In the software industry, there has been a lot of discussion around product-led vs sales-led growth recently. But what does it mean exactly and why is it important?

Simply put, product-led growth (PLG) is a strategy that drives business growth through providing access to the product, while sales-led growth (SLG) relies upon a more traditional sales process that requires telling the customer about the product [1]. A typical differentiation characterises product-led growth as being ‘low touch’ (the product sells itself), and normally the approach reserved for business to consumer or small to medium business sales. A sales-led approach tends to lend itself to large, complex, enterprise deals. But is it really so clear cut when to apply each approach? Enter product-led sales. An approach that utilizes the product in a self-serve context to drive highly qualified leads either through a free or lower tier price point, while subsequently utilising a traditional sales process to further nurture the customer towards a more comprehensive deal. 

Despite the hype around the PLG approach due to its perceived benefit for hyper-growth Software-as-a-Service (SaaS) companies, some evidence suggests that only few companies are seeing outsized returns from applying this model [2]. If we consider some of the characteristic differences between a typical service-based and product offering it makes sense to take a hybrid approach. With a clear engine of growth [3], a product offering is highly scalable, whereas a service-based offering can be difficult to scale due to its ‘high touch’ sales approach. In terms of business valuation, the more predictable revenue of a product offering is attractive for investors; however, adding a service layer to a product company to create additional value is increasingly common [4]. Productising a service-based offering brings efficiencies.

If product offerings can benefit from additional value streams created through services, offered using traditional sales processes, and productisation of service offerings enables their optimisation, then a hybrid growth strategy such as product-led sales would seem a necessity. The extent to which its implementation is possible within a given business is dependent upon that business’ ability to support a suitably sized sales function. With a general consensus emerging in the product development community that software development should not be managed as a series of finite projects, see for example [5], the challenge would appear to be how to manage the bespoke, project-based world of services with the hypothesis-driven, world of product development.

[1] https://productled.com/book/product-led-growth
[2] https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/from-product-led-growth-to-product-led-sales-beyond-the-plg-hype
[3] https://larslofgren.com/marketingbasics/the-three-engines-of-growth-with-eric-ries 

[4] https://www.forbes.com/sites/forbestechcouncil/2020/10/13/the-product-vs-services-conundrum

[5] https://flowframework.org/ffc-project-to-product-book/
[6] Photo by Markus Spiske on Unsplash