B2B is looking a lot more than B2C these days: From Figma to Slack, individuals and teams can sign up for tools that their entire organization will end up adopting. This concept is also known as product-led growth.
The definition of product-led growth is almost tautological: As a vendor, it basically means that you’re using your product as the driver of growth for your company, Amplitude chief product officer Justin Bauer told TechCrunch.
The Exchange explores startups, markets and money.
Read it on TechCrunch+ or get The Exchange newsletter every Saturday.
But under this self-explanatory concept, there’s a major change at play. The biggest change, Bauer said, “is that the customer relationship now starts with the product versus ending with it, which is how B2B traditionally worked.”
While the rise of PLG has upended the traditional top-down sales funnel, it hasn’t replaced sales. However, it does have profound implications for sales teams, but these don’t get discussed often enough.
Today, we’ll explore the impact of product-led growth on sales teams, with notes from Bauer and other practitioners in this field. They may disagree and compete on some aspects, but they all agree on one thing: Sales still have a role to play, especially in winning big enterprise deals.
From marketing-qualified leads to product-qualified leads
The rise of product-led growth is often framed as displacing sales-led growth, but the reality is a lot less binary. “I think almost every company has a combination of both,” Pendo CEO Todd Olson said.
Amplitude and Pendo both sell product analytics tools, which gives them front-row seats on the adoption of product-led growth and its hybridization with traditional sales models. As Olson noted: “Even Atlassian, which is famously product-led, has an enterprise sales team that absolutely works hand in hand with their product-led motion.”
Sales isn’t simply a remnant of the past: It is still very much a revenue driver, but its efforts can now be focused on high-value deals.
Citing the example of Amplitude customer Miro, a visual collaboration platform, Bauer highlighted how it has been able to convert product-led adoption into million-dollar accounts. “Those weren’t million-dollar self-serve deals, obviously; they have a sales team who close those deals.”
Self-serve is going further than ever, with teams sometimes signing up for subscriptions worth $20,000 a year without talking to a human. But the rise of product-led sales means that sales teams can now focus on the largest opportunities — those potentially worth millions.
In product-led sales, leads are surfaced differently than they used to: They are product-qualified leads, Olson explained.
“For years, the [focus was on] marketing qualified leads, where a prospect engaged with a marketing asset, whether it’s downloading a white paper, or going to a webinar, or going to a physical event with some indication of intent,” he said. “But now, what we’re seeing is a much better indication: How they’re using the product itself. So [companies are] coming up with scoring models and looking at other product data as an early indicator of intent, which then causes humans to reach out.”
Surfacing leads this way is less formulaic than in traditional marketing, but it is more and more common for companies with a freemium model. HashiCorp is one of these, with a tweak: As a software company that offers both open source and commercial versions of many of its tools, it doesn’t have perfect data on its free users.
In order to know which companies to go talk to, HashiCorp co-founder and CTO Armon Dadgar said the company keeps an eye on its users’ digital footprint. “It’s a bit of an imperfect art, but you look at a few different signals and it builds a picture.” If it seems that 10 teams at a single company are using one of HashiCorp’s products, such as Terraform, it’s probably time to approach someone there and discuss a commercial contract.
A fraught transition for sales teams
This makes a lot of sense, but it is also a lot less straightforward than the top-down funnel approach that sales teams are used to. And as often happens in transition, it is hard for people not to step on each other’s toes.
Things are particularly tricky for companies that are transitioning into product-led sales but already have sales teams. A common mistake, Bauer said, is “not really spending the time to think about what is the change management required.”
If you just go ahead and add a credit card payment option to your site, “you’ll end up in situations where your sales team will think the product is actually competing against them.” Because of this, “it’s really important that you’re bringing the sales team along the journey.”
Elena Verna, a product-led growth expert and the interim head of growth at Amplitude, also thinks that internal channel conflict “is a terrible place to be.” She warned against another risk: Sales teams not seeing that product is adding any value to their sales process.
As an adviser and investor at several SaaS companies, Verna has a piece of advice to mitigate channel conflict: Rethink sales compensation. In a recent LinkedIn post, she argued that “expand” — driving more revenue from an existing client — should warrant a higher reward than “land” — acquiring a new client. The latter is the usual focus of top-down sales but not of product-led sales.
“It speaks a bit to the future of sales,” Bauer said. “With product-led sales, we’re going to see a change in the role of the salesperson. You’re definitely going to see salespeople shift from land-focused account execs to more expansion-focused account managers. And I think they’re going to have much more of a focus on the customer experience; their job will be identifying areas for upsells.”
More often than not, a corollary to product-led sales is that sales teams become focused on enterprise leads — because SMBs can often sort themselves out with self-serve, while enterprise buyers need to be sold extra features. But the shift to become enterprise-driven “is not just about hiring enterprise sales,” Bauer said. “The biggest shift in going enterprise is in your product.”
Amplitude went through this transition itself, as it wasn’t initially targeting enterprise clients like it does today. Recalling how that shift took place, Bauer said the company made a priority of ensuring that the entire company understood why it wanted to sell its services to larger clients and what it would take.
“We did a lot of work to make sure that we were enterprise-ready,” Bauer said. “We worked very closely with a number of our early enterprise customers [ … ] to learn more about the challenges they had. By doing that, we were able to change [our] culture and understanding around why this is important. We then did hire enterprise [sales] reps and rethought through the enterprise sales team. But at the same time, we also changed the product, and did those all in concert, which I think is what enabled us to be successful in making that transition.”
If hiring enterprise sales representatives isn’t the be-all and end-all, it’s also because product-led sales require a different employee profile than traditional sales.
New needs, new skills
In product-led sales, sales and product need to work collaboratively. In particular, salespeople need to have a much deeper knowledge of the product than their peers at sales-led companies. As a consequence, the profile of salespeople is changing.
Bauer, for instance, believes that product-led sales “is going to drive a more technical type of salesperson. Potentially even a merging of with traditional solution engineers. [ … ] At the end of the day, their job is to help that customer grow, and ultimately sell through that.”
In the SMB segment, this could also mean that sales roles overlap with customer success roles. In this segment, “people don’t necessarily want to talk; they don’t want to be sold to.” What they do want, according to Bauer, “is to understand how they can get more out of the product. If they can get more out of it, then of course, they want to spend money on that because they’re getting an ROI.”
In both scenarios, sales development representatives (SDRs) need to be product-trained, Verna concurred. “An SDR that is just setting meetings or asking about budget to qualify leads is useless in this motion.” To have a user’s confidence, it’s not just account executives that need to be knowledgeable: SDRs also need to be able to answer product-related questions upfront.
The need for training is also being answered by specific courses; for instance, Verna is working on a course of her own for Reforge on product-led growth and product-led sales. While more narrowly focused on tech companies, it will compete against offerings from Product School and from Mind the Product, the product management community that Pendo acquired a few months ago and it partnered with to offer a product-led certification course.
It is not just Amplitude, Pendo and training: Product-led growth creates a lot of opportunities for others in their wake. As we looked into a few weeks ago, startups have emerged to help companies implement usage-based billing or create new usage-centric dashboards.
Along the same lines, another byproduct of product-led sales is the emergence of PLG CRMs, a category that we might explore further soon — stay tuned!