There are two generally accepted ways of growing a company.
One could be called the ‘push’ method, in which sales teams and/or marketing campaigns try to ‘push’ the product or service to new customers. It’s usually referred to as sales-led or marketing-led growth.
The other might be called the ‘pull’ method. It uses the product (or service) and/or existing customers to pull in new clients, with limited emphasis on sales and marketing. This is usually called product-led or customer-led growth.
In this blog, I want to talk about why I’m a big fan of customer-led growth, and why I think that in many circumstances it can be more effective than its sales-led counterpart.
Customer-led growth works
My own experience at Knak and at my first company, Revenue Pulse, demonstrates conclusively that customer-led growth works. At my first company, that was in fact all we did. We had no sales team.
There are other examples of this approach, my favourite being Tesla.
Tesla founder Elon Musk is in some ways the poster boy for product-led or customer-led growth. He has famously resisted advertising his Tesla cars – standing apart from other carmakers, who spend big on marketing.
Why does customer-led growth work?
Because if you put all your focus on making your customers happy and successful, they will do your advertising for you.
At Revenue Pulse, we never had a sales team. We never did marketing. Our customers were our sales and marketing team. They liked our service so much they talked it up in their networks. As a result, we had triple-digit growth rates for years.
“Product-led growth companies are those with high-quality product experiences, prompting customers to use them often and share them with their networks,” notes one article in Forbes. “Growth in these companies has a significant viral component. Users can get unique value from the product or service right away and can benefit from helping to attract new users.”
We took that approach when we started Knak. We had a chat system in our first free trials to make sure our customers were happy, and we used customer feedback to improve our product. As a result, our early growth was fuelled by referrals.
Customer-led growth forces you to have a good product and a good culture
The term ‘customer-led growth’ is often used interchangeably with the term ‘product-led growth’ for good reason: You won’t have happy customers if your product does not meet their needs.
I would add that it will be difficult to meet customer needs if your internal work culture doesn’t foster the creation of committed, engaged teams who are enthusiastic about coming in to work.
In my mind, creating a good work culture comes first; a good product and happy customers flow from that, and the end result is growth.
What makes for a good work culture?
I think it’s about respect and trust. The best workplace is one in which the employees respect and trust each other, and know they can depend on each other. When a business’s internal culture is working as it should, customers feel that respect and trust as well. It’s about the relationship as much or maybe more than the business transaction.
We put a lot of effort into making sure our people are happy and passionate and working together as a team. And I think our customers sense that.
It bears noting that a SaaS (software as a service) company isn’t like a retailer selling, say, clothing. Our relationship with a customer doesn’t end with the sale. Customer service and support are part of what we sell, so we can’t shrug them off.
Back to the product:
Tesla created a great product, and uses customers to drive growth. Once people try the cars, they are hooked. As a result Tesla owners become the car’s biggest advocates. In an age of influencers, in which people rely on people they trust as much as (or maybe more than) any ad or salesperson, enthusiastic customers are gold. Unbiased people talking about your product or service can be a lot more effective than thousands of dollars of advertising or any smooth-talking salesperson.
But again, your product has to be great for this to work.
Customer-led growth drives authenticity
Customer-led growth relies on existing customers to drum up new ones. But when you are just starting out, how do you get your first customers? The ones who are going to talk you up in their networks?
That’s why it helps to have a good narrative, a story that lets you stand out from the crowd and provides some context for your excellent product. Tell that story to your own contacts to find your first customers, and once those first customers are satisfied, they will pass the story on.
But for that to work effectively, your narrative has got to me authentic.
Here’s an example of what I mean:
In my own neighbourhood, local Facebook groups started talking up this tiny restaurant that sold great Thai take-out food. The restaurant was in a gas station – a gas station, of all places! – and it was run by a woman who had recently immigrated from Thailand. A great product (delicious Thai food) plus a compelling narrative (a female immigrant who was struggling to establish herself through a tiny restaurant in a gas station) combined to create an image in customers’ minds: This woman sells amazing food, let’s help her out. Now her business is growing through word of mouth.
Could she succeed with good food alone? Maybe. But then again, would you really go to a take-out place in a gas station and expect it to be good? The authenticity of her narrative gives customers a reason to seek her out.
Our narrative starts with a great product. What makes us stand out is the quality of our people, and the great interactions customers have with our people. That sets us apart from the bigger firms and informs our narrative..
The limits to customer-led growth
Nothing is perfect, and nothing works 100% of the time.
So it is with customer-led growth. There are some pitfalls.
SaaS companies, for example, have to learn when to set limits on customer requests.
Customers are always going to be asking for something – a new service, a tweak to an existing product – and those requests may divert a company’s limited resources from longer-term goals. For example, a company that puts its resources into answering customer requests for tiny changes to a product may be preventing itself from working on a new, much-improved product that would be much more efficient.
So even as it remains customer-led, a company must remain focused on its longer-term product vision, and the needs of all of its customers, not just the squeakiest wheels.
A company that wants to grow must also recognize that at some point it may need to break into new networks if it wants to take things to the next level. Your existing customers will recommend you to their friends and colleagues, who will usually be in their industry. It’s harder to develop contacts in industries where you have no customers already.
Finally, it’s important to recognize that once you reach a certain size, you will likely need sales and support staff to handle your growing roster of customers. The sales staff will get them signed up, and the support staff will make sure they are happy. After all, once you have the customers, you can’t ignore them.
Right now, we are wrestling with the limits to customer-led growth.
We’re at the point where we feel we have to build up our sales team so we can grow faster. In other words, we want to try the push method of finding new customers in addition to the pull method. There must be people out there who need our product but who haven’t heard about us from our existing customers.
And as I have already noted, we’re at the point where we are starting to think about looking for an injection of outside cash to take things to the next level.
I think outside investors seem to prefer a sales-led approach to growth.
But I want to make sure that whatever happens, we remain a customer-led company. I want to make sure we continue to focus on our culture, our team and our product so that our customers will be happy.
I remain convinced that’s the best way to go.