Product-Led Growth or Content Marketing? Most SaaS companies need both.
In SaaS circles, product-led growth is a hot topic. It’s a new-ish business strategy for SaaS companies that is gaining traction. What is product-led growth? According to The Product-Led Growth Collective:
Product-led growth (PLG) is a business methodology in which user acquisition, expansion, conversion, and retention are all driven primarily by the product itself. It creates company-wide alignment across teams—from engineering to sales and marketing—around the product as the largest source of sustainable, scalable business growth.
Note that this definition mentions “sales and marketing.”
But here’s another quote from The Product-Lead Growth Collective:
“Sales-led and marketing-led had their time. The future is product-led growth.”
And here’s another:
“People don’t want to interact with salespeople or marketing campaigns anymore— not at the expense of actually getting to experience the product they’re buying.”
Wow. Tell this to all the SaaS companies that are struggling to hit their monthly targets for free trials.
Don’t get us wrong. We are very excited about the Product-Led Growth movement. At its core, they want to put user experience with the product and the brand at the center. We agree with that wholeheartedly. Customer and user experience are incredibly important to every software company’s success.
The question is, however, does focusing on user experience and customer satisfaction mean that there is less of a need for sales and marketing?
Slack is usually mentioned as an example of a company that has a product-led growth strategy. Yet, Slack spent $219M on sales and marketing in Q3 this year. That amounts to over half of Q3’s $234M in revenue. So, clearly there’s room for embracing product-led growth as a strategy while continuing to utilize sales and marketing.
OpenView Partners publishes an annual SaaS Product Benchmarks guide. For their 2020 guide, they surveyed 153 SaaS companies. A key metric for SaaS companies is Web-to-Free Account Conversion rate. For low growth and high growth SaaS companies, this rate varied from 2% to 11%. Low growth companies averaged close to 4.5%. High growth companies averaged close to 7%.
So, the very best performers had 11% web visitors to free account conversion rates. This means 89% of the visitors didn’t convert.
This is where content marketing has always played its role. By offering those 89% of website visitors an interesting content piece, you have a way of capturing the contact information from a portion of that 89%. You can now market to them. Offer them additional content. Or a one-on-one demo.
The point is that by investing in content marketing, a SaaS company can convert and nurture the majority of website visitors who aren’t ready to trial the software.
Some people love to test drive software. Others prefer to read a ton of content, reviews, comparisons, discussion groups, or YouTube videos. Once they have whittled down the list of contenders, they’ll spend the time required to trial the software.
Another metric from the SaaS Product Benchmark is the conversion rate from trial to customer. In the 2020 survey, this rate ranged from around 6% to almost 23%, with the average under 15%. So what are the companies with a 23% conversion rate doing that the companies with a 6% rate are not doing? Well, it could be the product. Or it could be the experience surrounding the product.
We believe that content marketing should play a vital role in supporting the user’s trial of the SaaS product. Offering helpful tips, how-to videos, and other content that enhances the user’s overall experience with the product and the company will lead to higher conversion rates.
And let’s not forget the critical role the sales team plays. For some products – especially higher priced SaaS products – sales will be involved. Sales can answer questions. They can give demos. They can negotiate pricing in large contracts. They can help the prospect buy.
We believe the following factors influence how much sales (and content marketing) will be needed at a SaaS company. As each of the following factors rise, so will the need for sales and content marketing:
- The complexity of the product.
- The price of the product.
- The length of the sales cycle
- The number of different departments that will use the software
- The number of users
We recommend that SaaS companies invest in product led growth AND content marketing. The product led growth strategy should lead to a better user experience during the evaluation period AND as a customer/user.
Content marketing will help drive more trials and more sales. It’s not an either or situation. You’ll come out ahead leveraging both strategies.
Want to discuss your SaaS funnel and explore ways to improve it? Let’s talk.