The journey to product-led growth, often referred to as the "pinnacle" of growth, is (like almost all things in startups) a rollercoaster. And it never happens overnight. In the early days, most startups go through a sales-led growth model - direct, boots-on-the-ground tactics. So how do you make the shift, and when is the right time? 

The stages of startup growth

In broad terms - there are three:

• Sales-led 

• Growth-led 

• Product-led

Let's take a look at what each stage means:

Sales-led - The MVP

What is it?

Sales-led growth is how many startups begin, and acquire their first users or customers. It means that the majority, if not all, of your acquisition comes from direct sales efforts. Picture boots on the ground, knocking on doors, pitching your product - whether it's just your early team, or an actual sales team, doesn’t matter - when you use team time to acquire users - and thats how you grow - you’re running a sales-led model. While straightforward to initiate, it’s costly, time-consuming, and challenging to scale. As your customer base grows, so does your sales team, almost linearly. You won’t hit exponential growth without exponential resources. This stage suits the early days when you’re carving out your product-market fit and can benefit from direct feedback. 

But - make sure you invest in moving on:

There is an expiration date to sales-led growth. Not only from a cost perspective, but also from an operational perspective. Relying primarily on this strategy to drive your growth can - in the long term - become an operational nightmare. Training and retaining 10 sales people takes time and communication - but scaling to 10,000 means less efficiency per hire, gradually increasing CAC, a large-scale ops arm to support this level of staff and their associated training, churn, hiring, etc. If you don’t make the jump soon enough to the next stage, you’ll find yourself building an ops business within your original business.

Growth-led - Getting to exponential

What is it?

Transitioning to a growth-led stage, the focus shifts towards rapid user acquisition and revenue boost. It's a phase full of A/B tests to discover effective growth hacks, relying (often) on promotional tactics for quick wins. The aim is to pack the funnel, encouraging that initial purchase or sign-up.  

It’s costly to set up - you’ll spend quite a bit before you figure out the right messaging, promotions, channel mix, etc. You’ll go through a phase where you’ll want to go back to sales-led. But eventually, with enough testing and failing, something will click - and your growth curve and cost curve will grow further and further apart.

Many businesses stop at this stage of scale. They’ll resign to continuing to seek growth from inflating the top of funnel. However - when your growth strategy relies so heavily on acquisition and first purchase rather than retention/engagement - then sooner or later you’ll find yourself in a race to the bottom on pricing and discounts against competitors. Users will want what they get from your product, but they won’t love the product itself - they’d be happy to switch to a competitor if they give them a nice enough deal. Whoever has the deepest pockets to give the biggest acquisition promotions will win - eventually competition will drop off as budgets dwindle. We saw this with cab-hailing, and food-delivery startups. Wherever you got the biggest deal, that’s where the consumers went. 

So - whatever the space - I recommend looking further. And deeper into the funnel. Giving people not only a reason to join, but more importantly, a reason to stay. This is where the transition to product-led scale begins. 

Product-led growth

What is it?

Reaching the product-led growth stage is like hitting efficiency nirvana in your growth spend. Here, your product is so compelling that users naturally gravitate towards it, share it, and stay engaged. This doesn’t eliminate marketing spend but ensures every dollar works harder. You're more likely to see conversions, active engagement, and organic user acquisition. But let’s be honest, pure product-led growth won’t work for everyone. And it’s especially hard to achieve when the switch on the user/consumer side is so easy (like online shopping). Platforms like Slack, on the other hand, are poster-children for product-led growth. Once you’re in, you’re very unlikely to switch. You’re tied to it, because it’s so embedded in your day to day and holds so much of your company’s knowledge. It’s super sticky.

But pure product-led isn’t always the answer. There are hybrid solutions that actually work better for some startups. Here’s where we look at a blend of growth and product-led. One where we have:

1. A product that's delightful to use and others organically refer it

2. An acquisition strategy that's competitive

3. A loyalty scheme that users know beats the one-off promotions from competitors

4. Ideally, a continuously evolving feature add that makes the product more useful, and mirrors Slacks “lock in” on loyalty

It’s still technically product-led - your users know and love what you offer, and so your retention is high. But the time and spend split between product and growth is more balanced than in pure product-led growth. This strategy marries the dynamism of growth-led tactics with the sustainability product-led, focusing on creating an enduring user journey. This approach doesn’t just look at the funnel's top but enriches every stage, ensuring users not only arrive but thrive and multiply. This is where the product and growth team synergy really comes to shine.

Adopting the Growth-Product-led hybrid approach allows for true efficiency in growth spend. It's a holistic view of the funnel that ensures sustained growth, far removed from the boom-and-bust cycles of scale that focus only on top of funnel growth.

While product-led growth is seen as the pinnacle, the journey to it takes us through different phases - each with its value. But knowing when to move on is crucial - both for your budget and org planning. Naturally, every phase will require a slightly different team, or rather, team focus. As we move towards product led, the focus shifts from serving only acquisition to serving retention and user/customer advocacy. And with every step you take towards more scalable growth, your team dynamics need to get better and better - you need true collaboration, and cross-functional problem solving.

If you’d like to chat about your startups growth strategy, or if you’d like to learn more about how to plan your team structure and focus to fit your needs now and in the future, send me a message on sofie@bramble.club