In recent years, product-led growth has become a hot strategy because it allows for quick scalability with relatively minimal investment. Some of the fastest growing companies like Shopify, Snowflake, and Zoom use this tactic, making it look all the more appealing.
But that doesn’t mean companies with a more sales-led approach to growth are headed for the scrap heap. Salesforce and Microsoft, for example, are successful companies that rely on a sales-led strategy.
So which is the right option for your company?
“Sometimes it’s not a question of choosing one or the other, but rather how companies can leverage elements of both GTM strategies,” says Andrew Levy, senior director of product management at ZoomInfo.
Here’s what to think about as you develop the GTM strategy for your company.
What is Sales-Led Growth?
Sales-led growth puts sales teams at the forefront of a company’s operations, and works to move leads through the sales funnel. The key objective is rapid revenue growth, while also keeping a keen eye on profitability and customer satisfaction.
Companies that use a sales-led growth strategy typically have a complex product that requires more hands-on training from experts. They tend to invest heavily in their sales team, focus on hiring and training top-performing sales professionals, implementing effective sales processes, and providing the necessary resources to support sales efforts. The sales team often enjoys a great deal of autonomy and flexibility, to pursue leads and close deals in a way that works best for them and the company.
How to See Success Using a Sales-Led Growth Strategy
In short, sales-led growth is about using sales as a company’s growth engine. It can be an effective strategy for many types of businesses, but it requires a strong sales team, a solid understanding of the market, and a willingness to invest in sales and marketing efforts.
Additionally, a successful sales-led growth strategy requires personalization. Every email, call, and meeting should be tailored and relevant to your prospect, making it clear how your product or service can solve their distinct needs.
Sales-led growth metrics
Specific goals and objectives will vary, but these are some common metrics that you can track to monitor the health of your sales-led growth strategy:
- Monthly recurring revenue (MRR): The amount of revenue that your company expects to receive on a monthly basis from your customers. This metric is particularly relevant for businesses that operate on a subscription-based model.
- Customer acquisition cost (CAC): The amount of money a company spends to acquire a new customer. CAC includes all costs associated with marketing, sales, and advertising.
- Customer lifetime value (CLV): The total revenue a company expects to generate from a single customer over the course of their relationship. CLV takes into account the customer’s average purchase frequency, average purchase amount, and length of the customer relationship.
- Sales conversion rate: The percentage of leads or prospects that convert into paying customers.
- Average deal size: The average amount of revenue generated per transaction. This gives you a better understanding of the size and potential of your market.
- Sales velocity: How quickly your company can close deals. It takes into account both the length of the sales cycle and average deal size.
What is product-led growth?
With a product-led growth strategy, customer acquisition, expansion, and retention are all based on your product, rather than your sales team. Dropbox, Canva, and Slack are some popular companies that use a product-led growth strategy. These companies often rely on free trials or “freemium” offers to sway a customer into purchasing.
Product-led growth non-negotiables
Effective product-led growth requires a few things:
- Frictionless process. Trying out your product shouldn’t require a sales rep or an implementation specialist.
- Your product should speak for itself. Customers have to love your product and that typically means a seamless, user-friendly interface. Your product is responsible for turning users into loyal customers and advocates of the product.
- Time to value should be short. It should be clear to your customers what value your product brings. It should be a very short time after purchase for those promises to ring true.
Product-led growth metrics
There are several metrics that can be used to track the success of your product-led growth strategy. Here are some of the most important ones:
- Activation Rate: The percentage of users considered to be active adopters of your product.
- User Engagement: How frequently and deeply users interact with your product. High engagement rates indicate that users find the product useful and are likely to continue using it.
- Retention Rate: The percentage of users who continue to use your product over time. High retention rates indicate that users are finding value in your product.
- Conversion Rate: The percentage of users who take a desired action, such as upgrading to a paid subscription or making a purchase.
- Net Promoter Score (NPS): This measures the likelihood that a user will recommend your product to others. A high NPS indicates that users are satisfied.
- Time to Value: The amount of time it takes for a user to see the value of your product. The shorter the time to value, the more likely a user is to become an active and engaged user.
Interestingly, the gap between sales teams at product-led and sales-led growth companies is probably narrower than you’d think. An analyst at PeerSignal.org found that, while they often start with smaller than average sales teams, product-led growth companies eventually hire sales teams that are comparable in size to the average B2B company.
So which is it?
“Increasingly, we see hybrid sales-and-product-led strategies deployed across the industry,” Levy says. “How those strategies come together will ultimately be unique to each company based on any number of factors. This could take shape as a product-driven motion to acquire and activate new customers, while sales-led tactics facilitate expansion and retention, or vice versa, or something else altogether.”
Levy says that the key to determining which growth strategy is right for your company starts with evaluating your business goals, target customers, and available resources, and then designing the best solution that suits your unique situation.
Whether your company chooses a sales-led or product-led growth strategy, or a mix of the two, ZoomInfo can help you prospect faster, connect more often, and exponentially increase your productivity. Read our Customer Impact Report to see how.