The GTM Perspective: Navigating Product-Led Growth vs. Sales-Led Growth Models

Why is it important to discuss PLG vs. SLG ?

Product- and sales-led growth models create vastly different requirements across a SaaS company, specifically the GTM team. Each area—product, sales and marketing—plays a distinct role that must align with the chosen model. Additionally, pricing and packaging structures need to be tailored accordingly.

PLG model companies aspire to go ‘upmarket,’ or target larger and more sophisticated customers, while SLG companies target smaller customers and introduce a self-serve motion. As a result, transitioning from one model to another, or even considering the introduction of a new model, requires careful deliberation and thorough groundwork. 

In this blog, we will navigate the nuanced distinctions between PLG and SLG models, shedding light on their varied impact across an organization, influencing pricing and packaging decisions, monetization and innovation plans, and crucial considerations such as discounts, upsells, cross-sells, as well as funnel and pipeline management for GTM teams.

The Key Differences Between PLG and SLG Models

Below table highlights some of the key differences between PLG and SLG models:

	Product-Led	Sales-Led
GTM - Customer Acquisition and Expansion	Acquisition and Expansion is mostly self-serve Customers sign up for the product, choose a plan/package of their choice and pay directly Customers upgrade/downgrade/add more products	Acquisition and Expansion is sales and marketing-driven Sales lead conversations with prospects to position offerings, negotiate terms and close deals Upsells/cross-sells are led by Sales/Customer Success
Systems and Operations	Usage information, reporting, billing and payments are typically integrated into product Product is integrated with other backend systems such as ERP, Success/Support platforms and BI	Billing/invoicing sit outside product and is handled offline by Accounting CRM is the heart of sales-led motions and integrates with Success/Support, CPQ, etc.
Product and Innovation	Product Management is responsible for market assessment, customer feedback etc. to shape the product roadmap. Rest of organization takes lead from product.	Marketing and Sales play a key role in shaping product roadmap as they become the “voice of customer” and have close knowledge of competition, key market trends, etc.
Marketing	Marketing’s primary role is to drive demand gen. Since customers are mostly self-serve, demand gen is key to bring prospects. Marketing is responsible for generating organic and paid traffic.	Marketing also plays an important role in demand gen but relies more on content marketing, events and ABM to generate pipeline and co-manage with sales
Pricing and Packaging	Pricing and packaging typically live in the product along with the checkout experience Self-serve experience influences the pricing and packaging models used	Sales plays a critical role in shaping monetization CRM and CPQ are typically the key systems where pricing and packaging lives Sales-led motion also influences the models used

Pricing and Packaging for PLG and SLG Companies

Many aspects of pricing and packaging decisions are influenced by the growth model in place - product-led or sales-led. We discuss four of these aspects below.

Pricing Models

SaaS pricing models vary across the spectrum, and PLG and SLG strategies impose certain limitations on the available options. Let’s take a look at three commonly used models: usage/consumption-based models, hybrid models and entitlement-based models to determine which pricing models are most effective for PLG and SLG strategies.

Product-Led	Sales-Led
Most pricing models can work fairly well in a Product-led growth model which is one of the advantages of a product-led model Consumption or Hybrid models can work especially well as customer spend keeps scaling automatically with usage which is one of the core benefits of consumption models	Entitlement and Hybrid models can work well in Sales-led motions but pure consumption models are difficult to support in SLG for a few reasons Sales compensation becomes a major issue Pipeline management and forecast is a challenge Expanding usage in consumption models is not typically ‘automatically’ billed

Packaging Models

Packaging models can be categorized on a spectrum from modular to tiered structures. In modular structures, there is typically a base package that all customers must subscribe to and then a set of optional add-ons. On the other hand, tiered structures follow the familiar “Good-better-best” approach, where price and functionality increase from a good package to the best package. Additionally, there are hybrid models that combine elements of both, featuring multiple base packages with optional add-ons.

Growth models have a bearing on what packaging structure is most feasible. A general rule of thumb for self-service is that simpler packaging structures with fewer permutations are easier to implement.

Product-Led

Sales-Led

Product-led models can support both packaging structures but modular structures are complex to support. In product-led models, the responsibility of driving upsells and cross-sells primarily falls on the customer marketing function and the product's self-serve experience. Having too many add-on options with modular structures can make self-serve experience challenging. Similarly, any customer marketing campaigns also can get complex with multiple add-ons.

Sales-led models can support both packaging structures effectively since the final packaging and pricing options are presented by sales who do so after a discovery process.

Price Transparency and customization for PLG and SLG Companies

When it comes to pricing a product or service, whether in the tech or non-tech industry, there are generally two approaches:

1. Prices are published for everyone to see, allowing customers to make decisions based on their willingness to pay (WTP) for a product or service.

2. Prices are not published and are only shared with customers when they inquire about a product or service, allowing pricing to be adjusted based on customer needs.

See how the chosen pricing approach is influenced by the growth model in place below.

Product-Led

Sales-Led

PLG by its nature works well only with fixed pricing - any special pricing has to be introduced as promotions. This also implies you have to do a lot of groundwork to define the optimal pricing and packaging - Revenue maximizing/Share maximizing whatever is the criteria There can be testing and optimization that can be done but in the end, there is one price point Competition will have a clear view of your pricing and packaging

SLG affords you the luxury of negotiated pricing on every deal. But requires sophisticated deals desk, discount guidelines, approval process and governance etc. You can of course choose to have published prices in SLG as well but negotiation is the name of the game. Typical SLG models lean to set the list prices high and give sales a lot of leverage to discover the WTP of customer and negotiate/discount accordingly You rely a lot on sales to discover WTP and negotiate well to capture the value

Systems and Instrumentation

Price and order management are distributed across various systems, including product, ERP, CPQ and CRM systems. These systems are interconnected with various linkages to other systems. The chosen growth model determines the relative importance of each system.

Product-Led	Sales-Led
Pricing, packaging co-exists with product and hence any price changes have to be scoped into product roadmap just like other innovations Pricing and Packaging changes have to be scoped/signed off by Product and Marketing leadership. Creates a very tight integration between product usage metrics , pricing/packaging and the self-serve experience	Pricing, packaging and contracting typically sits in the CRM and CPQ Any pricing and packaging change has to be scoped with the IT/Sales Ops so the CRM/CPQ can be updated Ideally, discount guidelines and governance should be integrated into the CRM systematically and not be offline

Product-led growth strategies necessitate  significant resources, including larger teams and advanced tools, to ensure a seamless purchasing experience that’s integrated with the product itself and other systems such as analytics and reporting, billing, and customer success and support. In contrast, a sales-led approach adds complexity to a sales team’s operations, involving detailed processes such as deal desk review, finance approvals for  pricing outside the standard range,, product configuration setup and onboarding, and lastly, the intricacies of using CPQ (Configure, Price, Quote) and CRM (Customer Relationship Management) systems etc.).

As discussed above, the three most critical decisions in a pricing and packaging strategy are the packaging structure, pricing model and price levels, all of which are heavily shaped by the growth model in use.

Product and Monetization for PLG and SLG Companies: Double Helix

With continuous innovation, it’s necessary to frequently update packaging and pricing. The ideal path for innovation, or innovation roadmap, should be shaped proactively with a focus on monetization potential and competitive differentiation. However, in both PLG and SLG models, product innovation and monetization plans are at times competing levers. Product-first organizations typically prioritize PLG, focusing on product innovation first and considering monetization afterwards. Sales-led motions differ in that GTM teams are often the drivers of new monetization efforts that affect product changes. While there’s no one-size-fits-all approach, aligning innovation and monetization efforts with the specific growth model is crucial as detailed below.

In summary, there are three key factors that influence how new innovations are packaged and brought to market:

• Packaging structure (Modular vs. Tiered)

• Monetization potential

• Packaging ‘theme’ (Good packaging should be thematic based on factors such as customer segments, maturity, industry etc.)

In PLG models, product and marketing teams usually drive the motion, and monetization considerations often come later. In contrast, SLG models identify gaps where they can monetize.

GTM Considerations

A company’s go-to-market strategy is significantly influenced by the chosen growth model. We will explore two key aspects of this relationship in the sections that follow.

Discounts, Upsells and Cross-sells

Discounting is closely linked to the approach taken towards pricing, be it published or negotiated,as previously mentioned. As such, discount management plays a significant role in the sales-led growth model, which then has downstream effects on how sales and marketing teams operate, particularly in their approach to expanding customer value through upsells and cross-sells.

	Product-Led	Sales-Led
Discounts and Governance	Product-led models are typically associated with self-serve and 'fixed' pricing One-off discounts are less common and administered by product/finance teams Open/closed promotions are typical vehicle for price offers	Sales-led models are associated with a 'Deals desk' who are tasked with structuring deals in collaboration with sales Negotiated pricing is common and so discount guidelines and a governance process is a must to ensure quality of deals
Upsells and Cross-Sells	Mantle of driving upsells/cross-sells is primarily on customer marketing function Upsells and cross-sells are driven through in- product messaging and/or marketing campaigns	Mantle of driving upsells/cross-sells is primarily on Account teams/Inside sales (If it exists) Sales and marketing/pricing typically create sales plays identifying right target customers for reach out with the right offers Account based marketing plays a key role

Funnel and pipeline management

In a product-led model, the marketing team plays a pivotal role in funnel and pipeline management, ensuring a seamless flow from awareness to conversion. Conversely, within a sales-led model, it is the sales function that assumes this role.

	Product-Led	Sales-Led
Funnel creation and management	Growth relies on the growth in inbound funnel created by paid or organic demand generation activities. The time to convert to paid customers can be very short from the time they are identified as an MQL. Pipeline can be boosted through promotions or other paid activities.	Pipeline is jointly managed by sales and marketing. Leads are acquired through events, webinars, partners, etc. and then scored and nurtured. Time to conversion can run into months or quarters. Creating a new pipeline on short notice is generally not feasible.
Deal sizing and scoping vs. self-serve growth	Funnel qualification/pipeline measurement is more ‘formulaic’ based on estimations of quantity and ASP by segment or profile of visitors. There could be surprises from week to week that are sometimes harder to anticipate.	Opportunity size, stage, etc., are carefully monitored as leads go through each stage. Pipeline estimations are more accurate since they are based on 1:1 qualification by sales.
Partner Ecosystem	The service/reseller partner ecosystem plays a smaller role in this model. Technology partners are more critical.	Tech partners continue to be relevant, but service/reseller partners are also important in both pipeline generation and the successful close of opportunities.

Conclusion

To sum it up, many factors influence whether PLG or SLG, or a combination of both, is the efficient model for an organization. It is important to note that this comparison isn't about pitching PLG against SLG as rivals to see which one comes out on top. The right fit varies based on things like target customer segments, size of deals/customer spend, optimal routes-to-market, product complexity, product time to value and market maturity. It's not unusual for companies to blend PLG and SLG approaches to match the needs of different customer segments or products. So, there's no one-size-fits-all answer here. 

Introducing a different model or transitioning from one model to another necessitates careful consideration and thorough preparation. For companies eyeing to go ‘upmarket’ with a PLG approach, building up go-to-market capabilities is key—think stronger sales, marketing, and partnerships. Similarly, SLG-focused companies aiming to attract smaller customers with a self-serve motion face their own set of challenges, like enormous product development efforts. As a result, many companies end up abandoning the idea altogether.

As you embark on this journey, you may inevitably encounter more questions along the way. Feel free to contact me (mohan@pricingshastra.com) with questions.