Hybrid sales model can boost SaaS companies
4th September 2023 | Journal Of Sales Transformation
Product-led growth seeks to place the product at the epicentre of customer acquisition, retention, and expansion to achieve “lower sales costs, greater product virality, and higher net retention”. As such, the product itself plays a critical role in acquiring, growing, and retaining customers. This approach has traditionally been seen as a more effective way to engage SME businesses, while a sales-led model works better to serve enterprise-level customers.
However, companies need to implement the product-led growth strategy effectively if they wish to reap the rewards – and only a few are doing so.
Only a few outperform
Research by the management consultancy found that, while the product-led growth model enables a few to outperform when they get the approach right, it does not differentiate the majority using the model from more traditional sales-led companies, in which salespeople sell software to a (senior) executive, usually over the course of an extended sales cycle. Instead, those adopting a hybrid product-led sales approach “can enjoy sizeable boosts in both revenue growth and valuation ratios”.
The research found that highperforming companies taking a productled approach spend ten percentage points more on marketing, sales and R&D expenses than sales-led high performers. They also generate ten percentage points more in annual recurring revenue growth and are able to achieve valuation ratios that are 50 percent higher. Meanwhile, averageperforming, product-led businesses spend significantly more on operating expenses than average-performing, sales-led companies, yet fare only marginally better on key performance metrics, according to the research.
A new hybrid approach sees sales-led companies investing in product-led experiences to help their sales teams prove the value of the product and to broaden their appeal to a new class of SME customers, McKinsey suggests.
One key aspect is to deploy innovative sales techniques enhanced with product and usage analytics, McKinsey advises. “Try-before-you-buy tools coupled with product analytics can help sales teams implement innovative data-driven strategies to increase conversions by understanding user behaviour, segmenting users, and delivering personalized, product-led experiences.”
It adds that the most advanced companies incorporate product usage insights into lead scoring and qualification models, which helps sales teams focus on “product qualified accounts”. These are “sales leads that have already experienced the product’s value through trials or freemium offerings and are more likely to convert than traditional marketing qualified leads”.
For more information, see “From product-led growth to product-led sales: Beyond the PLG hype”.