The move towards product-led growth is on the rise, in part because potential customers increasingly prefer to experience a product or service first-hand before committing rather than read about (or be told by sales or marketing) the perceived value.
Of course, customers heading straight for the product have a pretty significant impact on sales organizations.
Growing Sales in a Product-Led Company
Traditional Sales Models
Let’s walk this back a bit. In a traditional sales model, prospects work directly with salespeople. But it’s sales folks who do the bulk of the talking. They assess what a prospect is looking for, what problems need to be solved, and the potential purchase’s overall context. They also tend to educate the prospect about a product’s features, functionality, and benefits. Sales act as a go-between between prospective customers and the product.
And in a marketing-led approach, prospects start their relationship with a product’s advertised perceived value. These values are strategically marketed in well-orchestrated campaigns. Still, they run a fairly high risk of creating a costly value gap with customers when the promise of perceived value doesn’t align with a customer’s real experience with the product. When this happens, relationships break down fast. Disappointed prospective customers lose trust. Sometimes they even walk away.
“Statistically, 70% of online businesses fail due to a less than optimal usability. Users expect meaningful experiences that ‘show and don’t tell,’ with the products that they are going to buy.”
However, in a product-led model, prospects lead the charge. They take an intentional and active role in looking for a solution, exploring various options, researching, and ultimately experiencing the product first-hand before they buy. Experienced value seals the deal. And although prospects initiate and hold space for the conversation, it’s the product itself that does the bulk of the talking, for better or worse.
But because prospects experience a product for themselves, see how it works, and eventually make their own decision whether to convert their trial to purchase or upgrade to a paid tier of service, the sales organization plays a less direct, different role in the overall sales process and ultimately in closing deals.
Which Companies Are Following a PLG Model?
What is Product-led Growth (PLG?)
When done right, it can boil down to a value proposition that is simultaneously well-communicated and well-executed. In other words, you build a great product that delivers on its promise.
OpenView Venture Partners
The entity that first coined the term “product-led growth” describes PLG as follows:
“Product led growth (PLG) is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion.”
So who’s following a PLG approach to sales? Calendly is, for one. According to Oji Udezue, VP of Product and Design at Calendly:
“Product-market fit is achieved when you have a product with a clear value proposition that resonates with customers whom you know how to reach and convert. In other words, build a great product that solves a real problem—and make sure you have a way to get it to the people who need it.”
So who else? Expensify, Slack, SurveyMonkey, Grammarly, and Dropbox are just a few SaaS companies that use PLG as the main driver of acquisition, retention, and expansion.
ProductPlan’s Approach to Product-Led Sales Growth
According to Jim Semick, co-founder and chief strategist at ProductPlan, “we discovered really early on that [people] don’t want to have their hands held, especially by a human,” preferring instead to figure the product out for themselves and letting the product speak for itself. Semick attributes his own company’s organic growth within existing customer organizations to offering free viewer licenses, which has expanded exposure of ProductPlan’s roadmaps and planning boards more globally across customer organizations.
When the product leads the charge, there’s less hand-holding with potential customers. As a result, company overhead costs go down. The sky’s the limit on growth scalability—a wider top-of-funnel (i.e., customers enter your funnel earlier in their journey) and a rapid global scale (i.e., instead of onboarding new sales reps, you can ramp up the onboarding experience of customers).
With product at the helm, customer acquisition costs also go down due to faster sales cycles, higher revenue per employee, and a better user experience.
Growing Sales in a Product-Led Growth Company
But how do you build and scale in an organization that is highly collaborative internally and hyper-focused on figuring out if our product can help its customers?
Jeff Horn, VP of Sales at ProductPlan, approaches building his product-led sales team this way:
“I focus on finding empathetic, curious people.” Building a core group of like-minded people then influences and forges the culture of the rest of the sales team. “What’s important to me as a sales leader is to be empathetic and committed to ongoing learning and growth. In a sales org, I want loyalty, heart, and grit,” adding that a team embodying these characteristics will provide an excellent experience for customers.
The ProductPlan sales team is well known for its curiosity, drive, and, most important—its empathy-first mindset. “We get to know our customers,” continues Horn. “We recognize that we are in the same boat and can’t be profitable if our product doesn’t fit our customer’s needs.
Revenue will come on the heels of an amazing product and a sales organization committed to figuring out the impact of the customer.”
Best practices for Building a Product-Led Sales Team:
- Traditionally, sales team people ask: “Tell me about how you ranked against your quota. Stack rank yourself. What number are you?” Those questions are important, but you can find the answers on LinkedIn.
- Culture first, history of excellence second. At ProductPlan, we never deviate. Start by hiring those who will lift others and help them improve. A person can be a top rep and still offer best practices to peers. And once you have a core group, it will attract others with similar character and focus.
- Be an architect of culture. If you aren’t intentional about defining culture, you’ll end up accepting the culture defined for you.
- A high-performing sales rep who doesn’t embody any characteristics of your culture lowers the bar and brings down the team’s entire culture.
- You don’t want a customer to churn, so don’t set up a pressure-driven process. Give the customer the time they need to make the right decision. We have a sales process that we follow. There’s a responsibility on both sides, as well as accountability with both sides.
Doing what matters and creating a meaningful culture aligned with that belief are two non-negotiables at ProductPlan. Putting product first and placing a high value on heart, humility, and hustle are the building blocks of a successful PLG company.
Other non-negotiables include team focus: empathy, commitment, grit, loyalty, humility. “Grit is important,” asserts Horn.
How to Link Sales and Product to Solve User Pain
To be successful, a PLG company must follow three fundamental steps:
- Understand its product’s value.
- Communicate the perceived value to prospects.
- Deliver on its promise.
According to Intercom, provider of a business messaging tool that enables companies to communicate directly with customers in an online context, 40-60% of people who sign up for a free software trial use it once and never come back.
Building a great product that delivers on its promise without a sales team to talk a prospective customer through the process must be approached thoughtfully by working with product managers to understand users and solve real end-user pain.
“The interesting challenge is in a space like this, the potential client is using nothing more than a simple spreadsheet. How do we help that customer evaluate and understand the cost of not going with ProductPlan—of continuing to work the way they are currently?” He adds, “The client has to be open and willing to examine their process. Where are the inefficiencies? What’s the cost? We can find the value gap. There’s a cost if you’re working late and you’re not with your kid. How do you assign a value to that?”
Here are four tips to keep in mind to ensure that sales and product teams align in that goal:
1. Customer Centricity
Product-led companies place the customer in the middle of every decision. Read 6 tips to keep customers front and center.
Ongoing and consistent communication is essential, but it also needs a structural component. Regular communication between leaders, the front-line sales team, and the product team needs to be built in.
“Product managers are expected to have a diverse set of skills that are considered soft and hard. Year after year, we’ve asked the most important skill in product management on a day-to-day basis? Communication skills always take the cake.”
3. United Teams
Keep silos at bay by holding regular meetings. Create opportunities to have fun together (e.g., book club organized by the sales team to bring in customer service team members to get to know each other better).
This is a big focus at ProductPlan and other PLG companies because it shows that the product is becoming embedded.
What Does Product-Led Forecasting Look Like?
Forecasting sales in a product-led company can be challenging without traditional engagement with salespeople and traditional sales stages.
Derek Skaletsky, the founder of Sherlock, writes:
“The emergence of the self-serve, product-led model has turned much of the traditional software operation on its head — and it’s completely upended revenue forecasting. Traditional forecasting models are dependent on a salesperson’s interaction with a prospect. But a pure-play product-led model is designed to eliminate the sales interaction.”
Product engagement plays a central role in product-led forecasting. Skaletsky continues:
“In a true product-led motion, how a trial account is engaged with the product during a trial is the biggest determinant of their Likelihood to Convert. If they see value with your product, the more likely they are to pay for it.”
Product managers need to understand that a PLG model changes the customer acquisition model. But whether or not a company is a PLG business shouldn’t change the focus. Building a great product is still the goal.
Is product-led growth the right fit for your company? This blog post featuring Wes Bush of Product-Led Institute explores this question and how to shift to product-led growth.