As we near the end of this fiscal year, you are undoubtedly already planning for next year. You need to carefully assess your overall go-to-market strategy.
Are you still reliant on traditional field-led, marketing, and sales-led models? If so, your strategy and growth will likely be an uphill slog with low conversion and a high CAC.
Now is the time to think about ways to shorten your sales cycle, and reduce the friction and the CAC limiting your growth.
According to research conducted by OpenView Partners, 98% of MQL’s never even convert. As a go-to-market advisor for Investors and CEOs, I have the chance to meet many companies whose leadership teams pour hard-earned venture capital into sales and marketing efforts — such as outbound calling, paid traffic, and lead generation programs — resulting in poor unit economics and sub-par growth prospects.
What is wrong with a sales-led growth model?
First, let’s talk about cost. It’s not uncommon for companies to spend 15% of their total revenue on marketing. Very few early-stage companies have a strong product-market fit, which means most don’t have the right messaging, positioning, and potentially also, pricing. Given these limitations, low conversion and retention will likely lead to an unfortunate outcome of high burn with limited growth. Furthermore, sales-led approaches focus on acquisition, rather than activation and retention. Lastly, many campaigns focus on the buyer, not the users. If you aren’t yet aware, it is the users who hold the vast majority of the power. These same users can outnumber the buyer in an account by up to 50:1 (possibly higher, depending on your product).
To share an example, I recently met two cybersecurity companies in the same market space. One had a better product, but a sales-led growth model. The other company had — what I deemed to be — an inferior product, but invested in a product-led or a PLG model. Guess who was doing better? The product-led company created a robust community of over 50,000 freemium users and experienced growth that had almost 2.5x better customer retention.
As you can see below (data courtesy of Openview), companies reliant on Freemium models are significantly outperforming companies who are only sales-led. In fact, freemium models result in >100% growth in almost 40% of the companies surveyed, vs only 16% of the sales-led companies…