5 Growth Models and How to Price for Them
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.
Growth is an imperative for most companies. Forward momentum makes it easier to keep balance, as when riding a bicycle, and to change direction when needed. Growth needs a growth model.
In the past the main growth model was relationships. Trade was conducted based on trust and reputation, and organizations invested heavily in these two key aspects of business. The great trading and finance companies were built in this way, and this is still how most finance and professional services are delivered.
It is difficult to scale the relationship model though. And over time a more systematic sales profession has grown up. The sales-led growth model relies on disciplined pipeline management and sales methodologies, whether these be the classic solution selling or more modern versions like the challenger sale.
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More recently, relationship-led growth and sales-led growth have been complemented by new models. These new models are enabled by the Internet and the ability to take solutions to market rapidly at scale, and by the greater availability of data of all types. The most popular of these models is Product-Led Growth or PLG. More recently this has been complemented by Service-Led Growth and by Community-Led Growth.
Each of these growth models has its own growth flywheels, business processes, roles and skills and is supported by its characteristic software platforms. And each growth model is best suited to solutions targeting certain types of business problem.
In many cases, the best growth model is not a pure play. One leads with one growth model while supporting it with another. The best combination will depend on the problem being targeted and the company’s aspirations. The most common combinations are shown below:
Leading with one growth model and supporting it with another is a powerful combination. Kyle Poyar describes how this can work with the combination of product-led growth and community-led growth. Your guide to PLG and community.
Different growth models are associated with different pricing models. What works well for one model does not generally work for another model. As companies organize around one or two growth models they frequently need to evolve their pricing. Identifying pricing metrics that work across more than one growth model is part of the art of pricing model design. See When and how to change your pricing metric.
Growth models come in and out of fashion, but one should not choose a growth model on the basis of fashion.
Align the growth model with the type of problem you solve
Align the growth model with your overall business strategy and positioning
Consider the financing requirements for each growth model and your willingness to raise equity
Build the skills you need to deliver
Use a pricing design compatible with your growth model
Read other posts in the Service-Led Growth series
Product-Led or Service-Led Growth: Which is a Better Fit for Your Business?
Five Growth Models and How to Price for Them (this post)
