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Why SaaS businesses turn to product-led growth

Product-led growth is a powerful strategy for any industry, but it really shines when it’s applied within the context of a software-as-a-service (SaaS) company: product-led go-to-market practices can revolutionize the way SaaS businesses function.

But that doesn’t mean other growth methods—like sales- or marketing-led growth—don’t have their merits.

Last updated

4 Jul 2022
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In this chapter, we look at three different growth methods and explore how SaaS product-led growth (PLG) measures up. By the end, you’ll have the insights you need to decide whether a truly product-led SaaS business is right for you.

Be ready to drive rapid growth with Hotjar

Use Hotjar’s product experience insights to learn what’s most important to your users and empower your product team to focus on key outcomes that drive growth.

3 types of growth strategies for SaaS companies

Many of today’s fastest-growing SaaS companies have PLG to thank for their exceptional success. By adopting a PLG strategy, companies like Calendly, Slack, and Dropbox have used their products to create a steady pipeline of satisfied users—which they then convert into paying customers.

However, companies exist and function at various points across the SaaS spectrum. On one end are those with products that have a complex buying process, more suited for large businesses and enterprises; on the other end are companies with more accessible products that are mostly designed for small businesses, or departmental or team use. 

Different companies use different growth strategies, which reflect various growth models that have evolved over time. Let’s look at three of the most popular go-to-market (GTM) strategies for SaaS businesses.

1. Sales-led growth

A sales-led growth (SLG) strategy puts the sales team in the forefront. The main driver for growth is to generate and capture qualified leads—a responsibility that lies in the hands of account managers and sales representatives that manage the entire sales pipeline and customer journey, typically in collaboration with the marketing team.

Sales-led growth is a classic and popular method that comes from back when most companies relied heavily on field, inside, or telephone-based sales, with or without marketing support. It’s helped build many of the early SaaS legends, like Microsoft and Salesforce.

Today, this tactic relies on the sales team to ramp up the benefits of the product to a targeted audience to make sales, renewals, and upgrades.

#Enterprise software developer SAP still uses sales-led tactics to retain market leadership
Enterprise software developer SAP still uses sales-led tactics to retain market leadership

2. Marketing-led growth

As product price points came down and products became easier to sell, many companies were happy to transition to strategies that were often more efficient and generally easier to scale. It wasn’t long before marketing started taking a more dominant role, as content marketing and inbound marketing gained traction. 

Marketing-led growth (MLG) relies on targeted advertising, SEO, and other marketing tactics to bring prospects into the sales funnel, where they’re transformed into qualified leads. Since it focuses more on top-level metrics—such as acquisition and initial revenue—to get results, and less on product adoption and retention, it’s one of the less popular options when it comes to driving SaaS growth.

Brands like Drift, Hubspot, and Ahrefs are some of the best examples of companies that have leveraged marketing-led growth to grow their business.

#The Ahrefs marketing team focuses on creating blogs, videos, and courses that explain the benefits of using the product to their likely users
The Ahrefs marketing team focuses on creating blogs, videos, and courses that explain the benefits of using the product to their likely users

3. Product-led growth 

In time, more and more SaaS businesses started making more and more happen directly through the product interface—a shift that benefited both users and companies. Ultimately, we reached the PLG model. 

Product-led growth is a go-to-market strategy that relies on the product for user acquisition, conversion rate, retention, and ultimately expansion. For companies like Twilio, Atlassian, Zapier, Hootsuite, and Buffer, the SaaS product is the solution, salesperson, and single source of truth. 

It supports users’ daily activities, enables customers to make the initial purchase, renew their subscription, and upgrade their package. It delivers everything the user needs—pricing, contract length, feature FAQs—from within the product. 

Making the product the primary driver of user acquisition, retention, and expansion has also allowed SaaS companies to create company-wide alignment across teams like marketing, sales, customer success, engineering, and design.

That being said, PLG is not a way to replace marketing, sales, or customer success teams—it’s a methodology to get all these teams working together towards a common goal.

#Slack has a self-serve product with great user onboarding that solves users’ problems
Slack has a self-serve product with great user onboarding that solves users’ problems

Which growth strategy is best for SaaS? 

Each growth method has its own merits, strengths, and weaknesses. In general, more complex SaaS companies will benefit from a traditional approach to growth, while companies on the other end of the spectrum will be more suited to a PLG approach.

The right growth strategy for your SaaS business depends on factors like the maturity of the market, the complexity and sophistication of the product, and the proficiency of the user. When building your growth strategy, you need to consider all of these pieces and find a plan that strikes a balance between the various ingredients.

Pro tip: keep your product in tip-top shape. 

Regardless of which SaaS growth method you use, your product should do as much as possible to ensure your users are always experiencing your very best. To do that, maintain a sharp focus on your core product and constantly reassess how it can best serve your customers.

Feedback is key to understanding how your users react to your product features and updates:

  • Place an on-site survey on a high-traffic web page or product landing page to learn what users think about your latest iteration and if it helps enhance problem-solving. 

  • Prioritize features through user feedback with qualitative tools like feedback widgets to understand what people think and how they feel while they experience your product in real-time.

  • Watch out for blockers (e.g. bugs and broken links) and signs of frustration (e.g. rage clicks and u-turns) by routinely studying session recordings. Doing so will tell you more about your customer’s pain points, and how you can address them through future product features.

Let’s dive into the three SaaS growth strategies—their pros and cons, and how to tell which one is best for your company. 

1. Sales-led growth 

Benefits

  • Early earnings: sales-led growth can be a great way to get paying customers in the earlier stages of growth.

  • A team you can count on: having great sales people can significantly increase revenue and drive growth, sending your SaaS into the stratosphere.

Drawbacks

  • Less of a focus on customer success and support: because it’s focused so narrowly on the sales funnel, sales-led growth can cause your business to place less priority on a positive user experience.  

  • Can be unilateral: SLG reduces the value of marketing and product as strategic drivers of business growth, putting whether your company successfully scales entirely in the hands of salespeople.

  • Higher costs: sales-led growth can lead to initial acquisition costs that are significantly higher than other methods (like PLG), since more people need to be involved in the process.

How do I know if a sales-led growth strategy is right for my SaaS company?

Sales-led growth strategies are a common (and valid) tactic for many SaaS companies. SLG is generally considered best for service-based companies thatrely on high-touch methodologies to onboard and convert customers.

SLG also works well if:

  • You’re launching a product and don’t yet have a successful product-market fit, since the sales team is solely responsible for generating and capturing qualified leads.

  • Your product is revolutionary or complex, in which case the self-educating style of PLG won’t work as well.

  • Your product is expensive to build and the free trial or freemium models may not be sustainable. 

  • Your product is designed for large enterprise buyers, and directly targeting your ICP and selling to a handful of decision-makers may be faster and more efficient.

When it comes to measuring the progress and success of an SLG strategy, you should track metrics that are relevant to your Sales Qualified Leads (SQLs), and give you insights into their customer journey from prospect to customer. These include metrics like traffic to sign-up, sign-up to demo booked, and demo to closed + upsells.

Pro tip: achieving product-market fit doesn’t have to be complicated.

Hotjar gives you tools to better understand your customers' needs so you can build a product they'll truly love.

The ability to have conversations with each existing (or potential) customer gives you valuable insights into your product's strengths, weaknesses, and benefits—helping you further refine and enhance your product:

  • Use on-site surveys to understand what your customers are looking for in their own words. 

  • Base your product decisions on user feedback rather than assumptions.

  • Test your MVP with potential customers by collecting feedback through interviews, surveys, feedback widgets, or product experience (PX) insights tools like heatmaps and recordings.

  • Gather authentic customer insights and opinions about your product to understand which features you need to prioritize and the changes you need to introduce to achieve product-market fit.

2. Marketing-led growth

Benefits

  • A good way to rapidly scale: by bringing in leads and growing your brand through content.

  • Cost efficiency: MLG has lower costs than a sales-led strategy, and focuses on minimizing the initial cost to acquire leads.

  • More agile product management: this tactic allows you to rapidly test, assess, and iterate on both your product and your marketing messages, with constant pivots and shifts in line with market feedback for the product team.

  • Great option for short-term customer acquisition: there’s a focus on short-term driven payback periods, with a heavy focus on acquisition. 

Drawbacks

  • Higher initial costs: you may end up spending more than you anticipated on lead generation and content development.

  • No deeper level of engagement: MLG is strictly top-of-funnel, with little focus on long-term sales, deeper product engagement, and customer retention.

  • Metrics that don’t measure product growth: MLG can focus more on short-term metrics instead of long-term investment growth gains. Actions like filling out a form, downloading free content, or signing up for a company’s newsletter may indicate intent on a marketing level, but they don't indicate intent on a product level. 

How do I know if a marketing-led growth strategy is right for my SaaS company?

These days, marketing-led growth strategies are more popular in B2C companies than SaaS ones. Coupled with the fact that customers in both the B2B and B2C space are more skeptical of marketing and sales messagesthan ever before, this makes an obsessive focus on growth at all costs less of an ideal move. 

An MLG strategy might prove beneficial if you have:

  1. A product with a broad appeal to a large audience, and

  2. A world-class marketing team who wisely walks the line between investment and wasteful spend.

Metrics for marketing-led growth include tracking the customer journey of Marketing Qualified Leads (MQLs), which base buying intent on more arbitrary factors like email opens, lead magnet downloads, and webpage visits, as well as SEO and ad-relevant metrics like SERP impressions and clicks, Cost per Click (CPC), and Return On Ad Spend (ROAS).

Pro tip: placing your customer at the core of business growth is always the best practice.

If you’re in a very early stage and still looking for product-market fit, MLG might be a good growth strategy for your company. This approach can quickly return both customer insights and data to the product team—about what is and isn’t resonating—so further adjustments and developments can occur. 

Hotjar’s Heatmaps help you identify low satisfaction points. Maybe people aren't clicking on your most important call-to-action (CTA) button like you anticipated, or they’re just scrolling through your content on the website, without taking any desired action. 

Heatmaps show you this and give you the consumer insights you need to create a brilliant product for your users.

3. Product-led growth

Benefits

  • Holistic user journey: PLG strategies focus on everything from consideration, acquisition, activation, and long-term retention.

  • More cost-effective advertising: the product is the centerpiece of your growth strategy, which can lower customer acquisition costs, especially if you’ve achieved product-market fit.

  • Reinforces innovation and user-first features: by tying the value of the platform back to revenue.

  • Creates a flywheel: by aligning customer success and retention with the product and other departments.

  • Team effort: PLG promotes collaboration between all stakeholders and gives equal focus to sales, marketing, product, and customer success as drivers of growth and value.

Drawbacks

  • Unilateral focus: an obsession with growth via product utilization can lead you to ignore other important aspects of growth, such as branding.

  • Communication silos: a lack of proper integration between core teams could mean silos and decreased communication between departments.

  • Self-directed onboarding may not work: if the product is too complex or sophisticated and requires human assistance, the user is not experienced or proficient enough to use the product, or the market is not yet ready for the product.

  • Flawless delivery: since PLG positions the product as a marketing channel, this requires intimate understanding, communication, and delivery of a product’s value to customers.

How do I know if a product-led growth strategy is right for my SaaS company?

PLG has become a staple for SaaS companies, but that doesn’t mean it will necessarily be a fit for every type of product. 

Hotjar’s CEO, Mohannad Ali, believes that choosing the most effective SaaS growth strategy depends on your mission as a company and the product or service you provide. He believes there are four main criteria a company must meet to have success with PLG. Here’s how they all fit together:

  1. Market: your product needs to serve a large market (i.e. not be enterprise-only).

  2. Model: users must be able to sign up and pay online (self-service customer acquisition), have an easy way to try your product for free (freemium plan or free trial), and pricing must be accessible and transparent.

  3. Channel: you need to focus on low-cost marketing channels like word-of-mouth, content marketing, or cost-effective PPC advertising.

  4. Product: you need a product with a broad value proposition and very quick time-to-value.

PLG allows SaaS companies to get more out of every product iteration by making it easier for users to discover product features and their use cases. But it doesn’t mean your product is your only growth channel.

A product-led strategy should work in tandem with your sales and marketing efforts. This helps you get more engagement, activation, and retention from every new customer by helping them discover and get value out of the product more easily throughout their lifecycle.

Product-led businesses are also a great fit for agile development practices. Cross-functional alignment with product and engineering adds greater focus on the customer experience and allows teams to focus on the product—and how it directly impacts users. 

When it comes to product-led SaaS growth, traditional metrics may become secondary to alternative ones

  • Product-led growth metrics like Customer Acquisition Costs (CAC), Annual and Monthly Recurring Revenue (ARR and MRR), and Customer Lifetime Value (LTV) are a great way to measure how efficiently your product attracts, retains, and grows customers.

  • Customer and product experience metrics like Time to Value (TTV), churn rate, and quantitative and qualitative user feedback insights will help you measure how users achieve success with your product, how important it is to them, how they expand business, and whether they recommend your product to others.  

By having your teams aligned towards reaching goals across various metrics, you can ensure a steady flow of sign ups that ultimately lead to PQLs.

Pro tip: customers love self-educating, researching products, and, when possible, trying them out for free. 

Putting the power of knowledge acquisition in their hands is a great way to achieve customer-centricity, but building a product that enables self-service takes a unique approach—one that puts user-centric design front and center.

If you’re using Hotjar, you can start collecting user feedback straight away with the product research survey template. It will help you generate insights—like who your users are, what they think about your product, and what problems they’re having—that help you build a product that delivers value.

It’s important to note that none of these growth strategies—SLG, MLG, or PLG—are mutually exclusive. On the contrary, your SaaS company may find it more beneficial to adopt a hybrid growth strategy that incorporates elements from all three to adapt to changing market conditions.

By taking a hybrid approach, your SaaS business can enjoy the benefits of PLG—product virality, reduced CAC, and faster client activation—while still encouraging your sales team to nurture relationships with enterprise customers.

5 reasons SaaS products are so compatible with product growth strategies

There are many examples of successful SaaS product-led strategies—like Microsoft Teams, Slack, Zoom, and Hotjar (😉). So what is it about the SaaS industry that makes it so well-suited for a product-led approach?

Compared to other strategies, PLG improves margins, reduces time to value, boosts engagement and retention, and improves the user experience for companies that choose to embrace it. Let’s look at five other SaaS-specific reasons why product-led growth is an ideal method for this space. 

1. Push vs pull tactics

Both SLG and MLG are ‘push’ tactics, using reps or content to spread the word about brilliant product features, offer great deals, provide tailored demos, deliver contracts, and take control of the onboarding process. In PLG, that’s the role of the product. 

Product-led SaaS growth is a ‘pull’ tactic that uses the product as a magnet for customers. With three-quarters of B2B buyers preferring to fully self-serve, that puts PLG at an advantage.

#InVision is one of the highly successful companies that have achieved swift, scalable growth by leading with their product from day one
InVision is one of the highly successful companies that have achieved swift, scalable growth by leading with their product from day one

2. Upfront costs

Tactics that require extensive teams and constant human interaction with the end-user add considerable friction and costs to the customer acquisition process. They’re a great fit for mature companies with large reserves—not so much for startup SaaS businesses looking to optimize spending.

OpenView calls product-led growth “a capital efficient model through which companies can scale quickly.”PLG has minimal upfront costs, leaving SaaS businesses with even more money to invest in improving the product and user experience—which leads us to our next point.

3. Time-to-market

SaaS companies are at their best when they can reduce their sales cycle and time-to-market as much as possible, and a product-led strategy helps you do precisely that.

Since PLG allows prospective buyers to experience real value even before onboarding, it speeds up the average sales cycle and time-to-market of a SaaS product. In such a highly competitive industry, even a few days can make a difference.

#Companies like HubSpot have successfully transitioned from a sales-led to product-led approach
Companies like HubSpot have successfully transitioned from a sales-led to product-led approach

4. Credibility

This one really stings, especially if you’re one of the companies relying on sales reps and advertising, because both the B2B and B2C space are more skeptical of marketing and sales messages than ever before. 

No matter how compellingly your sales or marketing team tries to communicate the value of your product, many people are unlikely to listen. You know what they will respond to? 

Experience with your product. 

PLG allows you to do more than just dictate the value of a product to your audience—instead, you can show them the value firsthand. 

In a hybrid approach, any human interaction with the sales or customer success departments becomes less of an advocate and more of a guide, there to answer any questions or address any concerns a prospect has during a proof of concept.

5. Passionate product champions

With PLG, your company can move beyond the traditional sales funnel and towards the PLG flywheel

By adopting a product-led strategy, your priority shifts from selling to providing an excellent customer experience from beginning to end. This doesn’t just help you gain customers—you also create advocates willing to actively promote your business to others. Since your growth strategy puts the product and its value front-and-center, it’s significantly easier for them to do this.

#Sometimes all it takes for a great product referral is a good experience and a Twitter account
Sometimes all it takes for a great product referral is a good experience and a Twitter account

To see what other benefits PLG offers to teams and their users, head over to the PLG benefits chapter of this guide.

Your journey to SaaS product-led growth

By focusing on your users first and embracing a holistic process of revenue growth, product-led companies are leading the pack when it comes to big-time success.

If you’re considering taking the plunge to become a product-led company, your decision should be based on:

  • The complexity of your product

  • How easily you can deliver value

  • How your customers want to buy your product

  • The complexity and length of the buying process

  • The price point of your product

But remember: every growth strategy is valuable in its own way, and SLG, MLG, and PLG don’t have to exclude each other. When implemented the right way, a hybrid approach can accelerate your SaaS growth. 

No matter which SaaS method of growth you choose to embrace, Hotjar’s product experience insights are priceless and help shape your product for better business development.

Be ready to drive rapid growth with Hotjar

Use Hotjar’s product experience insights to learn what’s most important to your users and empower your product team to focus on key outcomes that drive growth.

FAQs about SaaS product-led growth