Product Led Growth versus Sales Led Growth

Emerson Taymor, Beata Wilczek, Marine Palamutyan at UXDX EMEA. Video: https://youtu.be/z4iQaOXcsGM

Readable transcript: edited from the recording's captions for readability (fillers and false starts removed, punctuation and section headings added). Wording is the speaker's own. Timestamps are positions in the video. Names marked [?] could not be verified against the audio.

Round one: going from zero to one

[00:00:01] Marine: Hi everyone. If you're in a food coma, this is about to wake you up. Setting some expectations here: I think we could just jump right in and start with the first question. Let's dive right in. First question: which go-to-market strategy is best when you're going from zero to one? Think about a startup or a newly formed company. One thing to keep in mind, too: once they share their point of view, at the end the audience will vote in a poll on whether one argument swayed them one way or another. That'll be the fun part. With that, Emerson, your two minutes begin now.

[00:00:54] Emerson: Awesome. Well, I love starting off with this, as I've spent the last 20 years helping companies go from zero to one in both startups and enterprise. I think there are a lot of interesting benefits, and we'll talk about them today, but the first thing I want to lay as a foundation is that I really reject that sales-led growth has to be at the expense of a great user experience. I think we can have both. When we're going from zero to one, I think it's good to think about the funding climate that we're in today. Year-over-year funding rates are down, at all-time lows. The funding dollars are down 50% year-over-year, so it's a really hard time to raise funding.

[00:01:31] Beyond that, there are other benefits to sales-led growth. One is that salespeople are great at actual customer development. They're talking with the customers on a day-to-day basis, so you can learn from them. You can hear what the real pain points are that customers say they're having, and what they say versus what they buy is often very different. That information can go into your marketing materials, and that information can help you figure out your product roadmap.

[00:01:56] That's on the startup side, but if we look at the enterprise, where I know a lot of us work, including myself, there are a lot of other challenges and benefits in the enterprise. Going from zero to $1 million of revenue in a year is not that impressive. That doesn't even cover your legal bill to get that MVP approved and launched. So I think one of the key aspects of sales-led growth in the enterprise is: can you build letters of intent? Can you get people and companies saying, hey, I'm interested in what this is? That gives you more runway to figure out what the right thing to go build is, and I think it gives you a lot more sway with your leadership teams.

[00:02:30] One of the projects we worked on with PwC over the years started off very product-led. We actually got funding because it was going very well, but then the leadership was like, hey, actually this project isn't important anymore, let's move to another area. With the next one we were really focused on building LOIs, and we ended up having a much longer-term runway as a result of having that. Wow, look at that, I have time.

[00:02:53] Marine: Thank you for that. It was very salesy. And how great you are with time: you had just four seconds left. Okay, Beata, yours begins now.

[00:03:04] Beata: Yeah, there were some great points from Emerson about sales-led growth strategy. However, for me, product-led growth strategy is the one to go with. They are both completely different, of course, but when it comes to fast adoption, or giving your users what they really want, when you think about product-led strategy, PLG, part of the strategy is to get fast customer feedback and actually build for your customer what they really want. This strategy allows you to keep flexible and start building not from a big visionary product. You don't need to go with a big vision of what you want to achieve at the end and start selling that to your customers. You can start smaller.

[00:04:07] You don't need to have that big cost of sales. Of course, when you get the funding, when you have that money to spend, it's nice to maybe go with the sales-led growth strategy. But if you really want to grow, not from zero to 1 million but from zero to one, to get some adoption of the product on the market, then I believe involving your customers way early, getting their feedback loop, including them in your design process and your thinking process, is truly the better strategy to go with. It will give you, first, better adoption. Second, customers usually tend to stay longer, because you built with them what they want, and you have a product not only that you envision but a product that they want to have.

[00:05:05] Marine: Wow, okay, you're making this job so much easier. You're on time, early. Now let's get the votes in and see which one made a stronger argument and if they swayed you one way or another. Product-led growth, see. Uh-huh. I think votes are still coming in.

[00:05:30] Emerson: Oh, come on, sales-led, come on, come on.

[00:05:34] Marine: Okay, sounds good. I think this round goes to Beata.

Round two: business to consumer

[00:05:41] Marine: Let's move on to the next question. Now let's talk about when the situation changes. Which strategy is better for B2C, meaning business to consumer directly? This round we'll start with Beata.

[00:05:58] Beata: I will just continue with what I started at the beginning, with the adoption of the product and involving the customer. Especially when you talk about B2C strategy, you can also expect a certain level of virality. You get your product designed together with you, so you are naturally our sales and marketing team, because you built it with us. You share it with your friends and this goes viral in your network. So we can grow the customer base without significantly increasing the cost of heavy marketing and a heavy sales team. Not necessarily does that always need to work, and I'm not saying you can go completely without a sales strategy and marketing strategy. There's always the moment when you need to invest more in marketing and sales.

[00:07:02] But for B2C customers, whenever they see that you incorporate their feedback, that you actually care, that the product grows together with their customer needs... Especially nowadays, we can see all the emerging new technologies, like the famous AI and everything. If you built the strategy for your product first, let's say last year, and you merge with your customers today, and half a year ago OpenAI just released ChatGPT, you are left alone there: okay, I don't have what my customer wants, because they want a different experience. They were not able to tell you that half a year ago. They are able to tell you 100% today that they don't want to click through the different fields any longer. They want to really chat, for example, if it's any type of customer service portal. So I think definitely for B2C, thumbs up for product-led.

[00:08:05] Marine: Okay, great argument. Emerson, you're up next.

[00:08:09] Emerson: Awesome. Again, I want to keep repeating the fact that I don't think sales-led growth means you aren't talking with users, you aren't thinking about or involving the users in the process. It's really about how you actually gain that growth. Again, I want to frame it around the context of the climate we're in today. We're no longer in the zero interest rate period. It's very hard to start businesses and very hard to build businesses today and raise that money. One of the key challenges that we see out in the field is that if you just focus on engagement, engagement, engagement, but you aren't showing that path to revenue, it becomes very hard. You're going to have a very short leash in terms of that runway.

[00:08:50] One of my good friends has a pretty successful consumer app startup, but the challenge he's run into is that even though his engagement metrics are so strong, he's got about 90% retention after that first month, he is not able to show investors what the path to revenue is. That's really putting him in a tough position, even with a lean and mean operation, in terms of getting that next funding round.

[00:09:13] Even beyond the funding side, there are other aspects of it too. It's very hard and expensive to acquire customers today. Facebook, Instagram, TikTok hasn't really figured out its advertising platform. As opposed to five years ago, how do you get that runway? It's very challenging. And the last thing: in a consumer app, again, it's easy to say, hey, consumer app, it's obviously product-led growth. But the end user is probably not your real revenue driver. If you think of Facebook, their revenue is obviously in this big ad platform, which drives a lot of growth. Same with Google. So how do you actually pivot? How do you get those sales? How do you show your investors, or your internal investors if it's an enterprise, that, hey, we have a path towards revenue and we're going to survive? To do that, you have to talk to the end customers who are buying the product.

[00:10:08] Marine: Awesome, well done. Let's see what the audience thinks now. Who do you think made a stronger argument about which strategy is better for B2C? It's pretty close. Let's give it another couple of seconds. Here comes product-led. Ah, okay.

[00:10:28] Beata: Come on, product people.

[00:10:31] Emerson: I mean, sales is outnumbered here, so I don't know what's happening here.

[00:10:37] Marine: Okay, sales-led growth. This round goes to Emerson. One to one, tied up. Close race.

Round three: business to business

[00:10:46] Marine: Okay, on the flip side, which strategy is better for B2B, thinking about selling directly to businesses? Emerson, we'll start with you.

[00:10:55] Emerson: This has come up in a few conversations, both on this stage and the other one today: the enterprise buyer is not really the same as the end user of a product. I think this is a really tricky dynamic that we have to play with in B2B, and I think it's a very strong case for sales-led growth. When I think about this, I had a client who used to say to me, "Would you rather be right or would you rather win?" If we have the best possible user experience but no users actually use it, who cares? We've lost. There are a lot of startups and enterprises that have ended up dying on that vine because they haven't thought of this. So I think it's really important, when you're building products in the enterprise, in B2B, to create separate journeys for the economic buyers and the customers, and separate those from the end users.

[00:11:46] The second thing on this topic that I want to share is that McKinsey did a really interesting survey and study on all 107 B2B SaaS companies that are publicly listed. Only a third of those are product-led growth, so that's already kind of an indictment. If you drill in further, there are only 11 actual high performers in terms of product-led growth, compared to the rest being sales-led growth. I think this is a showcase that it's very hard to do product-led growth in the enterprise and actually sustain it. If you look at a lot of the big product-led growth companies, their stock prices have all tumbled since COVID. How do you continue to maintain that?

[00:12:23] Also, I think the high performers end up tilting towards the audience members in this room. I come from a product and design background, as I said before, so we're going to be naturally inclined to products that think about the user first. But that's not really the core enterprise user. There are a lot more people in the enterprise who don't look like us. Unfortunately; I wish there were more people that looked like us there, but there aren't. So I think we have to think about how we're selling to those economic buyers.

[00:12:52] Marine: Thank you for that. Awesome. Over to you, Beata.

[00:12:55] Beata: Yeah, thank you. Definitely a great point. When you first think about product-led growth in B2B and enterprises, you will say, oh, that's naturally not the path. Naturally it's a path for B2C, probably, though we have seen you don't think so. For B2B it's not a natural path, but I think we need to think about one important factor when we lead this discussion this way. We are thinking rather of the world of the past: the old-fashioned enterprises of the past, the old-fashioned CEOs, which were really led by sales and salespeople, and whoever was selling best to them, that's the product they were going to buy.

[00:13:42] Today the entire economy is changing. The entire world is changing. You can't really even force your employees to use a certain product just because you bought it. Everybody is highly independent. Everybody wants to have a say in what I use, how I use it, why I use it. If you lead your company towards a completely sales-led strategy, you might find, and I'm certain of it, that maybe today you will still sell, but in five years, three years, maybe even earlier, you will find yourself in a kind of hole.

[00:14:25] You said it's only one third of the companies that are actually high performers which are PLG. It's one third, but for the B2B sector it's still an emerging strategy to actually be a product-led company, not a sales-led company, when you're entering a B2B space. So it's not only one third; it's already one third, and soon it's not going to be one third, it's going to be two thirds, and it's going to be 100%.

[00:14:54] Marine: Nicely done. I like how you used his argument against him.

[00:14:59] Emerson: Old-fashioned, on me.

[00:15:02] Marine: You did it to yourself. So old-fashioned, new money, money. Well, let's see what the audience thinks. Which is better? There we go, looks like PLG is winning this race.

[00:15:19] Emerson: Oh, come on. Come on. Oh, so close. Oh, going the wrong way, people.

[00:15:29] Marine: You are going to the winning seat.

Round four: which strategy scales better

[00:15:32] Marine: Awesome. Let's go to our last question, which is: which strategy scales better? Is it sales-led growth, where you have the sales folks trying to make the sales, or product-led growth, where you have products and features organically being introduced to customers? With this one, Beata, we'll start with you.

[00:15:53] Beata: Obviously, product-led is the strategy which scales better, and I think there are no questions about that, even with the earlier discussion. I will just give you an example. You build a company, you start from zero to one, so you don't know what you really want to build. You go and build your MVP, you give it to your users, they give you feedback, you start with that. But you're visionary, so you get your new ideas, your new visions, together with your customers, and you add and add from that. Actually, with a B2C product, in many cases you can drive this strategy even to add a B2B product on top of this B2C product.

[00:16:40] I have seen it more than once: platforms or products which were built initially for B2C customers, then with the scale, with the growth, with listening to their customers and their feedback, they get to the B2B space and enter a completely different world. From there it grows organically. Of course, you acquire more and more sales cost and more and more marketing cost the more you scale, but it's not that much compared to when you're a completely sales-led growth company and you need to invest in sales and marketing from the very beginning.

[00:17:24] When you just think about that example, and I think we can all draw thousands of examples ourselves from our past experience, I will say product-led growth is truly organic growth. You can see you grow together with your customer, you grow together with your customer needs, and then of course your PLG grows as well, your footprint grows, and people adopt your product way better.

[00:17:56] Marine: Awesome, thank you for that. Emerson, over to you.

[00:17:58] Emerson: Awesome. Again, going back to that McKinsey study, and yes, it might be based on past data, but data is still valuable in terms of looking at where we're going: product-led growth companies actually end up spending a lot more money on sales and marketing than sales-led growth companies do, actually 10 percentage points more. While we can say, oh, they're going to spend less because they're building the product features, that's not how it ends up playing out. The reason for that is you end up spending all this time marketing to the wrong customer segment. You end up spending all this time trying to convert a free trial person into a paid enterprise subscription.

[00:18:37] When you look at the enterprise deal volume, especially when you're thinking about scaling a business, scaling with $10 a month licenses is not going to cut it. You need to be scaling with massive, multi-million dollar contracts, and that's really only possible through sales-led growth. I think we can all just use the basic example of Teams versus Slack. Slack is a classic product-led growth example. Teams came onto the scene and absolutely crushed them. There are 270 million users of Teams and only 18 million active users of Slack. Most of us here have used Teams and Slack, and Slack is a much better product than Teams is, but they lost the race from a growth perspective.

[00:19:17] Yes, there's the Microsoft distribution network, but you also have to take into consideration other examples. Famously sales-led, Salesforce: 50% CAGR over the last 20 years, and over 30% in the last decade. There's just a lot more growth that happens at that scale because you have salespeople. In all the examples of product-led growth, again, the reason they end up spending more is that they then end up spending a lot of their money on sales teams to actually convert. How many of us that use Notion have seen their salespeople hammering us for account license seats? Same with Shopify, same with Stripe. All these examples lead to the point that even if you start product-led, you're always going to end up sales-led, because it's where the money is.

[00:19:55] Marine: Awesome, thank you. Strong arguments on both sides. I'm going to need the audience's help to determine which argument won this last round. Ooh, looks like sales-led growth. Oh, it's dropping. Okay, sales-led it is. Thank you for that. So that's a tie. And now, no, we've got one more. We've got the closing remarks. This is the deciding round.

Closing arguments

[00:20:33] Marine: Closing arguments. Emerson, we'll start with you.

[00:20:38] Emerson: Awesome. Thank you all for attending, and thank you, Beata, for being a fun sparring partner. This is a really interesting conversation, and I think it's one that we can hopefully keep going, and I do think there's going to be a lot of evolution in this over time. In the immortal words of Wu-Tang Clan, cash rules everything around me. There's just so much more power in terms of scaling with sales-led growth. From going zero to one, there's a lot more stability in terms of getting that runway and figuring out how to find product-market fit. It's very hard to do that when you're piecing together tiny bits of revenue, and it's much easier to get big chunks of revenue if you're in a sales-led motion. That's a key aspect of it. Whether you're in B2B or B2C, you're really going to need to be out having people talking with customers, and those people can be salespeople too. There are lots of examples of that.

[00:21:32] All of that said, I do agree that we're talking about two very separate motions, and I think there's a middle-ground motion, which is product-led sales, where your growth is still driven by your sales team but you're doing that in an iterative, experimental way of creating great products and great user experiences. Again, I am a designer by trade, even though I'm a salesperson these days, and it hurts me to see all these, oh, sales-led growth, we have to have this terrible enterprise software. I think there's a middle ground there where you can still be driving that growth but building great products and great experiences.

[00:22:08] One of the key ways of doing that is to separate out user stories versus stories that are going to help you get sold through. If you don't do that, you're just going to end up building a great product for the end user, but it's not actually going to see the light of day. It's not going to be sold. And again, as I said before: would you rather be right or would you rather win?

[00:22:29] Marine: Awesome, thank you for that. Trying to keep the peace, I see you're coming into the middle there. Okay, over to you, Beata.

[00:22:38] Beata: You are going to stand between us so we don't really fight.

[00:22:42] Marine: I know. I mean, you made it really easy. I expected, I thought I'd have to jump in and prevent you from pushing each other off the stage.

[00:22:51] Beata: Yeah, I can't disagree completely with what Emerson was saying. There's always a sales aspect in anything that you are doing, unless you are truly not driven by any revenue. Then you can say, okay, we don't need sales, and we don't need to earn any money at the end. But we are all doing different stuff to earn money, and that's where you immediately think about sales and revenue.

[00:23:26] I think both strategies are different, but they are getting closer and closer together. The key point for me is the change which we all can see: the involvement of the people, the changing of the company, the changing of the hierarchy. Structures are changing: how much you mean in the company, how much your voice means in the company. That always leads to being more product focused and really building something for everyone, not only for your executives to please them, but also for the user to actually use.

[00:24:07] Whenever you design your product, you need to think about both sides, of course, because at the end you want to sell your product. You want to earn your money. Either you sell your product to the advertising companies, as you said, where people are using your product and you don't earn money from them but you earn from the ads on the platform, or a different sales strategy. You always need to think of that. But your audience will matter no matter what. How they use the product will matter. It will matter if they love the product. And of course, bringing those two together is the key point. I can't agree more. I would like to see more of the salespeople thinking about product, not only about revenue, and I think that way they can really truly win.

[00:24:52] Marine: Awesome, thank you, Beata. Let's have a round of applause for our debaters. Well done. Okay, now the deciding round. Before you came in, if you had a strong point of view on one or the other, after listening to the four rounds I'm curious to hear if you've now joined the sales-led growth camp or the product-led growth camp. Let's hear from the audience. Okay, ooh, this is going to be neck and neck.

[00:25:29] Beata: Oh, come on, product, come on.

[00:25:32] Emerson: Oh, that's close. Oh no. One more vote, one more vote, come on, sales.

[00:25:41] Marine: That's amazing, that's pretty close. Yeah, a tie. I think it's product-led sales. Win it. The conclusion: product-led sales.

Q&A

[00:25:48] Marine: Awesome, thank you. We have a few minutes for Q&A. Let's see what questions came in. Feedback: great, so they found this useful. That's good. Any other questions coming in there? People are typing. Let's see. I think you did such a fabulous job there are no questions. Now I know there are some questions. Okay. Oh, wait, wait, wait, I'm not doing that, so I don't know what's happening, but it looks like there were no questions. I think there's one.

[00:26:35] Emerson: Oh, I think I saw one, which is: how can one side work with the other side? That's coming through. I'll start, and I'd love to get your perspective on this too. I think the talk right before lunch in the other room had some really good insights on this, which is, as designers and as product people, can you actually go to the sales team and offer something to them? There's a natural resistance sometimes with salespeople in companies that you're going to impact the deal. Salespeople often have very strict quotas and are pushing hard towards a quota, and having a designer or researcher ride along can be a very scary thing. They can feel like it's slowing them down. But there are things that we can do to help show value to them as we go.

[00:27:18] We just did an internal research project using very similar customer development approaches and techniques for our sales process. Bob Moesta, who actually helped create the whole concept of Jobs to be Done, has a great book called Demand-Side Sales, where he applies a lot of the same Jobs to be Done style interview practices to actual sales processes, looking at what the emotional push-pull levers are. If you work with your salespeople on that, for example, and show, hey, here's how customer research can help your sales process, that will earn trust, which will then enable you to work with them more closely and get those customer interviews. Often they are the closest people to the end users and the end customers, and they also have the most access. Especially in the enterprise, it can be very hard to recruit users, so becoming friends and allies with the salespeople can be very valuable for that.

[00:28:10] Marine: Looks like we have... oh, sorry, go ahead.

[00:28:12] Beata: Yeah, definitely. I will just close it by adding to what you just said: at the end, it requires smart people to be at the top. Smart founders, smart CEOs, smart COOs, the ones who will not close their minds to only one or the other strategy, and will place both teams, or both points of view, equally on the table, and let the team deliver from that the best value from both perspectives, not be hyper-focused only on one thing or only on the other. As I said, we are all here to make money, and that's driving our business.

[00:28:57] But if we want to win... some years back we only had one or two applications which we needed to compete with. Today there are so many different solutions. We think we are innovative, we came up with an innovative product, and the next day we wake up and there are 10 others with the same innovative product doing exactly the same. So I think you need to be smart enough to put both perspectives and say, okay, product and sales are both needed, but depending on what is happening in the market, I maybe need to focus a little bit more on one, a little bit on another. And don't place any of your teams one above another. Don't place product above sales and marketing, or marketing above the product team. Let them work hand in hand. If you are going to do that, I think that's going to be a recipe for success, I hope.

[00:29:53] Marine: Awesome. I think we have time for one more question. The next one is: any advice to get sales feedback through to product teams? Billable hours are often a blocker to getting time with the sales team to learn and hear this feedback. Emerson, let's start with you. Maybe you have a point of view on this.

[00:30:13] Emerson: I mean, it goes back to the thing before. I think it's about creating that relationship between salespeople and the product team so you can have that flow of information both ways. It's definitely hard, but I think it's about showing that value, getting those wins to come through, and making that time. It's the same thing with user research in general. I know a lot of teams out there struggle to even get approval to do user research from senior management. Sometimes you just have to do a little bit of it on the side and showcase the results, so they can see the value. You almost have to show the value of it, not just tell them we need to do this. Sometimes you've just got to do it, or make allies within the organization, even if it's not approved.

[00:31:00] Marine: Mm-hmm. Anything to add to that?

[00:31:03] Beata: Yeah, I will say it also goes with the general company culture, but also with the processes you have installed in your company. I had a different example in my career, when we had difficulty getting feedback to the engineering teams. I'm normally leading engineering teams, and getting feedback from the customer to the engineering team is basically the same problem as described here, sales team to the product team, just like earlier on the stage. What we did: first, of course, you instill the culture, which is the feedback culture, a cooperative culture and discussion. But you also need to simply look at your processes and say, okay, maybe one call a month, I want my product team to sit in on the sales call just to listen, as a listener. You empower them to invite people, and on the other hand, you also drive the others: okay, you need to be there. Maybe it's not interesting for you the first call, but on another call you will find a better way to discuss with the others.

[00:32:16] Sometimes, if any of you here at this venue is a manager, a lot depends on the managers looking holistically at the organization and asking where the processes don't work. If, as the question asks, billable hours are not letting us speak to each other, there's something wrong with the process itself, because you shouldn't be looking for hours outside your normal working hours to get your sales colleague to talk to you. If that's the case, you need to look into the processes and say, okay, it's part of people's responsibility to get to know each other's jobs and each other's feedback.

[00:33:00] Marine: Yeah. And if you're interested in that topic, we actually have a talk about this tomorrow morning, so make sure to catch that, because we talk about formalizing those alliances and how you work together to foster customer centricity in an organization. With that, that's everything. Thank you both so much. Great job.