Navigating Challenges in Product-Led vs. Sales-Led Strategies for B2B SaaS Product Management
In the past decade, the field of product management has evolved, shedding much of its earlier ambiguity. Yet, it remains a domain rich in depth and diverse verticals. The spectrum of roles in product management is broad, ranging from highly specialised to more generalist positions. Whenever I chat with friends working as PMs in other companies, I’m time and again surprised by how diverse and sometimes different the role is from one organisation to another.
For example. There’s a clear distinction between technical and business-oriented roles, as well as between those focused on B2C and B2B markets. Within the B2B (SaaS) sector companies diverge into two distinct types, each with unique challenges and focus areas: Product-led companies, wielding innovation as their weapon of choice, and sales-led companies, harnessing the power of charisma.
Every company has an area that “leads”. Maybe it’s “sales led”. Maybe it’s “product led”. Maybe it’s something else. But it is something, and that area will 100% successfully influence your Roadmap” Andre Albuquerque post in Linkedin
Understanding the nuances of this strategic face-off is crucial for product teams. Failure to do so can lead to significant friction between product teams and other departments within the organisation. Ninad Kulkarni wrote a good piece about how to choose between the two. I will share my insight about the implications for the product team for both cases.
Let us start by listing the high-level differences.
Product-Led strategy:
- User-Centric Approach, Customer-Centric Metrics
- Focus on self-service onboarding and scalability. Minimise the need for direct assistance.
- Freemium or free trial business models. Transparent pricing.
- Product-led growth (PLG, Product is growth driver). Rely on the inherent value of the product to drive customer acquisition, retention, and expansion.
- The ideal customer profile is a high volume of small or medium-sized customers. Customers are expected to use the product as it is.
Sales-Led strategy:
- Sales-Centric Approach. Revenue Centric Metrics.
- High-Touch sales process. Long and complex sales cycles. Personalised demos to educate and persuade customers.
- Limited free offerings. Negotiable or custom pricing.
- Sales and marketing efforts as the primary drivers for customer acquisition and revenue.
- The ideal customer profile is big enterprise deals. Customers expect the product to be customised to their needs.
In both cases, there should be a proper high-level product vision and a product roadmap. In both cases, product management should monitor feedback and feature requests from potential prospects and customers (and talk to the users).
In product-led companies, the product team considers feedback and requests while strategising and managing their roadmap. Feedback not aligning with the product vision or planned roadmap is acknowledged but considered more as a background noise.
There’s a lot of saying no and sticking to that decision. Emphasis is on prioritising the needs of the majority over the few. Even when presented with a prospect offering a 10x MRR compared to the average deal size, it’s uncommon for product-led companies to divert resources from their planned initiatives to create bespoke solutions.
On the other hand, sales-led companies have the product team receiving more input from sales and success teams concentrating on developing features that facilitate closing significant deals. This often leads to a re-evaluation of the planned roadmap to accommodate the specific needs of a few major deals that are crucial to close.
The focus might occasionally shift to prioritising the needs of a select few over the broader user base and that's fine because success in closing a big deal might mean life or death for a start-up. Consequently, certain aspects like self-serve flows, usability improvements, and other elements critical for user experience but not deemed business-critical may be deprioritised.
Where can it go wrong?
Both approaches have their pros and cons. If these are communicated, mutually understood, and discussed effectively, then either choice can be the right one for a company and fulfilling as a role for PM. But what if the communication is lacking?
Companies shifting from product-led to sales-led strategies
Let’s imagine a company whose strategy is product-led growth and building products for small and medium-sized customers (think Zapier, Linear or Shopify). And then, what if management decided to move upmarket and target big enterprise customers instead (usually means switching from a product-led growth model to a sales-led approach) but forgot to send out a memo to the product team?
In such scenarios, proficient product teams adhere to their established best practices, often saying ‘no’ and strategically prioritising their work based on conversion funnels, usage metrics, and other relevant factors for PLG. However, this approach can contrast sharply with the realities of sales teams. These teams engage with customers in a distinctly different league, with their commissions and the company’s growth hinging on their ability to close deals.
A common issue that arises is a disconnect in priorities: new features developed by the product team may not align with the needs critical for closing sales. There can be a perception that product development doesn’t consider the requirements of potential customers, leading to a roadmap that appears confusing and misaligned with market demands. Not to mention the power struggle between sales and product organisation and who should have the last say behind the prioritisation table.
In situations like these, the first step is to fix communication, ensuring that all decision-makers are aligned on the strategy. The responsibility then falls to the product team to discuss the ramifications of this change. If certain teams are tasked with handling custom requests from a few customers, this can affect the delivery of the agreed-upon roadmap, some planned work must be postponed or reprioritised.
It may become necessary to restructure the product organisation, allocating specific resources to professional services focused on custom implementations. This approach allows other teams to continue their focus on the product and the planned roadmap.
When the strategy shifts towards a sales-led growth approach, certain metrics gain more significance for product teams. For instance, Customer Acquisition Cost (CAC), usually overseen by marketing and sales departments, becomes crucial for product teams.
As product teams develop custom solutions to secure deals, their efforts directly influence CAC. It’s essential for the sales team to be aware of these costs to ensure a positive Customer Lifetime Value (CLV). This understanding helps maintain a profitable balance between acquisition expenses and the long-term profitability of the business.
Some examples of other key metrics that become (more) important for product teams include:
- Sales Cycle Length: Understanding how product customisations impact the duration of the sales process. Shorter cycles can reduce CAC and improve CLV.
- Customer Success and Support Metrics: Evaluating the resources needed for customer support and success, as these can influence customer satisfaction and retention, thereby impacting CLV.
- Market Response: Assessing how custom solutions are received in the market, which can inform future product development and sales strategies.
- Return on Investment (ROI): Calculating the ROI of custom solutions, to ensure that the costs incurred in development are justified by the revenue they generate.
- Feedback Loop Integration: Establishing a robust feedback mechanism between sales, product, and customer support teams to continuously refine the product offerings based on customer needs and market trends.
Companies shifting from sales-led to product-led approach
Examples where this scenario can arise, is in organisations undergoing digital transformation (i.e. banks, telcos, and insurance) or startups that started their life building a product for few big customers and now are aiming to shift towards a product-led approach.
Traditionally, these companies have relied heavily on human support or account managers for customer onboarding, account setup, configuration, and other services. However, with the dual goals of cost reduction and modernisation, there’s a growing inclination to develop robust self-service platforms.
In this transition, product teams, accustomed to focusing on core product development, may overlook enhancing self-service features, considering them already addressed by existing customer support processes. The complexity of products and pricing schemes can complicate the development of standard self-service flows. This often leads to friction with customers who expect a comprehensive self-service experience but find themselves needing to contact support for changes or modifications to their products or services.
As companies shift towards a product-led growth (PLG) strategy, it’s important for product teams to measure a broader range of metrics that describe product performance. These metrics should not only include traditional ones but also encompass detailed insights into the customer journey and product interaction. This also means that product teams should focus less and less on tailor made solutions and focus more on the needs of broader (existing and potential) customer base.
Some examples of key metrics that product led teams should monitor include:
- Conversion Funnel Analytics: Understanding the customer’s journey from initial engagement to the final purchase. This involves tracking stages such as visitor, lead, qualified lead, opportunity, and customer.
- Conversion Rates: Analysing how effectively leads are converted at each stage of the funnel. This includes micro-conversions that lead to the final goal, offering insights into where improvements are needed.
- Product Usage Metrics: Monitoring how customers interact with the product, including frequency of use, feature utilisation, and user engagement levels. This data helps in understanding which features drive value and should be further developed.
- Retention Metrics: Assessing how well the product retains customers over time, which is critical for long-term growth. This involves measuring the percentage of returning users and understanding the factors that contribute to sustained user engagement.
- Churn Metrics: Identifying the rate at which customers stop using the product. Analysing churn helps in pinpointing issues that may be causing customer dissatisfaction or disengagement.
- Customer Feedback and Satisfaction: Gathering and analysing customer feedback to understand their satisfaction and preferences. This can include Net Promoter Scores (NPS), customer satisfaction surveys (CSAT), and user reviews.
- Revenue Metrics: Tracking revenue-related metrics such as Average Revenue Per User (ARPU) and Lifetime Value (LTV) to understand the financial impact of product strategies.
Conclusions
It’s crucial to have a clear understanding of your organisation’s product and sales strategy. Keep in mind that this strategy may evolve, sometimes subtly, akin to the proverbial frog boiling. Product teams should have a good awareness about the change and flexibly adopt the approach that aligns best with the company’s interests.
Aspiring product managers in sales-driven organisations often feel constrained in effectively managing their products. This sentiment is exacerbated by the fact that most self-help literature in product management predominantly focuses on product-centric methodologies. For product managers in sales-focused environments, delving into topics beyond traditional product management, such as sales, psychology, and stakeholder management, may prove more beneficial.
