James Cash Penney, JCPenney’s founder, once said, “No company can afford not to move forward. It may be at the top of the heap today but at the bottom of the heap tomorrow if it doesn’t.”
To propel their expansion and drive revenue, companies employ various growth motions. From sales-led growth to product-led growth, founder-led growth, and marketing-led growth, each strategy offers unique advantages and challenges. Let’s delve into the particularities of these strategies alongside their benefits, challenges, and best use cases.
Sales-led growth is a strategy emphasizing sales processes and people to increase revenue. In a sales-driven growth strategy, the sales staff takes center stage, and their efforts significantly influence the company’s overall success. Although the marketing department still has some say in how the brand is portrayed, the sales division ultimately determines the company’s success or failure.
SFE Partners indicates that “With a sales-led go-to-market strategy, salespeople can target specific accounts or segments of leads to find change-makers in an organization.” In contrast to product or marketing-led approaches, salespeople may give high-value information to best fit prospective customers much sooner using this method.
Advantages of Sales-led Growth
Usually, businesses prioritize acquisition, transaction closure, and revenue development when sales teams are in charge. This approach empowers the sales force to steer company results and build lasting customer connections. According to Substack, “The sales team can help customers understand the product better and provide personalized solutions.” Companies like Oracle and Microsoft have taken this strategy to heart by maximizing their sales force’s impact.
Challenges of Implementing Sales-led Growth
Most enterprises may have internal divisions if sales are the driving force behind expansion. Potentially neglected by this approach are customer service and customer success, both essential to expanding a firm. When departments work in silos, it may dilute the quality of leads and the sales funnel’s effectiveness and reduce the likelihood of deals being closed. There has to be harmony between the sales, marketing, and support departments.
Best Use Cases for Sales-led Growth
Sales-led growth is most efficient when the sales force is heavily involved in generating revenue and client acquisition. It works effectively for companies that depend on consultative selling strategies, complicated sales cycles, or a high volume of one-on-one customer encounters. Sales-driven expansion is generally successful in sectors where human relationships and networking are crucial, such as corporate software and high-value B2B products.
Gainsight found that a majority 58% of companies already embrace this innovative growth motion. It’s not just limited to a specific size or product type, as organizations of all scales have jumped on the PLG bandwagon, with 40% having an annual contract value (ACV) exceeding $25K. Besides, 91% of these companies plan to further invest in PLG, with an ambitious 47% aiming to double down on their existing investment.
Product-led growth is all about making a great product people love using and spreading the word about using viral loops to expand your business. The focus is on the product rather than promotion or advertising, which may save costs. Products like Slack, Netflix, and Zoom have found success because of the way their users interact with the platform.
Advantages of Product-led Growth
It has been demonstrated that PLG companies grow 25% quicker than their competitors and are more likely to double their year-over-year revenue growth, as per the findings of Openview Partners.
Companies can acquire users organically through viral loops, such as inviting users or being part of online communities. Once the viral coefficient takes effect, the product’s scalability and automation reduce reliance on traditional marketing and sales distribution channels. In addition, PLG offers lower customer acquisition costs (CAC) by leveraging the product’s inherent virality.
Challenges of Implementing Product-led Growth
Although PLG has great potential, it might still require some early marketing to find the right audience and boost visibility. Putting all of one’s faith in the product alone may be questionable to spur expansion since additional marketing and sales assistance may be required. In addition, it might be difficult to strike a balance between promoting product self-service and offering comprehensive assistance to business clients.
Best Use Cases of Product-Led Growth
SaaS businesses of all sizes, as well as collaborative or communicative software, may benefit greatly from PLG. It does well in markets where a superior customer experience significantly impacts new customer acquisition and business expansion. PLG works best for products that have the potential to become viral, in which consumers may spread the word about the product in an organic way and generate a network effect. Often, a PLG approach is useful for start-ups and enterprises who want to shorten sales cycles, expedite user onboarding, and emphasize product experience.
Peculiar in its reliance on the personal brand and influence of the company’s founder or CEO, “founder-led growth” is a unique growth strategy. When a firm or product becomes successful due to the founder’s name recognition and reputation, the company or product is said to have experienced “founder-led growth.” Steve Jobs and Elon Musk are just two business leaders whose charm, vision, and hands-on approach helped their firms explode in success.
Purdue’s Krannert School of Management’s research highlights that S&P 500 companies where the founder remains actively involved as notable public figures generate 31% more patents than their counterparts. Founder-led companies demonstrate a fearless attitude towards risk-taking by making bold investments to revitalize and adapt their business models, showcasing their commitment to shaping the future through inventive strategies.
Advantages of Founder-led Growth
Founder-led growth capitalizes on the personal branding and reputation of the founder, which can attract attention, investments, and customer loyalty. The founder’s influence creates a unique selling proposition and can generate trust and excitement around the company and its products. The founder’s vision and leadership can inspire and align employees with the company’s goals.
Challenges of Founder-led Growth
As the name outrightly suggests, successful founder-led expansion is highly dependent on the founder’s persona, connections, and reputation. Thus, it may be quite difficult to duplicate this approach if the founder’s influence is diminished. Unforeseen risks may arise if the founder departs or suffers a reputational setback since the company’s success may become reliant on them. Besides, expanding a company beyond the founder’s capabilities is difficult and calls for good delegation and a solid leadership team.
Best Use Cases of Founder-led Growth
When a company’s founder has a substantial personal brand and influence in their field or niche, they are in a prime position to drive growth. Start-ups and technology-based businesses where customers share the founder’s vision and drive are common examples. This may be effective for companies dependent on the founder’s experience and reputation, such as consulting firms, coaching enterprises, and those that rely on the founder as a thought leader.
Marketing-led growth is driven by marketing efforts, where customers are acquired through various marketing channels and strategies. Examples include content marketing, videos, blogs, eBooks, and other forms of engaging content. In other words, the overarching focus is on attracting customers through valuable content and building a differentiated brand narrative.
Accenture indicates that the key to achieving marketing-led growth lies in the seamless collaboration and integration of diverse customer data. The foundation of this process is built upon four layers encompassing client experience, work orchestration, ecosystem connectivity, and data & applied intelligence. Organizations can optimize each layer to enhance customer experiences, streamline internal workflows, foster connections with external partners, and leverage data-driven intelligence to fuel their marketing-led growth initiatives.
Advantages of Marketing-led Growth
With marketing as the core engine of expansion, businesses can update their brand stories, set themselves apart from competitors, and provide customers with valuable content. Without a doubt, it arises as a great tool for being noticed by customers, increasing brand awareness, and bolstering your reputation. Upgrades, social shares, recommendations, and customer reviews may all improve with this tactic.
Challenge of Marketing-led Growth
There are two main problems with marketing-driven growth. First, for efficient lead nurturing and customer understanding, seamless lead sharing between the marketing and sales departments must be seamless. Second, there is the risk of putting too much emphasis on client acquisition and not enough on customer retention.
Best Use Cases of Marketing-led Growth
Marketing-led growth is well-suited for service brands aiming to establish themselves as market leaders through organic growth. It is particularly effective in businesses with sustainable models that prioritize customer retention. Marketing-led growth is beneficial for sectors where customers seek quick self-help solutions and where content-driven engagement can effectively showcase the product or service’s value.