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How Growth Models are used together (Sales-Led Growth, Product-Led Growth, Service-Led Growth, Relationship-Led Growth, Community-Led Growth)

Steven Forth

Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.

B2B companies use many different growth strategies to expand revenues and market presence.

Different growth models imply different approaches to packaging and pricing, require different roles and skill sets, and provide value in different ways. So this is something the team studies closely.

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One of the questions we asked in our recent survey on Growth Strategies for 2022 (the survey is now closed and we are preparing the report) was what growth strategy will lead in 2022. Some interesting patterns emerged.

Which growth model dominates? Sales-Led Growth

Here are short definitions of each growth strategy (you can read more on Five growth models and how to price for them).

  • Sales-Led Growth, where the sales and marketing teams are responsible for growth - Sales Qualified Leads (SQLs) feed growth

  • Product-Led Growth, where the product attracts people and drives growth - Product Qualified Leads (PQLs) feed growth

  • Service-Led Growth, where solutions to complex problems drive both subscription and professional services growth - Insights from the subscription platform drive growth

  • Relationship-Led Growth, based on reputation and trust with key buyers

  • Community-Led Growth, where a growing community drives sales and adoption

Results for question on which growth strategy will you lead with from Ibbaka’s Growth Strategies for 2022 survey

The first thing to note is the dominance of Sales-Led Growth (SLG) followed by Product-Led Growth (PLG). Given all of the attention that Product-Led Growth has been getting, especially from venture capital investors, one might have expected PLG to lead the list, but the reality is that Sales-Led Growth remains the dominant model. But for most companies today, Sales-Led Growth is the default. It is the most easy to generalize, is well understood and supported, there are many (too many) different methodologies and there is lots of software supporting sales processes.

Product-Led Growth is attractive as it is based on actual use of the platform which assumes that value comes from this use. As product use drives growth the organization can scale quickly, especially with liberal application of investment. However, it does not fit all the different challenges that B2B solutions are asked to solve.

Service-Led Growth comes into its own when solving complex problems which require data and analytics. The service is delivered through a software platform, that supports a subscription and delivers insights that lead to new services.

Relationship-Led Growth is one of the oldest growth models. it is how the Medici family or the Rothschild’s grew their empires and how McKinsey works today. When a transaction relies on trust and trust comes from reputation the relationship growth model prevails.

Community-Led Growth taps into the value that can be created through people supporting each other. Communities often start as gift economies, like the open source movement, with monetization and growth emerging from the community dynamics.

Growth models are usually combined

In the real world there are relatively few pure play companies. What models are used together?

Companies leading with Sales-Led Growth complement it with all of the other growth models. The most common supporting role is played by Product-Led Growth followed closely by Service-Led Growth. Relationships also play an important role in Sales-Led Growth. We all know the meme of the great sales person with a large rolodex (using rolodex as a metaphor for a personal network of contacts).

Another interesting thing about Sales-Led Growth is that it is not only the most popular lead actor, it is also the most important supporting actor.

Product-Led Growth shows a very different pattern than Sales-Led Growth. While Sales-Led Growth is used with many other growth models, Product-Led Growth is used almost exclusively with Sales-Led Growth. This is a sign of the immaturity of the Product-Led Growth Model. Product-Led Growth thought leaders like Kyle Poyar at OpenView have noticed this. In a recent article “Your guide to PLG & community” he showed how communities can help to support and accelerate Product-Led Growth companies.

Pure play or hybrid growth model

An open question in growth model research is whether a pure play or hybrid model performs better and how growth models change over time. There are some who believe pure play companies will benefit from simplicity and focus and outperform their competitors, especially for Product-Led Growth companies.. Others (and I lean this way) believe that hybrid models will prove to be more adaptive and in a turbulent environment will outperform their more specialized competitors.

There is also an emerging consensus that as companies scale they will need to move away from pure play models of any type. Product-Led Growth companies generally add Sales-Led Growth as they scale and begin to sell to larger companies. Service-Led Growth companies often find that some part of their platform is better sold through Product-Led Growth and that usage provides data that can provide deeper insights. Outside of open source companies and multi-sided market companies few B2B companies are leveraging Community-Led Growth. We expect this to change over the next decade as lessons from social media, open source and the software development community are better shared and understood. No modern B2B software company would function without open source code. There are opportunities to create communities in many niches of the B2B economy.

Read other posts in the Service-Led Growth series