This article explores strategies for moving from product-driven growth to product-driven sales, going beyond the hype of product-driven growth. While the product-driven growth model is considered a panacea for technology companies, success often requires a combination of elements of more traditional enterprise models. Research shows that only a handful of companies with a product-driven growth model achieve outperformance, and they do so by adopting a hybrid approach called product-driven sales (PLS). PLS combines a product-driven growth model with a traditional sales-driven growth model, selling software to senior executives through long sales cycles. The research also found that companies that most effectively implement PLS experience substantial improvements in revenue growth and valuation ratios.
Ever since software-as-a-service (SaaS) innovators like Atlassian and Slack pioneered the product-driven growth (PLG) model, the strategy has often been viewed as the "holy grail" for achieving efficient and above-average growth. Many B2B technology companies, from SaaS companies to established enterprise technology providers to consumer brands, have adopted this model. In theory, by giving customers a free trial from the start and putting the product at the center of customer acquisition, retention, and expansion, companies can scale through lower cost of sales, increased product virality, and higher net retention Business size.
However, PLG's success is no easy task. Recent research from McKinsey shows that only a handful of companies using PLG actually achieve outperformance, and they do so by increasingly developing a hybrid model called product-driven selling (PLS). This innovative approach combines elements of PLG with the more traditional sales-driven growth (SLG) business model, in which salespeople sell B2B solutions to executives over a longer sales cycle. Research further shows that companies that implement PLS most effectively can experience significant improvements in revenue growth and valuation ratios.
1. What does it mean to be a PLG company?
As the name PLG suggests, becoming a product-driven growth company means letting the products themselves play a key role in acquiring, growing and retaining customers. While certain characteristics, such as time to value (TTV) and inherent virality, determine the extent to which a company can shift to a product-driven growth approach, all B2B technology companies can adopt some aspects of this model as they enter the market. Aspects (GTM) initiatives by investing in the following elements:
- Digitalization as a business opportunity nurturing engine . A well-designed, engaging website with the following attributes is a key driver of digital needs: interactive, use-case-based product demos; personalized landing pages with specific value propositions for different roles and personas; and streamlined trial or Register for live demo. Combined with an effective SEO strategy, content distribution and digital advertising, the website can achieve scalable reach that is difficult to achieve with traditional B2B marketing methods.
- Seamless access to products and TTV . Allowing customers to experience a product before buying is an important part of a product-led company. Try-before-you-buy tools like trials and “freemium” offers bring the research and evaluation stages of the buying process to life. This can be supplemented by simple, self-service onboarding, featuring in-product nudges and encouragement to help users quickly realize value with limited or no implementation.
- Enhance innovative sales techniques with product and usage analytics . Try-before-you-buy tools combined with product analytics can help sales teams implement innovative data-driven strategies to increase conversion rates by understanding user behavior, segmenting users, and delivering product-led, personalized experiences accordingly. The most advanced companies in this space incorporate product usage insights into lead scoring and qualification models. This helps sales teams focus on Product Qualified Accounts (PQA), which are leads that have experienced the value of the product through trials or freemium products and are more likely to convert than traditional marketing qualified leads.
- Cross-functional growth operations team with an experimental mindset . To help drive this seamless customer experience, the company's development team focuses on continuous incremental improvements to key conversion points to increase metrics such as user engagement, adoption, free-to-paid conversions, and TTV. These autonomous and empowered teams consist of approximately seven to nine people and typically include product managers (PMs), data scientists, demand generation experts, content creators, designers, and marketing strategists. These teams are typically led by product managers, whose role and incentives in customer acquisition and conversion monetization are more prominent in a product-led approach. The Growth team embraces a culture of iterative improvement through experimentation and data-centered decision-making. These experiments are critical to optimizing product-led experiences, such as perfecting product demo content.
2. Only a few have mastered the PLG model
The common sentiment among B2B software executives and investors is that product-led companies outperform their sales-led peers in terms of revenue growth, operating efficiency, and market valuation. While this is true in some cases, our recent analysis of 107 publicly traded B2B solution providers shows that most companies adopting a product-led strategy have not enjoyed any boost. Although, on average, product-led companies enjoy higher revenue growth rates than their sales-led peers, only a handful of high-performing companies account for the majority of this gap (Exhibit 1).
Only a few have mastered the PLG model, McKinsey, 2023
There are clear differences across a range of important B2B business metrics between a handful of high-performing product-led companies and other product-led companies and more traditional, sales-led companies.
For example, high-performing product-led companies spend 10 percentage points more on marketing, sales, and R&D expenses than high-performing, sales-led companies. They also improved annual recurring revenue growth by 10 percentage points and were able to achieve a 50% higher valuation ratio. Additionally, the study found that average, product-led companies spent significantly more on operating expenses than their average, sales-oriented peers, but only slightly outperformed on key performance indicators (Exhibit 2).
3. A new hybrid approach combines the best of both worlds: product-driven sales
For years, the B2B technology industry has generally recognized that there is a clear distinction between the PLG and SLG target markets. Many industry participants and observers believe that a pure-play PLG approach is best suited for small and medium-sized businesses (SMBs) or particularly tech-savvy buyers, and that SLG is the only way to build a scalable business serving enterprise customers. Recently, however, the industry has debated which model is more likely to deliver strong, sustainable and efficient growth.
Experience and research strongly refute the idea that there is such a clear dividing line between the applicability of these two models. There is a wide spectrum of product-led strategies, making most, if not all, B2B tech companies embrace this approach to some degree. The lines between PLG and SLG have begun to blur; pure-play PLG companies are recruiting sales teams to meet the needs of large enterprises, while more traditional, SLG-driven companies are investing in product-led experiences to help their sales teams prove product value and attract a new class of small and medium-sized business customers.
This emerging PLS hybrid approach combines the best of innovative, bottom-up (PLG) and top-down (SLG) technologies to maximize conversion and value at every stage of the customer journey. PLS recognizes the importance of leveraging product as the primary driver of demand generation while integrating this with traditional sales efforts to support customer acquisition. It converts self-service generated leads into sales opportunities and assigns sales reps to close large contracts for enterprise-wide solutions.
In a hybrid model, different product- and sales-led tools and strategies are used simultaneously for different roles. For example, one might outline a product's value proposition with a live demonstration (traditional SLG components) targeting C-level buyers, but it might make more sense to provide a trial for the product's end users so that they can experience the product through actual use. value. A senior executive at a product-led company summed up this approach by stating, “Our success comes from working simultaneously bottom-up with individual developers and top-down with technical leads.” Our Research shows that optimizing PLS (whether starting from PLG or SLG) can differentiate leaders from laggards in terms of product-led business performance.
4. Product-driven sales are increasingly attractive
PLS is increasingly attractive to traditional SLG-driven enterprises for two main reasons. First, it provides them with an effective way to cost-effectively expand their reach among SMB customers. Contract values in this segment are typically lower, but with no change in fixed costs for salespeople, larger B2B tech companies have no choice but to leverage self-service buying options and minimize human interaction during the sales process. Just as importantly, PLS can help these existing players respond to the changing expectations of enterprise customers and their growing need to understand and experience the value of a product before signing a large contract. In the current economic uncertainty, where corporate budgets may be facing cuts, proving the value of your products is more important than ever.
At the same time, more and more PLG companies are realizing that a completely self-service approach cannot sustain the company's growth trajectory. To keep up, they have to figure out how to turn smaller subscriptions for a handful of users, which often address the needs of one team, into enterprise contracts that cater to thousands of users and provide enterprise-wide solutions. Achieving this requires having a sales team that can help potential buyers navigate the complex enterprise sales process. By combining powerful self-service with a top-down sales approach, existing try-before-you-buy users (trial or freemium) become the primary channel for new sales teams. It is therefore not surprising that most of the once purely PLG B2B listed companies now deploy their own sales teams.
PLS's hybrid approach also aligns with client preferences. The average customer is influenced by both product-led buying factors (e.g., free trial, transparent pricing) and sales-led factors (e.g., interaction with the sales team, expertise) in the same purchasing decision. In a recent survey of 625 solution buyers across five different B2B technology categories ranging from cybersecurity to infrastructure software, 65% said they strongly prefer sales and product-led solutions when purchasing solutions. Double experience.
5. Carry out product-driven sales work
Implementing this integrated strategy requires a more coordinated and cross-functional approach to managing the end-to-end customer journey. For example, in a traditional SLG approach, the sales team owns a large portion of the end-to-end customer journey. This includes outreach, phone calls, on-site demonstrations and negotiations.
In contrast, a hybrid PLS approach requires different functions to own different parts of the customer journey. Marketing oversees the top of the funnel to generate demand, and the product team optimizes the testing phase to demonstrate value to potential customers. Once trial or freemium users are activated and convinced of the value of the product, the sales team can try to convert these users into paying customers. Additionally, ownership lines between functions become blurred as they share responsibility for key experiences. For example, marketing and product teams collaborate to educate customers during trial experiences.
As companies adopt more product-led strategies, it's important to redesign teams to be more cross-functional and multidisciplinary. Those who work at different stages of the customer journey should be included — product marketers, digital marketers, product managers, designers, engineers, sales and customer success teams — as they all share common tasks, rituals, and collaborations form. These agile growth teams also need to introduce new roles, such as growth engineers, who identify opportunities to increase product virality, improve conversion rates, reduce churn, and increase customer lifetime value. An important part of this alignment is creating stronger feedback loops between different teams and optimizing internal processes for this new initiative, such as leadership transitions.
In this new hybrid PLS approach, the key challenge for product teams is to adopt a usage and monetization-focused mindset that traditional SLG campaigns lack. It’s critical to minimize friction during trials or freemium, convert users into paying customers, and closely monitor usage to drive adoption and expansion. For their part, sales teams in an integrated model must also learn and be motivated to change their traditional ways of working and their definition of initial success. Enterprise sales focuses on closing the biggest deal possible from the get-go, while product-led sales focuses more on closing simply. They learn to measure engagement, prove the value of their products, and drive expansion and upsells. To ensure a smooth transition to a hybrid model, companies can provide new sales playbooks and tools.
As companies work to perfect their integration model, they must avoid a one-size-fits-all mentality. For example, while 59% of enterprise infrastructure buyers recently surveyed prioritized the need for free trials, only 10% prioritized proof of value or pilots. However, when it comes to cybersecurity software, the trend has reversed, with vendor-assisted proof of value or pilots emerging as the top purchasing factor for respondents. Being flexible and choosing specific approaches based on customer preferences and priorities can help companies get the most returns from a hybrid model.
To facilitate this integrated end-to-end approach, PLS needs to introduce new tools and models into the technology stack:
- Customer Data Platform: Serves as a single source of truth for customer data, such as organizational structure, purchase history, and browsing behavior
- Product analytics and telemetry: Track and better understand users’ specific actions within the product, mining for signals such as frequency of usage, number of app elements created and shared by customers, and the amount of data shared with other app users
- PQL/PQA scoring and nurturing: Identify product qualified leads (PQL) through the free plan, individual "activated" users who have interacted with the product and PQA, accounts with multiple "activated" users and prioritize using advanced leads Customer scoring and qualification algorithms that combine product analytics data with account intelligence and marketing actions
- In-product guidance and engagement: Create step-by-step guidance, how-to guides, and support for users to enable a smoother self-service onboarding experience and increase adoption of new features
- Integration of product, marketing, and sales technology stacks: Bring together multiple siled data streams and get a complete view of a company’s performance at various conversion points in the customer acquisition journey so they know where to focus their efforts
PLG innovative growth
6. Start moving towards a product-driven sales approach
While building a comprehensive, integrated GTM model will take at least a year, rapid results can be achieved along the way. Enterprise software companies succeed by building product-led experiences incrementally, starting small, experimenting, and scaling quickly—just like the most effective product-led sales campaigns. The following steps can help guide this process.
Start by designing a new customer journey . Teams can initiate this transformation by working to understand various user and buyer personas, mapping them out in process maps, identifying friction points in the buyer’s journey, and defining potential touchpoints. Clear handoffs and routing between functions is critical.
** Build new, product-led experiences incrementally. **The next step should be to decide on key product-led experiences to build and evaluate the current state of assets that can be improved, such as web pages, product demos, try-before-you-buy models, and any encouragement and coaching tools within the product. At this point, the team can begin improving the journey and assets through testing and iteration, measuring effectiveness, and incremental improvements. For example, you can first build a sandbox experiment in a simple read-only format using preloaded data, and then use the knowledge learned to develop a fully functional experiment.
** Assemble a growth team with decision-making authority. **Cross-functional growth teams will need the runway to act quickly and decisively, with full decision-making authority and sufficient autonomy. As vanguards, the growth team will lead fundamental organizational changes within the company, not just a reorganization of the sales team. From a change management perspective, this means that most functions will need to change the way they operate in some way. Designing truly open feedback loops between functions early on is critical to the success of this transformation.
** Provide enough budget to grow quickly. **Limited budgets often lead to slow learning and ultimately failure. Moving to more product-led actions is a systemic change that cannot be achieved as a side project. The first few months are an investment in learning and need to be treated as such and funded accordingly. The most successful companies have constrained their budgets to drive coverage and growth in specific areas and to test and learn quickly. Initial funding will be key to ensuring the growth team can achieve early success. In the process, they can demonstrate the value of the new approach and secure buy-in from different stakeholders within the company, which is especially important given that new product-led initiatives require more cross-functional organization and strategy.
How to start moving towards the PLS way
For those that execute well, a comprehensive hybrid GTM model that combines the best of product and sales-led elements can create differentiated returns. As start-ups continue to move upmarket and traditional players evaluate how to attract SME customers, companies may have to consider the merits of adopting a product-led sales model or risk disruption. Today's differentiators may ultimately become table stakes in the battle to win and attract customers and achieve above-average growth in enterprise services and many other areas.
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