Will the Same Pricing Model Work for Sales-Led Growth and Product-Led Growth?
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.
Product-Led Growth and Sales-Led Growth are Complementary
The two most popular growth models are Sales-Led Growth (SLG), and Product-Led Growth (PLG). These are not mutually exclusive. Most Product-Led Growth companies layer in Sales-Led Growth as they scale for larger companies. Think of all the pricing pages you have seen where on the far right is a package for ‘enterprise’ or ‘large’ customers. Sales is engaged when a prospect clicks on ‘Contact Us’ or ‘Learn More.’ This is where Product-Led Growth is transitioning to Sales-Led Growth.
Sales-Led Growth companies, which dominate the software business, are looking at how to build Product-Led Growth into their growth plans. There are two main reasons for this. One is the valuations of PLG companies, which, even with the recent correction, tend to be higher than SLG companies on the same scale.
The other motivations to layer PLG onto a sale-led growth model is that PLG
Brings one closer to the customer and how value is created for the user
Scales without having to scale the salesforce
Can be more capital efficient
This opens a critical question. Can the same pricing model be used for Product-Led Growth and Sales-Led Growth?
Can the same pricing model be used for Product-Led Growth and Sales-Led Growth?
I asked this question on the Professional Pricing Society’s LinkedIn Group to get some community insights.
I then reached out to some of the people who had provided each answer (my answer is checked) to get further insights.
Yes - Product-Led Growth and Sales-Led Can Use the Same Pricing Model
“Not only can the same pricing model be used, it must be used. Otherwise one confuses the market and one's own GTM team.” Product Manager at PLG company
“Pricing needs to be kept as simple as possible. Having more than one pricing model for the same solution is an anti-pattern.” Sales Leader at public SaaS company
“The value does not depend on how you sell it. The price should not either. And there are more growth models than just Product-Led Growth and Sales-Led Growth.” Pricing Leader at SaaS company
No - Product-Led Growth and Sales-Led Can Use the Same Pricing Model
“The PLG offer is different from what we sell through direct sales and needs its own pricing.” Chief Marketing Officer at Public PLG company
“For Product-Led Growth we need to include a free offer and be able to generate Product Qualified Leads (PQLs). This requires a different thought process than a product that is sold through the sales force. This thinking goes all the way down into the pricing model.” Consultant on Product Management and Product Led Growth
“Pricing is connected to value communication. How you communicate value in PLG is basically different from a sales driven approach. Grafting a pricing model design for a sales team onto product-led growth is a recipe for failure.” CFO at public PLG company
Yes, but the Pricing Model for Sales-Led Growth Needs Additional Components
“You need to use the same pricing model but when you add an outbound sales or even inbound sales you need to factor in the sales incentives and a discounting plan. Pricing and profitability needs to factor in the sales incentives. Sales people need some form of discounting to be effective.” VP Sales at SaaS company that supports both Product Led Growth and Sales Led Growth
“You begin with the value model. I have not seen any company have different value models for product-led growth and sales-led growth. I would be skeptical if I saw this. There may be some differences around the edges but you can’t let edge cases drive pricing. That won’t scale.” Independent Consultant on Value Based Pricing
“If it is the same product you need the same pricing model, but in many cases what sales is selling is a larger solution that includes services, integrations and even additional or custom functionality. You can’t design a pricing model for PLG that covers all these extensions and should not pretend to.” Vice President Product at Large Technology Vendor with Multiple Product Lines
Ibbaka’s Advice on Pricing for Product-Led Growth and Sales-Led Growth
Begin with value. Do the product-led growth packages and sales-led growth packages provide value in the same way
Make sure that a free offer and Product Qualified Leads are supported. These are important for sales-led growth, and not just product led growth
Segment the market by looking for segments that buy in the same way and get value in the same way
Provide a whole solution for enterprise clients that ensures they will have the support they need around training, integrations, security, migration etc.; large enterprises have legitimate needs that justify higher prices and additional pricing metrics
Give sales the tools it needs, including sales compensation and discounting plans
In most cases, this will leave you in the ‘Yes, but’ group, but not always.
If the product has the same requirements and provides value in the same way regardless of scale, then have just one pricing model.
If value changes with scale, the enterprise solution provides value in different ways, then have a different pricing model for the enterprise (enterprise almost always requires sales led growth).
If the basic value propositions are the same (the same value drivers are in play), then take a ‘Yes. but’ approach and have additional pricing metrics for the aspects of your solution that are unique to the enterprise offers. In most cases, you will also need to design a sales incentive plan (these plans should be designed together with the pricing) and a discount plan (this is part of the larger pricing model).
Companies that support the SaaS companies and the subscription economy (including usage based pricing) are moving to cover both product-led growth and sales-led growth. An example is Maxio (the merger of SaaSOptics and Chargify). See Is PLG Right for Your SaaS and Sales-led Vs. Product-led: Why You Don’t Have to Choose. Maxio will have some important announcements on this at SaaStr 2022.
Ibbaka Valio is able to support multiple pricing models and connect them to value models. This makes it a powerful platform for companies that need to cover both Product-Led Growth and Sales-Led Growth.
