PF #64: Sales at Product Led Growth Startups

Don't be fooled. Sales is still absolutely necessary in PLG businesses.

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Multiple times in the last year I have recommended shifting products toward a more product-led growth strategy. The thinking is quite simple — use a great product experience as the primary means drive business growth.

Who uses PLG? The majority of high growth B2B SaaS businesses leverage PLG to some degree today, including Zoom, Notion, Slack, Trello, HubSpot, ConvertKit, and DocuSign.

There is, of course, a lot more to it. How organizations structure themselves, prioritize product investments, and go-to-market are all significantly impacted by a product-led growth (PLG) strategy.

Basics of Product-Led Growth

In particular, when we discuss PLG, we think about minimizing the friction to attract and onboard new users. This has big implications on your marketing. Our goal should be on targeting the pains / needs that specific users have over the benefits that a business customer might experience as a whole.

As such, we see marketing efforts heavily weighted towards educating potential users with content marketing and, often, free to low cost entry points to start trying products out. Their goal is to get a few users at lots of organizations to be sufficiently interested in the offering that they try it out.

Product-Led Growth (PLG) is based on providing value to users directly as a first priority. After demonstrating clear value to users, leverage that into a sales opportunity to create paying “Customers”.

This is where the product-led growth comes in. While marketing is getting the highly qualified leads, it is the products job to convert them into customers through the delivery of great value. Done well, users will encourage additional users to try the product out and, before long, large numbers of users at a single enterprise are using the product.

PLG has taken off in conjunction with the growth of B2B SaaS products. Commonly we see PLG businesses using freemium, free trials, and other low barrier-to-entery approaches to get early adopters in to start scratching their itch.

Traditional Sales & Marketing Led Growth

In more traditional business models, we build software solutions and leverage marketing to create awareness and position our offering in the eyes of potential customers. The we look for big enterprises that might be issuing RFI / RFPs where we can use our sales execution prowess to get shortlisted. With some luck, and a possible short POC, we gain the confidence of the key decision-makers in the business along with procurement, that our solution fits.

Sales negotiates terms of the deal within some constraints dictated by the organization. Then, after a few to several months or more, we execute an agreement with the “customer”. The customer being represented primarily by a budget owner, functional managers, procurement, legal, and - infrequently - some lead users.

After the contracts get fully executed we move to the “handover”. Sales tells the Customer Success team about everything they sold and committed. Then Customer Success schedules their initial kick-off meeting with key stakeholders within the customer team. For the first time this might include a Project Manager and more key end users.

In this model, sometimes referred to as a Sales & Marketing Led Growth Strategy, we see the the user plays a bit part. Sometimes as an influencer but they are often blind to much of the process and getting no value from the vendor throughout much of the sales process.

There are lots of historical reasons for this model and some linger today. Yet, there are many acknowledged problems with such a procurement process and it is rapidly succumbing to PLG.

Where does Sales fit within PLG?

Since PLG flips the traditional sales & marketing model on its head, executives often ask where Sales fits? If the marketing finds users and a great product turns them into customers what role does Sales play?

The truth is that Sales role definitely changes. Rather than focusing on qualifying marketing leads to progress them in the funnel; rather than cold calling with SDRs the volume game - sales new mission is to find existing users that are getting considerable value and help convert them into enterprise agreements.

The gap that most PLG companies find themselves in, especially freemium products, is where they continue to build loyal users and struggle to convert them to paying customers. This is where Sales shines.

A good PLG business will be producing excellent qualified leads for sales to convert. Heavy users. Loyal supporters. Growing user bases within a large enterprise.

So unlike a traditional model of negotiating with procurement and business sponsors on the potential value of your product — a PLG sales exec has a customer being pushed from the bottom up on the value. In fact, a great product, will drive users to push for the paid tier to happen to unlock some remaining feature or usage limitations that will unlock even greater value.

Sales, then is picking the cream of the crop, of highly qualified prospective customers, and simply working to convince organizations that paying crossing some critical need or risk off their plate. Moreover, large enterprises can usually be converted into enterprise deals to reduce the overhead of department by department purchases.

Bottom Line for Sales in PLG

The strategies and tactics that sales rely on within a PLG business are significantly different from traditional sales & marketing led growth. Their attention needs to shift much more to lower volume activities around conversions and expansions.

PLG is basically a dead-end for the high volume ways of the SDR model and a return to the negotiating and high touch relationship building more prominent in earlier days of enterprise software sales.

For those building a new sales organization within a PLG business, be aware of this shift when looking for leadership and team members. This different model tends to require fewer, more strategic thinking sales leaders.

In summary, do not think that just because you are a PLG business that you do not need sales. At some point, large enterprises especially, need the right encouragement to get over the hump and sign that big contact.