source: Bessemer Venture Partners

According to a report from Allied Market Research, the global SaaS market size was valued at $121.33 billion in 2020, and is projected to reach $702.19 billion by 2030, growing at a CAGR of 18.82% from 2021 to 2030.?PLG companies are currently experiencing unicorn-like growth as they have proven to be a lucrative business model, with huge scalability and low customer acquisition costs. A few years ago, Slack was valued at $3.8B and Zoom at $1.3B.

Source: Felix Capital

But what do you actually need to get started on a PLG journey?

It all comes down to a few core things:

• Product
• Data
• Organizational alignment

Let’s break them down.

What You Need For Your PLG Journey

Product

Considering “Product Led Growth” starts with product, it makes sense to lead with this too.

Before pouring time and energy into building a PLG strategy, take a step back and ask “is my product, service and company right for PLG?”.?

Map out who your target ICP is, what your current GTM strategy is, and finally what your marketing > sales > onboarding > customer success flow looks like.

Once you’ve done that you’ll have a clear picture of where you stand today. Next up you have to figure out if PLG is a good fit.

Some things to evaluate:

• How long is your implementation process? Or is it sign-up and turn on?
• Could your sales process be self-service?
• What’s the typical time to value??

A great exercise to run is the “Jobs to be done” framework from Pendo’s PLG certification course. Get a think tank together and map out your product's ideal job(s) to be done.

Source: Pendo x Mind The Product

What does your ICP really need? Both functional and emotional.

Once you have that clearly defined and mapped out, it should become clear if what you have on the shelf right now is truly a fit for what your ICP needs, and if it will showcase enough value to make PLG worth it.

And if not, that’s okay. Most companies need to make changes to make this work.

PLG is designed to be quick and easy for a user to find the product, try the product, and decide if it’s the right fit for their needs. Friction is the enemy.?

Because of that, Self-Service is a must and Time To Value has to be short enough that they see a point in continuing rather quickly.

What’s “under the hood” is incredibly important. Your product has to be able to showcase value within days or less. It also needs a viral aspect to it. Make people talk about it, tweet about it, give incentives for signing up and inviting other users.

Now that’s not to say that you can’t have multiple product tiers, product offers or other?GTM motions.

?Many companies have success running PLG with a version of their product and then have a ‘premium’ offering used for enterprise sales and upselling. Other companies have different product lines entirely.

The key is looking at your product and figuring out if PLG can be a piece of your GTM puzzle or not.

Data

Other than product fit, good data is the next most important piece of a PLG strategy.

Good, accessible, clean data means a streamlined product and buying experience, based on product usage and interests. Otherwise, you’re stuck doing cold outreach with no real insight.?

Think about how many times you’ve gotten an email asking you to sign up to become a customer, or upgrade a feature, when you’re already using the product.

It’s a bad experience and can be the end of a good PLG motion.

This isn’t exactly a sexy process but you have to ensure that your revenue teams (sales, marketing, CS) all have access to the data they need, as they need it. It involves a lot of data mapping and integrations but it’s a crucial step to nailing product led growth.

I can’t stress it enough:?invest in good data and even better processes.

You’ll be collecting data from your CRM, MAP, directly from customers, from the product. Have a plan to identify what you need and how to tie it all together in an actionable way.

This also means figuring out lead scoring, typically in the form of a PQL. Get everyone on board with what this means and what happens next.

For this, you’ll want to map out the ideal customer journey and set scores based on high-value actions that will signal that they may be ready for an upsell or premium feature.

Typically there are three categories of PQLs:?

• High intent hand raisers: These are people who have said they want to talk to sales. Usually either through email, chat, or a high intent form fill (contact us).
• Behavior based: If you have different product tiers but run a free trial at the beginning, you can track who is using features that are included in the top level plan, and try and upsell accordingly after that trial ends.
• Usage based: This is a basic threshold of “if a user does XYZ 50 times they go to PQL”. This could be logging into the product, doing a certain action, looking at a certain tool, running a report - whatever you deem to be worthy of sales outreach for an upsell.

Organizational alignment

There’s no one size fits all when it comes to PLG. Every company has a different product, different skills, headcount, product mix, etc.

?But the best PLG strategies all have one thing in common:?everyone?is aligned.

PLG is a fundamental shift in your go-to-market. Measurement is different, sales is different, and customer success is different.

Is everyone on the same page for exactly what marketing is measured on and how they plan to drive results?

Is the sales team okay with not getting ‘leads’ from marketing anymore, but rather looking at other signals (PQLs, feature adoption etc.)?

How is the new outreach and cadence going to be structured? Do teams need to be structured differently?

Product-led-sales can definitely work combined with other GTM motions, but there has to be tight alignment. Sales become much more consultative instead of pure sellers, and have to be very strategic about what accounts they talk to and when.

There is a lot that changes with a PLG strategy, and everyone has to be aligned on the end goal and how to get there, or the whole thing fails.

What You’ll Want to Avoid

As I'm sure you can imagine, there are plenty of things you’ll want to avoid in a PLG journey. Here are a few of my top pitfalls to watch out for:

1.??Don’t assume PLG = Free Trial

A free trial is a great part of a PLG motion, but ultimately this is just a way to attract potential customers. PLG is an overarching way to run a business and go to market.

PLG permeates everything from sales, marketing and customer success through operations. It might change your product offer as a whole or open up a new market to expand to.?

Treating PLG as just a free trial is approaching it with handcuffs on.?

2.??Don’t launch PLG without sales buy-in and data support

Might seem obvious but it happens everyday. Sales teams are trained to spend their time researching, prospecting, following up on marketing leads, and running demos.

?PLG changes a lot of that. Instead of marketing leads and prospecting it’ll be sorting through intent signals, PQLs, and crafting upsell messaging.

Of course, you can still run a traditional sales motion in tandem, but this is where the alignment has to happen to make sure you aren’t spamming the same people with conflicting messages.

3.??Don’t assume that PLG replaces customer research

Product led usage data should be an extension of customer research not a replacement. You don’t want to be making assumptions based on usage data when the reality is something far different.

?Before drastically changing anything in your product or GTM you should always run it by either a customer advisory board or something similar.

You should also conduct frequent win-loss interviews, case studies, and general check-ins to deeply understand the perceived value your product brings to build around what the market wants, not what you want.

Ready to master the PLG game??

If you’ve made it this far, you’re probably seriously considering product-led-growth for your company.

Before you go rushing in, here’s one last pitfall to think about: maybe your product is good, but before starting the PLG path, you need to turn it into great.?

Take the time to build the foundation. Invest in data. Invest in talent.

It’s really easy to be too close to your product, and think that it’s more valuable than it really is. It happens all the time. And just because a product has value, doesn't mean it’s going to take off in a PLG motion.

Product-led-growth isn’t a magic bullet where you just drop in a good product and you’re an overnight success.

And above all, talk to your customers and potential customers, probably more than you think you need to.

What are their needs, wants, and challenges? What do they want to accomplish from their careers? What do they want in their personal lives that work either A) gets in the way of or B) can help them accomplish?

The secret to PLG is to blend psychology and you product together. Customers need to see a better version of themselves in your product.

Will it make them look good to their boss and get them promoted? Will it save them time at work so they can get off early and make it to their child's dance recital?

That’s the real key to PLG success.