Product-Led Sales

What is Product-Led Sales?

Product-led sales (PLS) is a go-to-market strategy that integrates the principles of product-led growth (PLG) with traditional sales techniques to create a more efficient and customer-centric sales process.

Unlike traditional sales models, which rely heavily on direct sales efforts to convince customers to make a purchase, PLS leverages the product itself as the primary tool for attracting, engaging, and converting users.

In a PLS model, the product often serves as the initial point of contact with potential customers, usually through free trials or freemium versions. This allows users to experience the product’s value firsthand, leading to more organic and informed buying decisions.

With this model, the sales team’s role shifts from being the primary driver of sales to acting as facilitators who guide and assist customers based on their interactions with the product. It complements modern strategies like solution selling and customer success.

Synonyms

• PLS
• Product-led sales strategy
• Product-led selling

The Product-Led Sales Model: Essential Concepts

There are a few essential components to the PLS model:

• The self-service funnel
• Product-qualified leads (PQLs)
• Product-led growth (PLG)
• Expansion revenue
• Customer lifetime value (CLV)

The self-service funnel

Roughly 88% of today’s buyers say they want self-service portals on company websites. And more than two-thirds (68%) of them say they don’t want to interact with a sales rep at all.

The self-service funnel allows customers to research, try, and purchase products without needing direct sales interaction. This includes:

• Free trials
• Freemium versions of your product
• Comprehensive documentation and resources for self-learning

The goal is to give customers the ability to try before they buy. But they have to call themselves to action and discover its features on their own.

Product-qualified leads (PQLs)

A product-qualified lead (PQL) is someone who has interacted with your product and is likely to become a paying customer based on their usage, behavior, or other predefined criteria. Unlike traditional lead qualification processes that rely on human judgment and outreach, PQLs are identified by the product itself.

With a PLS model, customers typically convert from free or trial users into paying customers once they reach a certain threshold of usage or engagement with the product. They identify this based on specific actions (like using a particular feature) or usage metrics (like number of logins or time spent using the product).

PQLs are considered highly qualified leads because they’ve already experienced the value and benefits of your product. Without direct feedback from the user, though, they’re tough to identify. That’s why this model primarily works for SaaS products, where it’s easy to track usage data.

Product-led growth (PLG)

Product-led growth is a business strategy that focuses on using the product itself as the primary driver of customer acquisition, retention, and expansion.

A product-led growth strategy typically involve:

• A self-service model
• Lead nurturing through marketing
• Free trials or freemium versions of the product
• Comprehensive product usage data
• An emphasis on creating a positive user experience to drive organic growth through word-of-mouth and referrals

The product-led growth model aligns closely with PLS. In fact, PLS is essentially the go-to-market strategy for PLG.

Expansion revenue

Expansion revenue is revenue generated from existing customers who upgrade their current subscription or purchase add-ons, upsells, cross-sells, and other additional products or services. It’s the ultimate lever for SaaS growth because it requires minimal effort and resources to acquire.

From a product-led sales perspective, the premise is simple: If you have a great product and you’re constantly updating it with new features, improvements, and add-ons that customers actually want, they’ll naturally want to upgrade or purchase more from you.

This is especially true in the B2B space. As your customers grow their businesses, they’ll need more features, capabilities, and support from your product. They’ll also need to pay for more seats, users, or licenses as they increase their internal headcount.

Customer lifetime value (CLV)

Customer lifetime value is the total revenue a customer generates for your business over the course of their relationship with you. It’s an average metric that factors in how long a customer stays with your business, their purchase frequency, and the average value of each purchase.

In a PLS model, CLV is heavily dependent on expansion revenue. The longer customers stay with you and the more they purchase from you, the higher their CLV becomes.

It’s worth mentioning, though, that the product-led sales approach itself generally results in a higher CLV (assuming it’s implemented properly). When leads are product-qualified and familiarize themselves with your product before converting, retention rates are higher.

When customer value is held constant and the average customer lifetime increases, CLV, by extension, increases as well.

Product-Led vs. Sales-Led: Pros and Cons

Like any sales strategy, the product-led approach has its unique pros and cons. Let’s take a look at when PLS is a good idea for your business, and when you might want to take the more traditional, sales-led route:

Advantages of product-led strategies

The main advantage of the product-led model is it’s remarkably effective at boosting:

• Organic growth
• Adoption and customer retention rates
• Customer lifetime value (CLV)
• Expansion revenue
• Customer satisfaction and personalized user experiences

Product-led growth also benefits businesses in the following ways:

• Lower customer acquisition costs (CAC)
• Reduced reliance on traditional sales and marketing efforts
• More accurate product-market fit due to direct user feedback and data
• Higher conversion rates, especially for self-service channels
• A shorter sales cycle, since users can make purchasing decisions without needing to consult a sales rep

Disadvantages of product-led strategies

While these benefits are clear, the simple fact is not every buyer will be able to make a purchase decision based on a free trial or freemium version alone. A lot of the time, it isn’t even a problem with the customer — it’s a product complexity issue.

For example, if you’re selling a simple photo editing app that anyone can figure out within minutes, then it’s a no-brainer to go full-PLS. But, if you were selling that same photo editing app to agencies with all sorts of extra tools and features at different price points, a rep would have to step in and help them find what works best.

When it comes to enterprise sales, PLS is simply too rudimentary. Most enterprise buyers require a high-touch sales approach to understand their needs and customize solutions that meet those needs. And reps in these areas need specialized knowledge to provide value that only a human could.

So, for more intricate, multi-faceted products and services, a product-led sales motion isn’t always the most suitable option.

Other disadvantages include:

• Limited market reach, since PLS relies on virality and referrals
• Longer sales cycles when customers passively explore the product on their own
• Overlooking other crucial elements that drive customer acquisition and retention, like customer support and sales enablement (which plays a foundational role in sales success)

Pros and cons of a sales-led strategy

A purely sales-led strategy involves selling to customers directly through traditional sales channels, like:

• Outbound sales
• Inbound sales
• Channel partnerships and other reseller arrangements

This is the age-old method of sales we’re all used to. Customers find you (or you find them), then a sales rep steps in to guide each lead through the buyer’s journey one-on-one.

The main advantages of a sales-led strategy include:

• Broader market reach, since reps actively seek new prospects
• More personalized and interactive sales experiences
• Higher average deal sizes, since reps can tailor solutions to fit individual customer needs

While this makes it better for companies with complex products, the approach has its downsides:

• Much higher customer acquisition costs (sales reps are expensive)
• Lower conversion rates due to a longer sales cycle and more touchpoints required
• Difficulties with scaling, since it requires a lot of resources to hire and train more reps

You also run the risk of coming off as too pushy or intrusive if your sales team isn’t properly trained in empathy and consultative selling. And you know what that leads to? Higher churn rates, lower customer satisfaction, and damage to your brand’s image.

Hybrid sales model

Every sale should be at least somewhat product-led. But, in the end, you’ll need to either make a convincing case for why your product is just right for a specific business pain point or directly convince qualified leads as to why your product is going to be a money-saving solution.

Implementing a hybrid sales model means you can combine the elements of both product-led and sales-led approaches (among other things). You can take advantage of the best of both worlds.

Let’s say you use tiered pricing and your product serves everyone from individuals to small businesses to enterprises. You can use a self-service model with low-touch sales channels for your simpler products while hiring sales reps to sell the more complex solutions. This way, you can keep CAC low for the smaller fish while still landing the big whales.

Use Cases for Product-Led Sales

The two main use cases for product-led sales are self-service SaaS products and free trial/freemium models.

Let’s take a closer look at each:

Self-service SaaS

A self-service product is one that users primarily purchase or start using without direct involvement from your sales team.

Self-service SaaS products typically have low prices and require minimal (if any) implementation and setup. A user can sign up online, pay for their subscription, and get started using the product immediately.

This category includes what’s generally the lowest product tier in a company’s offering. For example,   small agencies and businesses won’t talk to a sales rep before signing up for Trello’s project management software or Mailchimp’s email marketing automation system.

It also includes micro-SaaS products like AI-powered marketing tools or social media scheduling apps.

Free Trials and Freemium Models

When you offer a free trial or freemium tier of your service, you’re expecting the product experience to drive conversions.

Examples of freemium products include:

• HubSpot’s free CRM and marketing automation tools
• Google Workspace’s free suite of productivity and collaboration tools
• Zoom’s video conferencing solution

Again, most organizations do this, whether it’s through a fully self-service experience, a post-demo trial, or a sales POC. Because everyone wants to try before they buy. And not every organization has extensive product needs.

If you can make enough profit at the high end and you’re selling something that increases in complexity, making your lowest-end product a freemium offer will help you build brand awareness and introduce tons more people to your product.

And, of course, offering a trial of your product to everyone will boost conversions. Without it, some potential customers simply won’t ever try it.

Best Practices for Implementing Product-Led Sales

To successfully execute a product-led strategy, these are the prerequisites:

• Product-market fit
• Seamless user experiences (particularly onboarding)
• Advanced product analytics
• Sales-product alignment

Beyond that, here are five best practices to keep in mind:

1. Create guided, in-app onboarding flows.

Since user adoption is so critical (yet so hands-off) in a product-led model, you need to ensure that every new user is quickly onboarded and given guidance in the context of your product.

When developing your SaaS product, incorporate a setup flow for new users that clearly shows users each of its core features. They should have to actually click through or use the feature before they can move on to the next step.

This is the only way you’ll know if people use and understand your product.

2. Leverage customer feedback.

Encourage customers to provide feedback through surveys, reviews, through the app, or whatever channels they use. Use this information to understand their needs better and make improvements to your product.

Although your goal is to be completely hands-off, you can also speak with actual customers to get feedback about why they chose your product, what their use case is, and other key details. Pick a few of your most active users and schedule a call to get to know what they love and what they’d change.

3. Implement a self-service support system.

To keep your product-led strategy sustainable, you need to be able to scale without adding more sales reps or customer success managers. Have your marketing team create a comprehensive online knowledge base and help center for customers to access and troubleshoot issues on their own.

You can also use chatbots and live chat to provide quick/automated responses to common questions.

4. Utilize data for personalized recommendations.

With advanced product analytics, you can use user behavior data to make personalized recommendations for your customers. These could be product upgrades, additional features, or even complementary products that are relevant to their needs.

By utilizing this data and making these recommendations within the product itself, you can increase upsells and cross-sells without any direct sales involvement.

5. Align sales and marketing with the product experience.

Although the product will do most of the talking, your marketing team will have to bring customers in somehow. They should be well-versed in your value prop, ideal customer profile, and product details so they can create effective messaging and campaigns.

If you have sales reps (e.g., for a higher-tier product), they also need to be experts on the product, understand what differentiates it from competitors, and be able to adapt their sales pitch based on the customer’s specific needs and use case.

Doing this is simple: Have them use the product themselves, either through a guided demo or (if possible) through your own business operations.

Essential Technology in Product-Led Sales

We’ve already mentioned the importance of advanced product analytics and a self-service support system. But there are also specific tools that can help you streamline your product-led sales process.

CRM integration

Integrating your SaaS product with a CRM is essential to track user behavior, connect it with other data sources (like leads and contact information), and use that data to make personalized recommendations.

Project management software

You need a space to manage product ideas and development progress. Whether you use Asana, Trello, or another project management tool, it’s important to have a place for your team to collaborate and keep track of tasks.

Sales engagement platform

A sales engagement platform will help you automate personalized outreach, track conversations with potential customers, and streamline the handoff between marketing and sales teams.

With a product-led sales model, this tool is still important for high-value customers or those who need more hands-on assistance during the sales process.

Marketing automation software

You can nurture leads and maximize product engagement with your current customer base by sending periodic targeted messages. For that, you need marketing automation software.

Use it to:

• Keep track of leads and prospects as they interact with your product
• Educate your customers on benefits and use cases of your product
• Solicit feedback in the form of surveys

Billing and subscription management software

Especially in the SaaS space, you need a way to automate your billing process. It streamlines the customer experience, eliminates errors, automates revenue recognition, and overall makes your business more profitable.

Whenever a customer signs up to use your product, the software automatically starts billing them and manages their subscriptions. When they have a payment coming up or their free trial is about to end, they get an email reminding them. And it automatically knows when each customer’s free trial is over.

So, there’s no need for manual invoicing or payment reminders.

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