Introduction
Choosing the right growth strategy can make or break an early-stage startup. Product-Led Growth (PLG) and Sales-Led Growth (SLG) have emerged as two dominant approaches, each with its own merits and challenges.
But which one is right for your startup? And is it possible to combine both?
To shed light on these critical questions, we spoke with Natalie Marcotullio, Head of Growth Operations at Navattic, who shared her insights on navigating the conversation around going with a Product-led approach or a Sales-led approach.
Topics Covered
- PLG vs SLG fundamentals—what are the core principles of each strategy and how do they differ in implementation and effectiveness?
- Implementing PLG strategies—what are the critical steps to ensure a successful shift to PLG, and how can you measure its success through key metrics?
- Hybrid growth approaches—how can companies effectively combine PLG and SLG strategies, and what signals indicate it's time to shift between these approaches?
Understanding PLG and SLG
At its core, PLG is about creating a self-serve experience where users can adopt and find value in your product with minimal human intervention.
SLG, on the other hand, relies on great salespeople to guide prospects through the buying process.
While companies like Slack and Notion have become poster children for PLG, it's crucial to understand that the right strategy depends on your product's complexity and price point.
When considering which strategy to adopt, Natalie suggests looking at your product's price point. Generally, if your starting point is above $10,000 to $20,000 annually, a sales-led approach might be more appropriate. For lower price points, PLG could be a viable option.
Implementing Your Chosen Strategy
If you're considering a shift to PLG, Natalie emphasizes the importance of testing whether your product can truly be self-serve. "Beta test first," she advises, suggesting the use of user testing platforms to gather unbiased feedback.
Key metrics to focus on for PLG include
1. Activation rate: Aim for 20-50% of users reaching key value moments.
2. Time to value: Ensure users can quickly realize the benefits of your product.
3. Conversion to paid: Expect around 2-7% of free users to convert to paying customers.
For those sticking with SLG, focus on creating tailored, custom experiences for your target accounts. Key metrics here include sales cycle length, win rates, and conversion rates at each stage of the sales process.
Hybrid Approaches
As companies grow, many find success in combining elements of both PLG and SLG. This hybrid approach allows for capturing a wider range of customers, from individual users to enterprise clients.
However, it's not without challenges. There can be potential conflicts over lead attribution and the need for clear guidelines on when sales should engage with PLG-acquired users.
When to Consider a Strategy Shift
Recognizing the right time to pivot your strategy is crucial. For SLG companies, if you're hearing constant requests for self-serve options or losing deals to PLG competitors, it might be time to incorporate some PLG elements.
Conversely, PLG companies might consider adding sales support when they notice an increase in demo requests or struggle to upsell to enterprise customers.
Natalie suggests looking for "product qualified leads" (PQLs) - users who have hit activation moments, viewed pricing pages, or added new users to their accounts.
Key Takeaways
- Product complexity and price point should drive the choice between PLG and SLG. Higher-priced, complex products (above $10,000-$20,000 annually) often suit SLG, while simpler, lower-priced products may benefit from PLG. Many successful companies are adopting hybrid approaches, combining elements of both strategies to capture a wider customer range.
- Successful PLG implementation requires more than just offering a free trial. It demands careful consideration of user experience, clear activation metrics, and ensuring users can independently reach key value moments. Beta testing and gathering unbiased user feedback are crucial before fully committing to PLG. Don't underestimate the resources required for success.
- Transitioning between growth strategies or implementing a hybrid approach requires careful management of internal dynamics. Potential conflicts can arise around lead attribution and changing roles of sales teams. Clear guidelines, aligned incentives, and open communication between departments are essential. Be prepared for a learning curve as you fundamentally change business operations.
FAQ
What is the main difference between Product-Led Growth (PLG) and Sales-Led Growth (SLG)?
PLG relies on a self-serve product experience, while SLG depends on salespeople to guide customers through the buying process.
How do I know if my product is suitable for PLG?
If your product is simple to use, has a lower price point, and users can quickly see value without much guidance, it might be suitable for PLG.
What are some key metrics to track for PLG?
Important metrics include activation rate (aim for 20-50%), time to value, and conversion to paid (expect 2-7% of free users to convert).
When should a company consider shifting from SLG to PLG?
Consider PLG if you're hearing frequent requests for self-serve options, losing deals to PLG competitors, or if your product has become simpler and easier to adopt independently.
Can a company use both PLG and SLG strategies?
Yes, many successful companies use a hybrid approach, combining elements of both strategies to capture a wider range of customers.
What are some challenges in implementing a PLG strategy?
Common challenges include ensuring the product is truly self-serve, allocating sufficient resources for product improvements, and managing potential conflicts with existing sales processes.
How can I test if my product is ready for PLG?
Conduct beta tests with a subset of users, use user testing platforms, and gather unbiased feedback on the self-serve experience.
What's a Product Qualified Lead (PQL)?
A PQL is a user who has shown high engagement with your product, such as hitting activation metrics, viewing pricing pages, or adding new users to their account.
How does pricing affect the choice between PLG and SLG?
Generally, products with a starting price above $10,000-$20,000 annually are better suited for SLG, while lower-priced products might benefit more from PLG.
What's the biggest mistake companies make when transitioning to PLG?
Many companies simply make their product free or offer a trial without properly preparing the product for self-serve use or allocating resources to improve the user experience.
About the Guest
Natalie Marcotullio, Head of Growth @ Navattic—Natalie is the Head of Growth Operations at Navattic, an interactive demo software for SaaS companies. Natalie has been a two-time solo marketer at startups and has extensive experience in both product-led growth (PLG) and sales-led growth (SLG) strategies.
In her role at Navattic, Natalie is also a podcast host for a show called "Revenue on the Rocks," where she discusses sales and marketing alignment with her Head of Sales.
