These days, the B2B customer journey often starts with self-service. Even enterprise users have the autonomy to discover and onboard software products instantly, and companies are working on eliminating unnecessary friction to make it easier for customers to get immediate value from their products and services.
Given this backdrop, SaaS companies are rethinking their growth strategies. Traditional resource-intensive methods are no longer tenable.
Now the emphasis is on scalability, leaning heavily on automation and AI-driven solutions. Companies are streamlining their go-to-market strategies and making sure all their processes are agile and efficient.
Given the increased competition, what is happening in PLG right now — and what is working best?
OpenView collaborated with Pendo to survey approximately 1,000 top PLG private companies, to provide a snapshot of current GTM methods and product trajectories.
I'll be focusing on some key takeaways from their survey. For a complete overview, you can get the full report here.
Private company SaaS growth rates have slowed
There’s no doubt about it: SaaS growth rates are slowing.
This isn't a sudden revelation — last year's report already hinted at a downturn, but this year’s numbers clearly show a cooling trend. In OpenView’s survey, only one-fifth of companies have maintained a growth rate of at least 75% year-on-year, a steep drop from the nearly half (49%) reported in 2021.
Product-led growth (PLG) companies, which are often hailed as the vanguards of innovative growth strategies, are feeling the pinch, too.
During OpenView’s previous survey, PLG companies were major leaders with a 50% year-on-year growth, outpacing the traditional SaaS companies that posted a modest 21% growth. This difference underscored the potency of a PLG-driven strategy.
But now growth rates for PLG companies have contracted sharply, and it’s ringing alarm bells across the industry.
There are a lot of reasons for the slowdown, but the SaaS domain is definitely undergoing a period of recalibration.
Net Dollar Retention is decreasing across the board
According to the report, Net Dollar Retention (NDR) is declining, not just within private SaaS firms but also among publicly traded SaaS companies.
Net Dollar Retention is a metric that can reveal insights into the health and satisfaction of a company's customer base. A consistently high NDR indicates that customers find value in the product or service and are willing to spend more over time. A low or declining NDR can be a warning sign that customers are not satisfied and may eventually churn.
This downward trajectory of NDR signals potential challenges in customer retention or upselling. For public SaaS companies, which typically have broader visibility and established client bases, a dip in NDR raises questions about market saturation, evolving customer preferences or potential shifts in the competitive landscape.
Growth levers: Going beyond conventional strategies
Companies are constantly looking for the right levers to accelerate growth. And in the 2023 report, the most influential lever took me somewhat by surprise. It was product-led sales maturity.
Tracking product-qualified leads (PQLs) or product-qualified accounts (PQAs) increased the likelihood of fast growth by 61%.
The data shows relying heavily on platforms like Instagram or splurging on paid LinkedIn advertisements isn't the answer to sustained growth. In fact, overdependence on these paid acquisition channels tends to correlate negatively with being able to scale quickly. While they might provide a short-term spike in lead generation, the long-term ROI seems questionable.
Focusing on PQLs or PQAs increases the chances of fast growth, which is a testament to the power of using product interactions as an indicator of customer intent.
Embracing a product-led sales approach isn’t just a strategy for stalwart PLG businesses — it's a versatile tool any SaaS company can integrate into acquisition and expansion efforts.
Hiring strategy: Aligning personnel with PLG objectives
It’s time to debunk the myth that product-led growth (PLG) is a strategy driven primarily by product management. PLG extends far beyond product-centric strategies, and it requires a holistic approach that integrates many parts of an organization.
Many SaaS companies embracing the PLG model have questions about the timing of hiring, though. If you want to grow fast, when’s the right time to bring in dedicated teams?
According to OpenView’s data, as PLG companies approach their initial significant revenue milestone of $1 million in Annual Recurring Revenue (ARR), we start to see some interesting hiring patterns.
Sales teams are not an immediate priority right out of the gate. Fewer than half (47%) of PLG companies opt to establish a sales team before they achieve the $1 million ARR mark. This indicates that in their formative stages, these companies might be relying on organic growth, driven by the value proposition of their products and word-of-mouth marketing.
In the early days, companies are more likely to invest in customer success, with 57% of PLG organizations prioritizing this function before reaching the $1 million ARR milestone.
I believe companies make this choice because they know nurturing and retaining early adopters — and making sure these users get value from the product — are critical for growth.
Navigating nuanced conversions: Developers and larger companies
The data also shows that selling to developers and larger buyers tends to yield lower conversion rates.
Why might this be the case?
For developers, products and solutions aren’t just tools — they are integrated parts of daily workflows and projects. Developers often approach purchasing decisions meticulously, and they need in-depth product evaluations, trials and even peer consultations. They are looking for functionality, flexibility and seamless integration capabilities. Any product pitched to developers goes through rigorous scrutiny.
Selling to larger buyers introduces a different set of complexities. The decision-making processes in bigger organizations are usually layered, often involving multiple stakeholders, extended evaluation periods and rigorous vetting. Sales cycles for large organizations are often longer — but of course, the payoff from securing these buyers can be significant, too.
Both of these audiences require patient sales reps and tailored selling approaches.
SaaS is in flux: Here’s how to keep up with the changes
As SaaS companies grapple with slower growth rates and the nuances of converting unique audiences, strategic growth levers and timely hiring decisions are critical.
The insights from OpenView's 2023 Products Benchmarks report provide a clear lens into these shifts. Again, you can read their analysis of all the survey data here.
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