If you are the founder of a SaaS startup or working at one, one of the biggest challenges apart from figuring your SaaS pricing model is choosing the right go-to-market (GTM) motion. We have a fairly clear idea about when to consider an IPO that is far down the lane (typically when companies cross the $100m ARR mark). Yet astonishingly, we don't have clarity on how to choose the the GTM motion in the now, that might one day get us to the IPO stage.
But to be fair, it’s not an easy decision, given the amount of noise around each GTM motion, such as product-led growth (PLG), sales-led, marketing-led, founder-led, and more. If you go by the debates on each of the above GTM motions on social media—the polarized discussions confuse you even more.
Over the last couple of years, product-led growth has been getting a lot of attention—to the extent that PLG’s original concept is now mutating into interesting other ideas like product-led onboarding, product-led storytelling, product-led flywheel, and whatnot.
For product-based startups, it can be tempting to fall for the lure because PLG is often propagated as a strategy that frees you from the dependency on sales and marketing—therefore, cutting cost and automating the customer journey for the most part.
Hand over heart, in our early days, we at Avoma were tempted to go 100% PLG. But after a ton of debates internally and having understood what our customers appreciated with us—we realized that going completely product-led isn’t the direction we should be taking.
Our initial realizations with product-led
Ideally, every SaaS company wants to build products where users onboard themselves, learn to use the product and expand their usage—without the need for sales teams to reach out to the users.
Although it's economically appealing, it's not practical for most SaaS companies. In fact, in some cases, it might not be a good idea even to allow self-service. For example, in the early stages of your startup, you are better off offering onboarding in concierge-style to understand your customers better than trying to make zero-touch for the sake of it.
Here are some key realizations we've had along our journey:
Customer learning curve
PLG largely assumes that the product is an independent marketing channel that articulates its features and benefits without human intervention. While that might be true during the early days of a startup, a product's offering becomes overwhelmingly complex for customers to understand on their own once it grows complex in its scope. And even if the customers do convert, the lack of in-depth understanding about the product can lead them not to adopt the product in the way it's meant to be or subsequently churn quickly.
Avoma is in the conversation intelligence space, which is a relatively new concept. Typically, every customer has a different use case and is trying to solve a different problem. And that means, what each customer is going to look for in our platform, varies a lot.
Also, you cannot assume five broad use cases and create video demos for those. There will be nuances for each use case a customer brings in, which cannot be addressed if you went product-led completely.
Therefore, you would need a collaborative sales process that not only improves your conversions but ensures retention. You would want the marketing team to streamline the customer activation, the sales team to showcase the product’s real value, and the customer success teams to offer a better onboarding experience.
In such situations, you can either bolster your product-led strategy with marketing- and sales-assisted GTM efforts or transition completely to a marketing-driven, sales-led engagement model.
Another observation is that most product-led SaaS products are focused on specific use cases only. The pricing is mostly tier-based, meaning, it doesn't allow users to mix and match the features based on their need. In Avoma's case—our platform is used by customer-facing teams (like sales reps, Account Executives, CSMs) and internal teams such as product managers, engineers, etc.
So, had we gone completely product-led from day one, we wouldn't have got the customer feedback loop that led to come up with a flexible pricing model that we have today(shared in the blog post below).
Factors to consider to decide if PLG is your best GTM motion
Simply put, PLG as a GTM motion heavily relies on the product to drive growth across the funnel stages. Here are some parameters to consider before you decide to go product-led completely or with a hybrid model.
1. Time to value
And one of the key aspects of the products that drive growth by themselves is the time-to-value factor. Time-to-value is the amount of time required for a user to see the value in your product. To be clear—it’s not the perceived value but the real time-to-value, i.e., time taken for your customer to experience the desired results using your product.
A good example here is the Content Gap Checker in Ahrefs.
Let’s say you want to compare the content gap in terms of keywords ranking between ‘Ahrefs’ and ‘Semrush’—all you need to do is—add the URL of Semrush in Content Gap’s comparison URLs, and you’ll set the list of keywords Ahrefs is not ranking for, whereas Semrush is.
In Ahrefs’ case, the time to value is almost immediate. On the contrary, if the customers of your product need help in setting up your product and if it takes a few weeks before they see value out of your product—then PLG with complete self-serve doesn’t make sense. You need to make an effort to ensure your customers are making the most out of your product and are getting value.
2. Scalability for expanding use cases
Scalability is a vastly misunderstood concept, and it is not only about scaling the number of customers or accounts—but scaling across different types of users and their use cases. Some of the often talked about examples in the world of PLG are—Slack, Zoom, and DropBox.
Even for these companies, PLG has been more of a growth hack and not a long term solution. As they grew bigger and started to serve diverse customers, they couldn’t be dependent on the product alone for growth. It’s a challenge all scale-ups face in their growth trajectory—what worked for them during the early days won’t help them in adolescence.
As a result, the companies that idolized PLG eventually mature to a stage where their product still might be heavily optimized for better user experience and growth, but their GTM strategy now has a product-led and a sales-assisted balance.
3. Ability to go upmarket with product led growth
The next factor to consider is —the ability to go upmarket. PLG is often a bottom-up model, i.e., it is aimed at end-users. While it’s super useful to remove barriers in people trying your product and to adapt it, you hit an inflection point at some stage.
But once you achieve your initial product market fit, and while you still want to reach out to more customers in your ICP, you are also looking to improve your revenue per customer. That means you need to:
- Build a high-quality feedback loop to understand what’s resonating with your customers
- Optimize better for product-qualified leads (i.e. prospects who might see value in your product)
Next, you need a sales team layered on top of your product-led capabilities. The sales team typically pursues the product-qualified leads (PQLs) to convert the free users to paid, bundles multiple users in customer accounts under one contract or goes after net new business in an attempt to increase your Average Revenue Per User (ARPU).
But let’s get real—how many startups and mid-market companies can track PQLs? Here’s a snapshot from a survey by OpenView Partners:
It clearly shows that 45% of SaaS companies don’t seem to track PQLs at all, which means they need human assistance to make the sale. And even if you are tracking PQLs, when you shift to a bigger, more lucrative market segment to increase your account deal size—every deal requires high-touch sales interactions. That’s because most mid-market and enterprise customers don’t buy products without a rigorous vetting process—which invariably includes a ton of back-and-forth conversations with your sales teams.
Eventually, they expand their sales bandwidth to support their transition into new market territories and sustain a hockey stick growth chart. Here’s data from HeadsUp that found a similar conclusion.
4. Your users and decision makers
The next key factor is knowing who your users and decision-makers are. What if each of your users has different goals and also some collaborative ones? One of our learnings in Avoma to not go solo with the PLG strategy was our clarity about servicing multiple buyer personas across an organization. By design, Avoma is a horizontal app that improves cross functional collaboration. And collaboration is a necessary burden that all teams share equally.
Unlike point solutions, Avoma caters to a broad range of use cases and offers a wide range of capabilities not limited to just sales or customer success teams. More precisely, it serves organization-wide use cases and provides collaboration-friendly features baked into its conversation intelligence platform.
So, despite several internal discussions and debates—having more than one type of buyer persona wanting to use our product showed us that we cannot be 100% product-led.
5. Managing customer churn
Customers who prefer a self-service style of buying experience have little to no need of talking to the sales team. And that’s a great thing if it means a better user experience.
But from the business point of view—it’s tough to understand the different use cases for which your customers use your product. Not having a sales interaction in between also deprives you of understanding the customers’ actual motivation behind choosing your product.
Customer conversations are a goldmine of data that you can leverage to improve your product offering, minimize churn, and maximize customer lifetime value. PLG makes it difficult for your sales team to understand the customer’s needs if they aren’t conversing with customers enough. PLG bypasses the human interactions that are often very important to understand deep customer insights or the potential churn signals.
Case Study: Why Avoma chose the product-led and sales-assisted motion?
When Avoma launched, we mulled over what growth strategy was the best fit for us. And honestly speaking, we too were in the either-or camp for a long time when we evaluated between sales-led, product-led, or marketing-led growth strategies.
Like most early-stage startups, we were founder-led, to begin with. Avoma as a product was and has been pretty simple for everyone to start using. We also formulated a pricing strategy that was pretty straightforward as well as meaningful for our customers. So, going product-led was a tempting option. In fact, to date, we have many customers who go on to sign up and use our platform without ever talking to our sales reps.
However, we had one thing in our DNA from day one—we wanted to be a customer-centric company. Not the namesake customer-centricity that stops with murals and quotes. For us, being truly customer-centric meant—we stopped thinking what motion was good for “us” and started to question what experiences our “buyers” wanted.
That—combined with our concentrated effort to talk to our early users—soon led us to realize that we can have a good balance between product-led and sales-led growth motion. A simple dipstick to that is—when you look at our website—you see a “Sign up” as well as a “Schedule a demo” option.
Regardless of the number of licenses one will buy, some customers like to have their questions answered or objections handled. In contrast, some others prefer to be autonomous with the occasional asynchronous support or pricing questions.
In sequence, here’s how the flow for customers signing up on their own:
And here’s how the demo request flow looks like:
In hindsight, it was a great decision to ignore the hype and build a hybrid product-led and sales-assisted GTM motion. It meant we offer a freemium plan that attracts the right customers to the platform—supported by a sales and customer success team that knows when to chime in.
Having a product-led + sales assisted GTM motion has helped us create a naturally collaborative environment between product, sales, and other teams. After all, the ownership of driving growth is equally distributed across all teams. We have complete visibility into the people involved in every deal, both from our side and the customer side.
Similarly, pegging sales and product as two pillars of growth has allowed us to explore more growth opportunities to expand our user base, identify new market segments, and refine Avoma’s capabilities further.
The best out of all this is— our customers are really happy with Avoma both in terms of using the product and their interaction with our teams. It is evident by the above-average reviews/ratings that our users leave for us in software comparison sites and the direct feedback when we reach out to them.
If we had taken the PLG-only route, I doubt we would have arrived at the place that we are right now. Also, our experience clearly shows that it is not realistic to expect that every SaaS company can operate without assistance from sales and marketing.
To sum up, product-led growth is not a bad idea, and it is indeed legit. But it's not for everyone in SaaS. The key question is—can you add value in a self-service manner? For most products in SaaS, it is not that straightforward.
As you can see in the examples and stories, companies that started as Product-led eventually introduced the Sales-assisted model. There are more levers to growth—you needn't be dependent on your product alone, though it makes sense to have PLG factors in your product.
Here's a one-liner takeaway to conclude—always derive your growth motion based on your customers' preferences.