In SaaS, your growth strategy is essential. Why? 🤔 Because customers expect meaningful experiences.
It’s one of the big shifts in user experience over the last decade—right from the opening phase of the sales funnel, through to your onboarding process, you need to impress your prospects and customers.
So how do growth strategies look for SaaS in 2021? We’re in a product-led era, for sure. But there’s also the option for becoming sales-led, marketing-led, or customer-led.
It all begs the question… what’s the difference between them? Let’s start with the industry trend setter. 👇
The product-led approach
Okay, what’s PLG? It’s where a business relies on product usage and customer experience to gain new customers.
This means you’ll use two types of pricing models:
- Free trial
There’s a three-step process to PLG involving expansion, conversion, and acquisition.
And there are many benefits to PLG, which is why businesses like Dropbox and Slack use it. For a start, it helps to cut down on overhead costs. How? By reducing the costs of marketing and sales.
This doesn’t mean you’re trying to remove the sales or marketing departments. Quite the opposite, you’re looking to get them working together effectively.
By shifting your product to the center of your business, you’re setting it as your main customer acquisition tool. And you can align that with marketing and sales to manage conversions, while sales can help with the approach to onboarding.
This means, on the strength of your software, you can create a steady flow of happy customers.
What SaaS businesses should use product-led growth? Typically ones with self-service and transactional products. Especially if you’re selling to small businesses.
What you need to remember is your product price and the sales process you use. Is it complex? Because PLG isn’t suitable for every SaaS business out there.
If you’re selling enterprise products, then you’re best off using the more traditional approaches (which we handily list out further below).
What are the benefits of PLG?
There are many reasons to take this approach:
- Better TOFU: If you’re using PLG, then you can have a wider TOFU (top of the funnel). That means more customers will try out your software, thanks to a freemium pricing model (or if you’re offering free trials). But that also means you need to provide your users with value—as quickly as possible. Think of your pricing model as an acquisition tool—it’s not really about revenue to begin with. You’re looking to get the customers onboard. And it’s at that point you wow them with your product.
- A lot less CAC: PLG keeps your customer acquisition cost (CAC) lower. The approach relies on ensuring your product is great, so you grow organically in a market. You just need to make the acquisition count—focus in on your customer retention tactics and ensure your product is everything it can be.
- Improve the customer experience: Your users get value from your product before paying anything. They can pay if they feel it warrants their money, which means it’s their choice—either way, there’s much less chance of angry customers.
- Increase customer retention and upsells: As your focus is on how users use your product, you can gain extra data on user engagement and the best practices to keep them subscribing.
- Using PQLs instead of SQLs: Using product qualified leads (instead of sales qualified leads) is essential for business growth in the modern SaaS market. And with PLG, you’re doing just that.
The sales-led approach
Righto, so what’s this? In traditional marketing, your team will generate interest from the top of the sales funnel.
Then a sales developer rep (SDR) will take control of lead qualification. And they’ll pass prospects over to the sales team to close the deal.
After that, the customer will head straight to the onboarding process. Simple, traditional, and effective.
With this SaaS method, customer engagement is away from your product. This is because sales specifically target a decision-maker. Not the end user. And you have to pitch to them why your product is the bee’s knees.
There’s no freemium model like with PLG. You’ve just got to sell the brilliance of your business and seal the deal.
What are the benefits of being sales-led?
Here are the key reasons why you might want to rely on this approach:
- Speed and efficiency: A sales-led, go-to-market strategy can reward friction. If you’re able to quickly filter leaders, you can then focus on providing high-value with your product.
- Increase conversion rates: Sales-led is a sure-fire way to make sure you target relevant leads. And this can lead to much higher conversion rates, as you’re targeting customers who are keen on your product.
- It works with larger businesses: SaaS companies targeting enterprise level organizations typically use sales-led. These businesses often need specific software and this approach lets you target them directly.
- Helps with customer education: Using sales is an effective way to quickly inform prospects about what your product is, which can lead to faster customer onboarding. As well as greater awareness of the product when using it, which can increase the chances of retention.
The market-led approach
This focuses on the importance of customers and their needs. After you’ve done that, you can create products and content that matches your market.
Acquisition is very important in all of this. And the focus of marketing-led is to carry out thorough market research. This means the approach is more customer-focused. The goal is, after all, to provide a product that satisfies a customers’ requirements.
You need to be very responsive to sudden market changes if you take up this method, as it’s a competitive space driven by market research.
What are the benefits of being marketing-led?
The big benefit here is the value you’re providing your customers. That’s with:
- Excellent customer satisfaction: Based off your market research, you can build a product that delivers on your customers’ expectations. And that adds real value to every aspect of your product.
- Increasing customer retention: Happy customers lead to ongoing subscriptions, which means your retention rates will be strong.
- Great word of mouth: If you’re particularly customer focused, your users tend to sing your praises. So you can expect excellent feedback that’ll grow your product’s online reputation.
- Master your market: You’ll have a thorough understanding of how to approach your niche, helping you to stand out among your competitors.
The customer-led approach
Customer-led growth (CLG) takes user feedback to qualify overall customer value.
With the information you have, you can then maximize the potential of your end-to-end customer experience. So, the goal is to get a company-wide understanding of what the customer experience should be.
With the aim of adding value to customers at whatever stage they’re at with your product.
This means customer-facing and technical teams need relevant KPIs to build the following strategies:
So, you’re looking to qualify and quantify the value you create for customers. And why? Well, there are some great reasons to consider this growth approach.
What are the benefits of customer-led?
It’s an opportunity to thrive in your market with a thorough understanding of your customer base:
- CLG creates a profitable business model: With your customers’ POV in mind, you’re building a strategy that benefits your technical, operational, commercial, and organizational side. So you’re perfectly poised to build out a successful business.
- Customer acquisition is easier: CLG offers users support at every step of the sales funnel, which helps to improve long-term sales.
- It simplifies your onboarding process: With your focus on users, you can turn your process into an unbroken chain of events—from acquisition through to retention, you can tailor it to offer effective value.
- Build your brand advocates: When you’re making sure your customers are as happy as Larry, this can turn many of them into your active promoters. Once they’re spreading positive word of mouth, this can bring in many more users. Free advertising!
Many SaaS practitioners champion CLG as the ultimate path towards success. And a real opportunity to thrive in your market.
Summarizing those differences
Okay, ready for a quick recap? Let’s wrap up what the key differences are between the four approaches:
- Product-led: Where the product drives acquisition, expansion, conversion, and retention by itself.
- Sales-led: Tend to use a hard sell approach with sales volumes, upselling the produce with all sorts of promotional sales techniques.
- Marketing-led: Involves extensive market research to deliver a product that meets the target customers’ needs.
- Customer-led: Uses deep dive customer insights and research to drive growth decisions. From which you can develop your product.
The approach you use depends on your business model and what you want to achieve. So, it’s best to review what you want to aim for before picking your approach.
Help! I need somebody…
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