Sales and Marketing Are No Longer The Keys To Success – The Future Is Product Led

Marketing Research

If you’re a SAAS company still using sales and marketing as the primary channel for growth, you might want to rethink your strategy. In this time and age it’s all about users, their unique needs, and how the product can effectively cater to them by creating real value.

Tactics such as frequent promotions, leaping graphs, social proofs, sales, and demo meetings are just not enough on their own anymore. Why? Modern consumers are tired of brands promising more than they can deliver, so they become indifferent to ads and sale propositions. In fact, according to the American Association of Advertising Agencies’s research, 96% of consumers (Americans) don’t trust ads.

What Do Consumers Want?

So what do consumers want? Research shows that nearly 75% of B2B buyers say they prefer to purchase products directly from the website instead of the traditional way of buying through a sales representative. Simply put, people today want to research products and determine on their own whether it creates real solutions for them without any additional interaction involved in the process.

Let’s make it even simpler – consumers want to try before they buy. For SAAS and other software companies, this could be a good thing as it allows a dramatic cut in sales resources, hence decreasing total acquisition costs.

So it goes without saying that marketing and product teams should focus on creating an easy and pleasant experience for users, giving them the option to do their research, try the product, and eventually upgrade to a paid subscription (or something to that effect).

This way, your company can almost effortlessly retain satisfied users who would happily recommend your product to colleagues and friends, expanding the user base through word-of-mouth. This has become the new ideal funnel rather than continuously investing energy and budget for every qualified lead and in deal closures, which is no longer a sustainable business model. In other words – let the product lead the acquisition efforts.

What Is The Best Way To Do It?

There are two main product-led growth practices, freemium and free trial:

Freemium

Basic key features of the product are given for free for an unlimited time, as premium features require a paid subscription. This model can also come in a form of limited capacity if the product is offering storage solutions with a paid subscription for a bigger storage volume as Dropbox did.

It allows the users to get a taste of the general solution the product is offering and entices them to upgrade to premium features giving them even more value. One good example of a SAAS company that nailed this method is Zoom, which gives free users the first 40 minutes of every zoom call.

Free Trial

A free trial of the product with all its features is offered for a limited period. When the given period ends, a paid subscription is required to continue using the software. It allows the users to explore all the features and make an informed decision about the value it’s providing.

A good case study for a free trial company is Netflix which used to give all their streaming content for free for the first 30 days.

This has become the new ideal funnel rather than continuously investing energy and budget for every qualified lead and in deal closures, which is no longer a sustainable business model. In other words - let the product lead the acquisition efforts.

Pros and Cons of Freemium vs Free Trial

Both methods have their cons and pros, and different products and business models may benefit differently from each method.

Freemium Pros:

Brand Awareness – more users are likely to try the product since the onboarding is quick and easy and doesn’t involve interactions with SDR’s. After having a positive experience with the software, they will draw in new members who might become subscribers. In fact, HBR found that free users are typically worth up to 15%-25% as much as a premium subscriber, thanks to the new users they draw.
Word-of-mouth – it is a powerful marketing method requiring minimal costs and a product-led strategy is a great way to utilize it.
Minimal Costs – we mentioned the budget savings on sales resources, but what about the costs you can save on customer service? Keep in mind that non-paying users are not expecting outstanding customer service.
Data – whenever users join they bring valuable data to marketing and product teams, even if they never become paying customers.

Freemium Cons:

The main challenge with the Freemium method is to find that sweet spot between a free version that is attractive enough to constantly draw new audiences and a premium version that gives critical value beyond the one freemium does.

If conversion rates to premium are too low, then it’s probably because the free version is giving away too valuable and too critical features for free hence doesn’t motivate to upgrade; if the acquisition rates are low, then it’s probably because the freemium version isn’t giving enough value.

Free Trial Pros:

Valuable Feedback and Data – once the users try all the product’s features, they can suggest valuable feedback regarding all the existing features. The data they provide from using all the features is also valuable and can indicate further needed upgrades and developments.
Motivation – when the trial period ends, users that found value in the software will have a strong motivation to subscribe to gain back access.
- Free trials can be divided into two approaches: first is an opt-in without the requirement of payment info to start the trial, and the second is an opt-out approach which requires payment info to start. This means that in case of cancelation after the trial period has ended, there is a need in manual unsubscribing.

Free Trial Cons:

Just like in the freemium model, with a free trial you can save on costly sale resources, but unlike the freemium model here you shouldn’t save on customer service since the free trial period is the display of the product you are eventually selling.

In the free trial method, the user gets a lot of features to try; hence it’s important to keep track of usage data so if there are underperforming features that users may struggle with and due to that not continue to a paid subscription, you can quickly locate and fix the leak.

Final Thoughts

To sum things up, here is a quote from Peter Caputa, CEO of Databox, “The sales-led way of buying software: Read about the software, create a list of features needed, let sales qualify you, do a demo, and twist their arm so they give you a trial.

The product-led way of buying software: Just start using the product. Ask for help if you get stuck. Based on your usage and profile, receive personalized recommendations. Which sounds better to you as a buyer?”

Product-led growth may sound like a buzzword now, but it’s here to stay, and more and more SAAS companies are adopting this model. Are you one of them?