Why Ed-tech companies need to move away from Sales Led Growth to Product Led Growth

Last week ed-tech giant, Byjus had to wind off It’s entire operation in Kerala and in the subsequent week, they had to take the loan of $300Mn from its subsidiary - Aakash Education at 7.5% interest. What has changed in the last two years and why most of the ed-tech companies are struggling to maintain profitability?

Well, if you observe closely, it’s evident that not all ed-tech companies are struggling to maintain growth and profitability.. OK, let’s attempt the shortest route to address this question:

Put a CFO lense from Mid 2021 to Sep 2022 -  What’s common between revenue and market share of Byju’s, Vendatu, SimpliLearn, Upgrad, GreatLearning Vs KhanGS Research, PhysicsWallah, ApniKaksha and Finology? 

Also one of my colleague asked an interesting question on LinkedIn and this blog is an attempt to answer that question, let’s dive in.

Sales led growth require instant opex but difficult to scale at unit profitability.. However, prod led growth requires upfront  capex, plays on compounding principle and economy of scale..

Another fundamental difference is- Sales led growth forces you to HIRE brand promoters/advocates and you pay them to advocate however product led growth (given there is value creation at lower cost) helps EARN brand advocates and it creates a compound effect which is difficult to break..

Product led growth strategy leads to three fundamental principles-

1- Easy to create community and bring network effect

2- Eco of scale mode works in almost every market 

3- 1st and 2nd leads to value creation with leads to brand equity

Examples of product led growth- Toppr, khan research center, doubtnut, duolingo, Udemy, physicswallah, Aman Dhattarwal, Pranjal Kamra etc…

Here is how some of these ed-tech companies grown compared to Product led growth companies.

Key brand values- Democratizing education and learning for all, Value creation at low cost..

Key Competitors Edge- Large market share, low acquisition cost, strong brand equity, practically no sales team

I have seen only two B2C industries largely depend on Sales team/brand advocates on the payroll of the company - Real estate and High ARPU Courses 

However if we observe industries are getting unbundled with the help of tech.. almost every customer is asking this-

It may seem obvious, but it's worth mentioning why you might want product-led growth for your company. With a product-led sales process, you can spend less on salespeople and your company will grow organically over time, with a sustainable or even decreasing cost of customer acquisition (CAC).

It's worth delving a little deeper into how the adoption process works in a product-led model. The diagram below demonstrates how it works:

Product-led growth allows for the famous "hockey stick graph" that internet startups love to display:

1. Customers onboard themselves because the purchasing process is so simple. Rather than investing in salespeople, your company can concentrate on onboarding and customer service.

2. Because product popularity can grow online in a scalable and sustainable manner, the product-led growth model is popular. The sales funnel is wider at the top and literally open to users all over the world as they experiment with the "freemium" model to gain value from the product. Because users experience the product firsthand, in the palm of their hands, growth is rapid.

3. First-party data is becoming a gold mine for product companies as privacy policies evolve. You have access to a massive amount of customer data because your product is central. You can use this to better understand the behaviour of your customers and market your product. This will reduce your advertising costs while increasing your conversion rate in the long run.

4. One of the most important benefits of adopting product-led growth is that the product promotes itself. Members of the team can concentrate on learning how to create a high-quality product and provide an exceptional user experience.

5. The product is the core competency of every SaaS company. A PLG strategy must centre on the product. This necessitates that it be user-friendly, address their issues, and do so faster than any competing product. The product-led growth model ensures that your solution is in excellent condition.

Thanks for reading, some other day on this :)