The Product-led Growth for Sales-Led Guide
The Product-led Growth for Sales-Led Guide
How to *actually* do and understand it.
If we talk about why anyone entertains exploring product-led growth then it’s usually for one of two reasons:
You want to understand it better because the superficial implementation advice you usually deal with seems not to apply to your sales-led organization
A market opportunity has been discovered by usually expanding downmarket but you’re not sure how to do it. Your expertise is probably mostly in Sales-led distribution and you’re not even sure where to start.
Fundamentally, product-led growth involves a different customer experience with less control due to enhancing its self-serving capabilities. The counter-intuitive thing about PLG (product-led growth) is that it shifts the way you “control” ultimately from obsessing over process control to quality control.
We can only differentiate ourselves if our product IS better and we let the customer make their decision themselves without any chance to have a say in it.
I position myself specifically to address this pain point for sales-led companies because they have very few conditions in place to pull it off. Oftentimes we need to have a conversation on how to do good, basic product management.
The following guide is based on my passion for organizational building, scaling, and consulting with dozens of sales-led companies that wanted to expand with product-led growth. (If you want to work with me check my “Work with me” Section)
Table of contents
Free Section
1. What IS product-led growth?
2. Sales-Led vs Product-led Growth
2.1 Implementing
2.2 Buy-In
2.3 No free consumer version in sight
3. A de-risked 5-step plan for a successful PLG Distribution
4. Inventory: Dissect our existing value and Market
4.1. Moment to Monetize
4.2 Analyzing your current product (optional)
5. Redefine: The definition of “Product”
6. Focus: Find 3 ICPs and their 4 success signals
6.1 ICPS
6.2 Good & Bad ICPs, Examples
6.3 Customer Success Signals
6.4 Is plg for us? Cross-Roads
7. Measure
7.1 Data & Visibility
7.2 Split revenue reporting
8. Implement: Goals & Org changes
8.1 Growth Teams
8.2 Goals
9. Product-Led Sales
9.1 Deal Qualification
9.2 Product Qualified Accounts
9.3 Product-Qualified Leads
9.4 Expansion Qualified Accounts
9.5 Sales Ramp-Up and Incentivization
9.6 Product-led Sales Example Sunrise
9.7 More PLS Resources
Paid section
10. Common pitfalls
10.1 Treating collaborative environments as “Optional”
10.2 Ignore Data and replace it with “common sense”
10.3 Not doing product-led OKRs
10.4 Scaling product-led sales resources too fast
10.5 Mishandling Sales Incentivization
11. Unexpected Allies
11.1 Using a downmarket segment to build for an upper market
11.2 Unexpected expansion revenue
11.3 Payback Periods as health metrics for PLG
12. Tooling & Resources
12.1 PLG Blogs
12.2 PLG Analytics tooling
1. What IS product-led growth?
I have an extensive guide on the topic linked at the end of this chapter, so let’s keep this very brief:
In its purest form, product-led growth is one of many distribution models you can use to reach your users.
This transparent model places the product - what your customer values - at the front and center of your sales and marketing efforts. It depends on the product itself to do the selling by way of its features, performance, and use cases.
Display as much value as humanly possible to your users before guiding them towards any human interaction, like sales or demand payment.
In the right conditions, this is THE most cost-efficient method we know of to acquire users in a given market segment. Focusing on low friction, it’s a defendable moat that keeps you floating above companies that only acquire users through high CAC-related models like a sales-led approach in segments that can be addressed by both.
It has the best Go-to-Market fit the more potential users you can reach
Product-led growth blurs the line between product & distribution. It offers an alternate set of conditions to measure and understand customer value by - one that feeds back into development.
Optional reading for more B2C focus:
2. Sales-Led vs Product-led Growth
There is a problem painting product-led growth to be superior to sales-led growth. Both distribution models are inherently different and address different parts of their markets.
Putting one above the other ignores reality for most businesses: you cannot just abandon your core market to make everything self-serve. It doesn’t work that way.
So… is product-led growth for you? Well, you are reading this guide which means you might consider it. Unfortunately, the answer is a bit more complicated.
Let’s understand the underlying mechanics first, then develop a plan with as little risk for the business as possible in case it does not pan out. And if it does, we decide whether we fully commit to it through product-led sales.
2.1 Implementing product-led growth
Adding Product-led Growth to a Sales-led company is risky and counterintuitive. It's easier the other way around:
If we oversimplify what product-led growth (PLG) is then it's about self-serving value. We can access a customer segment that is not accessible by sales with little cost. Lower-lifetime value, self-onboarding customers.
Sales-led growth on the other hand is great at closing customers that cannot self-serve. PLG has no good fit there.
In between Sales-led growth (SLG) and Product-led growth (PLG) sits Product-led Sales (PLS) connecting both.
PLG: Low LTV, High Qty
PLS (subfunction of PLG): Medium LTV, Medium Qty
SLG: High LTV, Low Qty
2.1.1 The term “Product-led Sales”
While Product-led Sales is ultimately what we are trying to implement it’s important to understand the inner workings of product-led growth as a whole. This guide aims to cover this important gap.
Product-led Sales is a subfunction of product-led growth and not an isolated thing. For simplicity, we can just call it product-led growth if we understand that it addresses customers much closer to an enterprise segment than what people traditionally understand with plg.
Product-led sales (PLS) leverages customer signals and data to enrich deal qualification to identify long-term revenue before the customer even pays. This drives down our CAC, Cost to Serve, deal cycle times, and most importantly payback period.
2.1.2 The easy way: moving upmarket from B2C
For a classical product-led growth company, it makes sense to move upmarket bit by bit. You can use your existing understanding of user engagement to start gathering leads and qualify them.
That's a straightforward way to product-led sales. It's a natural expansion of your LTV. We target team use cases and slowly redefine what we understand with retaining our users. We have a lot of leads and qualifying makes sure we don't waste the time of our first sales hires.
These medium LTV accounts need to be found and our tracking makes sure of that. It’s a targeted approach from the get-go.
If we manage to close those we might get the odd High-value client that is entirely served by sales almost alone. We expanded slowly and moved upmarket bit by bit. We hired one or two salespeople and started gathering leads through forms.
But…
2.1.3 The hard way: Adding going downmarket as a Sales-led Business
For a sales-led growth business in the reverse case, the story is more complicated. The reason is that product-led sales require more things to change for a sales-led organization than for a classical B2C company starting to layer in sales.
You cannot qualify leads based on engagement if you don't understand your individual users well and what makes them care.
You may not have solid user research processes or enough clients to toy around with lots of data.
You have on one hand high-value accounts and now start to add lower-value self-serve customers. This triggers the fear of CAC staying stable (or even increasing) while ACV decreases. This fear is unfounded as we will explore later on.
This stretch is counterintuitive and uncomfortable for most companies. You have to trust that there is something good coming from it and it may take multiple quarters on top.
To make matters worse, you have to hire people like me (a subset of PLG experts) or entire growth teams which most companies don't know how to handle. Especially if they never measured user engagement and have a product that never dealt with it.
This is inherently more difficult than just adding 1 or 2 more salespeople.
That's why this is so difficult for most SLG companies. This is not SLG vs PLG. It's how to bring them together. An important tool for this is product-led sales.
The good news is, this is highly defendable for classical sales-led markets and a prime tool to disrupt your competition.
Let’s understand why properly:
2.2 Buy-In
Product-led Growth is not a product initiative. It’s also not a sales or marketing tool. It’s a company initiative. There are a couple of reasons for it:
It takes longer than you think. It’s not just adding a self-serve motion to your product, it’s about a fundamental shift in what “customer success” means, and how to operationalize and make everyone’s life better. This takes time. Sometimes more than a year.
It requires compromises in sales, product, and marketing. You might even add a new function to your company. “Growth” Teams. Naturally, other silos might feel threatened by those:
Product: Are they starting to change our product?
Sales: Are they messing with how we sell?
Marketing: Are they changing how we acquire?
Data becomes paramount. Data is very rarely its own function but serves multiple functions. Yet it is essentially nonexistent outside of core sales reporting when it comes to user engagement data. Building this costs time and expertise that might not be present.
I advise people who are starting out in product-led growth to not mention product-led growth too much. Especially in Sales-led companies, there’s a triggered fight or flight risk because they think it’s just hype.
We can show and prove value to the company without having to rely on buzzwords.
2.3 We cannot make a free consumer version of our product!
So much for the theory, in reality, most businesses cannot create a consumer version of their product for various reasons.
But there is almost always a simplified version that allows us to address more of our markets even if it’s just a mid-market segment. Whatever it is in the end, we need to make sure that we include a market where the amount of potential customers is technically too much (or too expensive) for our sales pipeline to deal with.
If we have too many deals with too little LTV attached to we need to qualify them to make them worth it. This is where product-led sales shine.
The goal is to have some version of your product that attracts so many customers that the differentiating factor is becoming to know exactly who you can close before you call them.
You also have to stop thinking about PLG and Enterprise markets as being separate. Over the longer perspective, it is common that some of your low ACVs are starting to expand into enterprise accounts with time.
Even if you discount all that, PLG is a strong driver for taking the guesswork out of product management.
We talk about unexpected allies like expansion revenue and product data in section 11. Unexpected Allies
3. A de-risked 5-step plan for a successful PLG Distribution
Even if you don’t manage to go the full nine yards you’re left with something valuable if done right.
My 5-step process for sales-led businesses I use progressively introduces higher risk but also certainty as we go along:
Inventory: Dissect what works and doesn’t in your value proposition
Redefine: Change what “product” means for marketing, sales, and growth.
Focus: Define ICPs and ignore the rest
Measure: Lay the groundwork to measure what you defined and analyze what you have
Implement: Teams, Goal Settings, Strategy
If you look at product-led growth and product-led sales as a business case it tends to work best. We don’t need to blindly trust the promises of thought leaders like me but can check our insights along the way. And if we decide to not go for it, we still have something useful in place.
4. Inventory: Dissect our existing value and Market
We’re assuming for this particular exercise that you know already in which market you want or are already participating. We start at the end of a great product cycle:
4.1 Analyze the best moment to monetize
Product-led Growth is more often than not an exercise for sales-led organizations to understand when to monetize.
If we simplify the journey of a user all the way up to maturing into an enterprise account it looks something like this:
Users transform from users who are ready to use to those that understand the value, eventually seeing extended value or developing a habit. Those have a chance of becoming teams. Further down we talk about teams of teams and enterprise accounts.
It’s better to monetize as late as possible because of three connected effects:
Virality and Word of mouth: Monetization (Sales or Paywalls like trials, and freemiums) introduces friction, the lower this friction is, the more likely it is that a free user is recommending the product to another user which itself has a chance of becoming a paid one.
Time of self-qualification: While the time necessary to arrive at a later stage becomes longer there’s an obvious upside to letting users go at their own pace. Users can qualify themselves through the process up to a point where they reach out to us and have already experienced a lot of value themselves.
This shifts the conversation by sales from generic inbound leads to highly interested inbound leads that are much more informed about your product’s value proposition and whether it offers a good problem fit.
The overall time to close goes up but the time from sales interaction (if it happens at all) to close reduces.Willingness to pay: Engaged users have a much higher willingness to pay than non-activated users. This might be counterintuitive to classical sales-led companies as they like to get a hold of the prospect as soon as possible.
Knowing this, we now should have a rough idea of how much a potential future solution could offer for “free” before a customer needs to interact with sales. Or they might even close completely by themselves. Closing accounts by themselves up to 10’000 USD per year is not uncommon anymore at all.
4.1.1 Virality and Word of Mouth
While I visualized the above flow as a funnel I highly recommend looking at your users as a self-running loop. It’s commonly referred to as a flywheel or growth loop. Every user that lands on your product has a chance of attracting others.
Fundamentally this is what product-led growth is about. Users acquire other users. The more downmarket you go the stronger the effect is and cannot be ignored.
If you don’t do it, your competition will. You cannot compete with a distribution model that costs 0$ per user.
4.2 Analyzing your current product (optional)
When we look at the start of our Inventory it’s optional to include your product into it. There’s an inherent danger to focusing too much on your solution. Your customers use your product but ultimately their problems live outside of it.
Addressing, and understanding the problems first without focusing too much on your product can help and simplify finding good opportunities.
As long as you are aware of that you can still do a full teardown of your existing product by splitting it up into growth and acquisition:
I would limit it to 3 core steps first thing: Acquisition, activation, and retention.
They fit into our customer lifecycle as follows:
Acquisition → Activation → Retention → Referral → Revenue
Same for “Referral” as the next step until you have nailed the other 3 steps successfully.
While product-led growth is incredibly strong when it comes to virality and network effects (referral) you cannot skip any steps to get there. Only retaining products will be referred and only activated users can retain them.
The following steps can be tested by observing test users or simply doing this as a team exercise to start off.
Detach yourself for the moment from thinking in Accounts. When I talk about “Users” I really mean "people who are using your product”, we deal with “Buyers” and Accounts later.
4.2.1. Acquisition
“How are users discovering our product”
It makes sense to really walk through the process of a typical user in today’s flow with your product and map it out:
Do we offer a free version of our product that users can explore to form a mental model of what the product is about?
This includes also the cost side, if pricing is not clear a product might disqualify itself quick
If not, what kind of material do we offer that comes close to a free version?
If not, what kind of interaction do our users have to take to get to that step?
Interacting with a form
Booking a sales call and so forth.
4.2.2 Activation
“How are users reaching success with our product?
Once a user is aware of our product how do they reach success in it (Aha-Moment, see 2.3 customer success)? (This can be after having received access by sales or through a self-serve)
Is the product self-explanatory to reach a value output?
If not, is it a problem to find the provided information
Or because the product needs to be explained by a salesperson due to complexity
If not, can success only be reached by integrating data by the users themselves?
4.2.3 Retention
“How are activated users continuing to engage with our product”
Once a user (people using it, not the buyers) has experienced success with our product what drives them to reuse the product?
The product is so easy to use and the value that they want to use it
If not, is your product easy to onboard but not easy to use repeatedly? (Single vs. repeat usage)
If not, are they using it because they are told to use it?
4.2.4 The (imaginary) product-led growth version of your product
Once these 3 steps have been mapped out you have some first indicators of how a product-led growth version of your product could look like by specifically targeting the gaps (which can be changed) from Acquisition / Activation / Retention we surfaced.
In general, it makes sense to try to design this flow with as little human interaction necessary as possible:
Acquisition: Free, self-serve version of our product
Activation: Easy to use and fast way to get to a first-value version of our product
Retention: Balancing easy-to-learn and easy-to-use repeatedly. What does our product look like if we focus on the most used actions?
By the end of this exercise, you should know how far you are actually away from having a product-led growth version of your product. The 3 areas around acquisition, activation, and retention are all focused on product work and give you a rough idea of what’s necessary to change.
4.2.5 Monetization
When to pay is a crucial component in any product-led growth flow as we explored in 4.1. We generally want to move the payment step as far back as possible.
While an initial implementation for a self-serve monetization might be given to the “product” teams to implement you will notice that there is natural tension emerging between sales and product because of it:
“You’re undercutting our pricing, our offering is getting too complicated.“ ← Your average SDR seeing PLG come up in an organization.
The answer is contained in the next steps
5. Redefine: The definition of “Product”
Terminology is important to nail from this point forward.
When we talk about “Product” we don’t mean people working in that function. We talk about the value of our customer’s experience beyond the “core product” (what you are selling):
This simple extension of the term can turn negative things like your platform going down into a retention driver.
Specifically when we talk about the post-product experience, anything on top of your core value... support should never be an afterthought and should be incentivized accordingly.
We reduced at Smallpdf our support response time to 15 minutes. We knew how directly this experience was correlated to their retention behavior (and reducing churn).
Also, your support and how to get ahead once you get stuck can turn something negative into one of the strongest retention drivers:
"We had a service outage of two hours in the night. Hopefully, none of our customers noticed it"
Should turn into
"We had a service outage of two hours, let's proactively inform the customer in any case as fast as possible."
One of the most placative sentences that you could stick on your door is
-> "We know that something is wrong before the customer does." <-
If you are proactive about failures you generate trust. For that, you need to be able to monitor, surface, and act on it. That's why it's part of the product. *Especially* with big contracts.
Let’s use this definition when we continue talking about “Product”.
In simple terms:
Sales & Marketing are not just selling the core product but extended value coming in from pre and post-product experiences if we can prove that they matter to the customers and which ones (ICP) at higher efficiency.
Sales results: Higher close rates
Marketing results: More revenue (LTV & ACV) per MQL for the same spend
6. Focus: Find 3 ICPs and their 4 success signals
Sitting down with your team and understanding the different stages of your user’s success is crucial. Before we do that we should look at for whom we are doing that. This is very similar to a positioning statement for a product but now for individual groups.
6.1. ICPs
I’m a strong proponent of understanding product-market fit as a function of your customer groups, aka your ideal customer profiles and not your overall product. This impact of segmentation gives you a completely different view on your product:
This might mean that you have different product-market fit answers if someone asks you whether you have product-market fit.
An ICP (Ideal Customer Profile) is a profile of users that are the best fit for your product. They retain and pay the best. You want as many of them as possible. They are the primary users we develop the product for in a product-led business.
Unfortunately, they sometimes get lost in the noise if you spray and pray with your acquisition methods as is very common for many startups. Especially in those cases, PMF is understood best as a metric that you have to find for a group rather than your entire user base.
Your retention might look something like this:
Retention for all of your users after 8 weeks: 5%
Retention for ICP 1 subgroup after 8 weeks: 20%
Retention for ICP 2 subgroup after 8 Weeks: 3%
Depending on how you defined your ICP you just uncovered that your product is an awful fit for the 2nd group but a much better fit for the first group.
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