ABM vs. PLG: Which One is Best for SaaS Growth?

Inbound marketing is losing its appeal due to rising advertising costs and dropping clickthrough rates. As a result, two alternative strategies are gaining popularity: product-led growth and account-based marketing. Which one is best for growth? To find out, read on!

ABM vs. PLG: Which One is Best for SaaS Growth?

Inbound Stopped Working

Traditionally, inbound marketing teams produced content and promoted it via multiple channels. This content was gated with forms to collect emails. Owners of the emails were subjected to email campaigns. Eventually, some of them were handed over to the sales team. The sales team executed a complex sales process, starting with a cold call and ending with a signed contract.

Lately, this approach has been losing its appeal due to rising advertising costs and dropping clickthrough rates. Putting it plainly, inbound stopped working.

As a result, two alternative strategies emerged: product-led growth (PLG) and account-based marketing (ABM).

PLG: Let the Product Sell Itself

With PLG, individual business users can discover a product and begin using it right away at little or no cost. If they find it useful, they recommend the product to their peers and superiors. Eventually, usage spreads throughout the organization, resulting in upselling opportunities.

The objective of the PLG sales and marketing teams is to facilitate this self-propagation process. Some PLG champions go as far as stating that if your product needs sales or marketing then you have a failed product.

ABM: Flip the Funnel

ABM, on the other hand, does not abandon the traditional approach. It turns it on its head:

ABM marketers use firmographic, buying intent, and CRM data to identify a relatively small number of similar accounts that share a certain need. They develop content describing how this specific need can be addressed with the help of their products. This content is used by the sales team to drum up interest among decision makers, which eventually results in a transaction.

ABM delivers larger deals more efficiently than the traditional inbound strategy due to better targeting, personalization, and closer collaboration between sales and marketing.

ABM vs. PLG: Which One Wins?

The two approaches, ABM and PLG, could not be more different. Naturally, the question arises of which one of the two is the best for generating growth.

Consider, for instance, the following graph.

Slack is famously the PLG poster case. Microsoft’s strategy, on the other hand, is a flavor of ABM. Based on this example, can we conclude that ABM is superior to PLG?

As usual, it depends.

More specifically, it depends on where the product is in its lifecycle. PLG underperforms at the very beginning and the very end of the lifecycle. It shines in the middle.

A new product lacks a product-market fit, and the product team operates in the growth hacking mode: ideate, prioritize, test, analyze.

At this stage, the product cannot yet attract a critical mass of early adopters. It also lacks the gloss and finish required to retain them. Therefore, PLG is hardly applicable. ABM, on the other hand, is very appropriate.

Once a product-market fit is achieved, PLG is the best strategy to grow adoption quickly and inexpensively via word-of-mouth.

Eventually, the addressable market is exhausted, and word-of-mouth growth slows to a standstill. The product no longer sells itself. However, it can still be offered as part of a bundle.

At this stage, PLG no longer works, but ABM can be used to prolong growth via cross-selling. Judging by the Slack vs. Teams case, this strategy can be quite effective.

Conclusion

In summary, PLG and ABM are both powerful go-to-market strategies when used appropriately. ABM is most effective at the very beginning and the very end of the product lifecycle, while PLG works best for igniting exponential growth via word-of-mouth in the middle.

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