Understanding the best strategy for your business can be challenging. This article delves into “Product-Led Growth vs Sales-Led Growth,” providing a comprehensive breakdown of both approaches.
We’ll explore their key differences and benefits and how to decide which strategy aligns best with your business goals. Whether you’re a startup or an established enterprise, this guide will help you navigate the growth strategy landscape effectively.
Overview of Growth Strategies
In the evolving landscape of business growth, understanding different approaches is crucial. The two primary strategies, Product-led growth, and sales-led growth, offer unique pathways for achieving success.
Product-led growth (PLG) means letting the product do most of the work in getting and keeping customers. So, instead of relying heavily on sales or marketing, the product itself is the main way to get new customers, keep them happy, and make them stick around.
This strategy leverages the product’s inherent value to attract and retain users, creating a seamless and engaging user experience.
On the other hand, Sales-led growth (SLG) relies on traditional sales tactics, where the sales team plays a pivotal role in driving growth. This approach emphasizes building relationships and providing personalized solutions to potential customers.
Deciding which strategy to use depends on what your business is about, who you’re trying to sell to, and what you want to achieve in the long run.
Importance of Choosing the Right Strategy
Selecting the right growth strategy can significantly impact your business’s success. When deciding between product-led growth vs sales-led growth, it’s essential to consider several factors:
- Customer Acquisition: PLG often results in a wider top-of-the-funnel (TOFU), attracting many users through the product itself. This can lower customer acquisition costs (CAC) and increase retention rates.
- Retention Strategies: Keeping customers around is super important for both plans. PLG emphasizes creating a product that users love and want to stick with, while SLG relies on strong customer relationships and ongoing support to keep clients engaged.
- User Onboarding and Experience: The user onboarding process is crucial in a product-led approach. A smooth and intuitive onboarding experience can lead to higher product adoption and engagement.
- Conversely, a sales-led strategy relies on personalized onboarding, often facilitated by a dedicated sales team, to ensure users get the most out of the product.
- Revenue Generation: The revenue generation model differs significantly between the two strategies. PLG typically focuses on scalable, self-service models that can drive rapid growth with lower overhead costs.
It’s really important to get all the little details right so you can choose what to do next. You can determine whether a product-led or sales-led growth approach will best support your objectives by considering your specific business needs and market dynamics.
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Understanding Product-Led Growth (PLG)
What is Product-Led Growth?
Product-led growth (PLG) is a business methodology where the product itself drives acquisition, retention, and expansion.
In this model, the product is the primary vehicle for growth, leveraging its own features and usage to attract and retain customers.
Unlike traditional sales-led approaches, PLG focuses on delivering value directly through the product, encouraging users to experience firsthand benefits before committing to a buy.
Many software companies, especially those that offer services over the Internet, really like this plan. They focus a lot on making it easy for people to sign up and use their software without any confusion.
Key Principles of PLG
Several key principles underpin a successful product-led growth strategy:
- User-Centric Design: The product must be designed with the end-user in mind. This involves understanding user needs, preferences, and pain points to create a solution that provides real value.
- Freemium and Trial Models: Giving away free trials or offering a basic version for free lets people try out the product without having to pay right away. This makes it easier for them to start using it and might make more people decide to buy it later.
- Data-Driven Insights: PLG relies heavily on data to inform decisions. By analyzing user behavior and feedback, companies can continuously improve their products and tailor their strategies to meet user needs better.
- Scalable Onboarding: Effective onboarding processes are essential to help users quickly understand and derive value from the product. This can include guided tours, interactive tutorials, and supportive resources.
- Product Engagement: Encouraging ongoing engagement with the product helps retain users and promotes deeper adoption. Features that enhance user experience and satisfaction can drive long-term loyalty.
Product-Led Growth (PLG) Model
The PLG model involves three main stages: acquisition, activation, and retention.
- Acquisition: Getting people to notice our product using things like writing articles, ensuring we show up on Google when people search for things, and using sites like Facebook or Instagram. We want people to try our product for free to see if they like it.
- Activation: Ensuring users experience the product’s core value quickly. This involves an intuitive onboarding process and immediate access to key features that solve user problems.
- Retention: To keep people interested for a long time, you must keep improving your stuff. That means always adding new things, making it easier to use, and being ready to help when users need it. This keeps them happy and wanting to stick around.
Companies can create a self-sustaining growth loop by focusing on these stages where satisfied users become advocates, driving further growth through word-of-mouth and organic referrals.
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Understanding Sales-Led Growth (SLG)
What is Sales-Led Growth?
Sales-led growth (SLG) is a business approach where the sales team is central in driving customer acquisition, retention, and revenue generation.
Unlike product-led growth, which relies on the product to attract and retain users, SLG focuses on building relationships through personalized interactions and tailored solutions.
This method works really well for fancy stuff or services that are hard to understand and need lots of personal attention to sell. It usually aims at big companies with special requirements.
Key Principles of SLG
Several key principles are essential to a successful sales-led growth strategy:
- Personalized Engagement: Sales-led growth emphasizes the importance of personalized engagement. Salespeople talk to customers to learn about their problems and give them solutions that fit their needs. This makes customers trust the salesperson.
- Insightful Customer Feedback: Collecting and analyzing customer feedback is crucial in SLG. When sales teams understand what customers struggle with and what they like, they can adjust how they sell things to match better what customers need.
- Targeting Enterprise Clients: SLG often focuses on acquiring and retaining large, enterprise-level clients. These organizations typically require more complex solutions and are willing to invest in personalized service and support.
- Comprehensive Onboarding: Effective onboarding is a key component of SLG. Sales teams guide new customers through the initial setup and usage of the product, ensuring they quickly realize its value.
This hands-on approach can reduce friction during the onboarding process and lead to higher satisfaction and retention rates.
Sales-Led Growth (SLG) Model
The SLG model involves several stages: prospecting, engagement, conversion, and retention.
- Prospecting: Identifying and targeting potential customers who are likely to benefit from the product. This involves researching and qualifying leads based on their needs and potential value to the company.
- Engagement: Building relationships with potential customers through personalized interactions. This can include meetings, product demonstrations, and customized proposals that address specific pain points and requirements.
- Conversion: Turning prospects into paying customers by demonstrating the product’s value and how it can solve their problems. This stage often involves negotiation and addressing any objections or concerns the customer may have.
- Retention: Ensuring long-term customer satisfaction and loyalty through ongoing support and engagement. Sales teams maintain regular contact with customers, providing updates, resolving issues, and offering additional solutions as needed.
Sales-led growth is a powerful strategy for businesses that require a high-touch sales process and personalized customer engagement. Companies can grow a lot and do really well in the long run if they make good friendships and give customized solutions.
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Product-Led Growth vs. Sales-Led Growth: Key Differences
- Initial User Engagement
When comparing product-led growth vs sales-led growth, the approach to initial user engagement is fundamentally different. In a product-led growth (PLG) strategy, the product itself is the primary tool for attracting and engaging users.
Potential customers often get a chance to experience the product firsthand through free trials or freemium models. This lets users directly understand the product’s value, reducing the need for aggressive sales tactics.
Conversely, in a sales-led growth (SLG) strategy, initial engagement is driven by the sales team.
Sales representatives reach out to potential customers, offering personalized demos and consultations to showcase the product’s benefits.
This high-touch approach is particularly effective for complex products that require detailed explanations and custom solutions.
- Product Value Perception
The perception of product value in product-led growth vs sales-led growth strategies also varies significantly. In PLG, the value is demonstrated through direct interaction with the product.
Users can quickly identify how the product solves their problems, leading to a more organic and convincing value perception.
In contrast, SLG relies on the sales team to convey the product’s value through detailed presentations and discussions.
This method allows for a tailored explanation of how the product can meet the specific needs of each potential customer, often resulting in a stronger perceived value for enterprise clients.
- User Guidance and Onboarding
User guidance and onboarding are crucial in both strategies but are executed differently. In a product-led approach, onboarding is typically automated and integrated into the product experience.
Users are guided through interactive tutorials, tooltips, and onboarding checklists that help them understand and utilize the product effectively from the get-go.
In a sales-led approach, onboarding is often facilitated by the sales team or dedicated onboarding specialists.
This high-touch process includes personalized training sessions, detailed walkthroughs, and continuous support to ensure that the user fully understands the product’s capabilities and benefits. This can increase user satisfaction and retention, particularly for complex products.
- Success Metrics
The success metrics for product-led growth vs sales-led growth are tailored to the unique aspects of each strategy. For PLG, metrics like user acquisition rates, product adoption rates, and user engagement levels are critical indicators of success.
These metrics reflect how well the product attracts and retains users without heavy sales intervention.
For SLG, success is often measured by metrics such as lead conversion rates, sales cycle length, and customer lifetime value (CLV). These metrics highlight the sales team’s effectiveness in driving revenue and securing long-term customer relationships.
Benefits of Product-Led Growth
- Wider Top of the Funnel (TOFU)
Product-led growth (PLG) is great because it immediately attracts more potential customers. Instead of using traditional methods like ads or salespeople, PLG focuses on making the product itself so good that people want to use it and tell others about it.
Giving away free trials or offering freemium versions attracts many possible customers because they get to try the product themselves without paying.
This approach increases the volume of leads entering the funnel and ensures that these leads have a genuine interest in the product, resulting in higher-quality prospects.
- Lower Customer Acquisition Cost (CAC)
Another significant advantage of PLG is the lower customer acquisition cost (CAC).
Traditional sales-led growth (SLG) strategies often involve high expenses related to sales teams, marketing campaigns, and extensive outreach efforts. In contrast, PLG leverages the product to drive growth, reducing the need for expensive sales tactics.
By allowing the product to sell itself, companies can significantly reduce acquisition costs while attracting many users. This cost efficiency can be a game-changer, especially for startups and small businesses.
- Higher Retention Rate
Product-led growth strategies typically result in higher retention rates. Users who can explore and derive value from the product on their own terms are likelier to remain loyal.
The self-service nature of PLG allows users to become familiar with the product’s features and benefits at their own pace, leading to a deeper understanding and stronger connection.
Additionally, the focus on continuous product improvement based on user feedback ensures that the product evolves to meet users’ needs, further enhancing retention.
- Enhanced User Adoption
Enhanced user adoption is a cornerstone of product-led growth. By providing an intuitive and seamless onboarding experience, PLG ensures that users quickly realize the product’s value.
Interactive tutorials, in-app guidance, and supportive resources help users navigate the product effortlessly, leading to higher adoption rates.
When users can easily understand and integrate the product into their daily routines, they are likelier to continue using it and recommend it to others.
- Viral Growth Potential
Lastly, product-led growth has significant viral growth potential. Satisfied users often become advocates, sharing their positive experiences with others.
When people tell others about a product and they like it, those new people might tell even more people, causing the number of users to grow really fast.
Features such as referral programs and social sharing options can further amplify this effect.
The viral nature of PLG can help companies achieve rapid growth without relying heavily on traditional marketing efforts.
Benefits of Sales-Led Growth
- Less Friction During Onboarding
One of the significant advantages of a sales-led growth (SLG) strategy is the reduced friction during onboarding. In a sales-led model, the sales team is pivotal in guiding new customers through the onboarding process.
This personalized approach ensures that users receive tailored assistance and support, immediately addressing their needs and concerns.
With a dedicated point of contact, customers can quickly overcome any initial hurdles, leading to a smoother and more efficient onboarding experience.
- Targeting Enterprise Organizations
Sales-led growth is particularly effective for targeting enterprise organizations. Large companies often require complex solutions and personalized attention, which a sales-led approach is well-equipped to provide.
Sales teams talk to many people in a company, figure out their problems, and then develop special solutions just for them.
This targeted approach helps secure high-value deals and builds long-term relationships with enterprise clients, which can drive revenue and growth significantly.
- Collecting Insightful Customer Feedback
Another key benefit of sales-led growth is the ability to collect insightful customer feedback. Salespeople talk to customers and learn important things about what customers want, like, and don’t like.
This feedback is crucial for continuous product improvement and innovation. Companies can improve their stuff when they know exactly what their customers like. This makes customers happy, and they want to buy more.
- Relationship Building
Relationship building is at the heart of a sales-led growth strategy. Sales teams focus on developing strong, trust-based relationships with their customers. This personal connection is essential for fostering loyalty and encouraging repeat business.
Through regular communication and personalized service, sales representatives can understand and anticipate customer needs, providing solutions that align with their goals.
This way of focusing on relationships doesn’t just make customers happier, it also opens up chances to sell them more stuff or different stuff.
- Higher Revenue Deals
One of the most compelling benefits of sales-led growth is the potential for higher revenue deals. By engaging directly with customers and offering personalized solutions, sales teams can negotiate larger contracts and secure higher-value deals.
This approach is particularly effective for complex, high-ticket products and services that require a detailed explanation and customized implementation.
Higher revenue deals contribute significantly to the company’s bottom line and enhance its market position and competitive advantage.
Implementing Product-Led Growth Strategies
Steps to Drive Product-Led Growth
You need a clear plan to make your product the driving force behind growth. Follow these simple steps to get going:
- Develop a User-Centric Product: Focus on creating a product that solves real problems for your users. Ensure your product solves real problems for people by understanding what they need and what bothers them.
- Offer Freemium or Free Trial Options: Allow potential users to experience your product without an initial financial commitment. This reduces barriers to entry and helps demonstrate the product’s value firsthand.
- Leverage Data-Driven Insights: Continuously gather and analyze user data to understand how they interact with your product. Use these insights to make informed decisions about feature improvements and user experience enhancements.
- Optimize User Onboarding: Make it easy for people to start using our product by showing them all the important things it can do. Make them to understand how to use it well right away.
- Promote Product Engagement: Encourage users to explore and engage with different aspects of the product. Use in-app messages, tutorials, and support resources to keep users active and engaged.
User Onboarding Best Practices
Effective user onboarding is crucial for product-led growth. Here are some best practices to ensure a smooth onboarding process:
- Simplify the Signup Process: Reduce friction by keeping the signup process short and straightforward. Ask for essential information only to minimize user drop-off.
- Provide Interactive Tutorials: Use interactive tutorials to walk users through the product’s main features. This hands-on approach helps users understand how to navigate the product and derive value from it quickly.
- Utilize Checklists and Progress Indicators: Offer checklists and progress indicators to guide users through the onboarding steps. This not only helps people stay focused but also makes them feel good when they finish each step.
- Offer Personalized Support: Access resources like FAQs, live chat, and help centers. Personalized support can address user-specific issues and ensure they have a positive onboarding experience.
Increasing Product Adoption
Increasing product adoption involves encouraging users to incorporate your product into their daily routines. Here are some strategies to boost adoption rates:
- Highlight Core Features: Ensure users are aware of the product’s core features and how they can benefit from them. Use in-app notifications and emails to showcase these features.
- Encourage User Feedback: Actively seek user feedback to understand their needs and preferences. Keep making things better based on what users say.
- Implement Gamification: Introduce gamification elements such as badges, rewards, and leaderboards to make using the product more engaging and fun. This can motivate users to explore and utilize the product more fully.
- Create a Community: Build a community around your product where users can share experiences, tips, and best practices. This fosters a sense of belonging and encourages users to remain active.
Utilizing Customer Feedback for Product Improvement
Customer feedback is invaluable for product improvement and driving product-led growth.
Here’s how to effectively utilize feedback:
- Collect feedback Regularly: Use surveys, feedback forms, and in-app prompts to gather user feedback continuously. Ensure that users have multiple channels to share their opinions.
- Analyze feedback Thoroughly: Categorize and analyze feedback to identify common themes and areas for improvement. Use special computer programs to understand better how people feel and what they want.
- Prioritize Based on Impact: Focus on feedback that significantly impacts user experience and product value. Prioritize changes that address critical issues and enhance the overall product.
- Communicate Changes: Inform users about the improvements made based on their feedback. This not only shows that you value their input but also keeps them engaged and informed about product updates.
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Implementing Sales-Led Growth Strategies
Steps to Drive Sales-Led Growth
To successfully implement a sales-led growth (SLG) strategy, follow these essential steps:
- Build a Skilled Sales Team: The foundation of SLG is a knowledgeable and persuasive sales team. Invest in hiring and training sales professionals who understand your product and can effectively communicate its value to potential customers.
- Identify Target Customers: Identify and qualify leads that fit your product well. Use market research and customer data to pinpoint potential clients, particularly enterprise organizations that can benefit from personalized sales approaches.
- Develop a Sales Process: Create a structured sales process that guides your team through each customer journey stage, from initial contact to closing the deal. This ensures consistency and efficiency in your sales efforts.
- Utilize Sales Tools and Technology: Equip your sales team with the right tools and technology, such as CRM systems and sales analytics platforms. These tools help track customer interactions, manage leads, and analyze sales performance.
- Provide Ongoing Training and Support: Continuous training is vital for keeping your sales team updated on product developments and sales techniques. Offer regular training sessions and support to help your team stay effective and motivated.
Effective Sales Tactics
Implementing effective sales tactics is crucial for driving sales-led growth. Here are some strategies to consider:
- Personalized Outreach: Customize your outreach efforts to address each potential customer’s specific needs and pain points. Personalization shows that you understand their unique challenges and can offer tailored solutions.
- Demonstrate Value: Use product demonstrations, case studies, and success stories to illustrate the tangible benefits of your product. Showing real-world examples helps potential customers see the value and effectiveness of your solution.
- Build Relationships: Focus on building strong relationships with potential customers. Regular communication, follow-ups, and providing valuable insights can help establish trust and credibility, making it easier to close deals.
- Handle Objections Effectively: Be prepared to address any objections or concerns that potential customers may have. Train your sales team to listen actively and provide thoughtful, well-reasoned responses that alleviate doubts and build confidence.
Leveraging Customer Relationships
Leveraging customer relationships is a key component of a successful sales-led growth strategy.
Here’s how to maximize these relationships:
- Maintain Regular Contact: Keep in touch with your customers through regular check-ins, newsletters, and personalized messages. This helps you stay top-of-mind and demonstrates that you value their business.
- Offer Exceptional Customer Service: Providing excellent customer service can turn satisfied customers into loyal advocates. Address issues promptly and go above and beyond to ensure a positive experience.
- Encourage Referrals: Happy customers are likelier to refer your product to others. Implement a referral program that rewards customers for bringing in new business, leveraging their networks to expand your reach.
- Gather and Utilize Feedback: Regularly collect customer feedback to understand their needs and preferences. Use this feedback to improve your product and sales approach, ensuring you continue to meet and exceed customer expectations.
Data-Driven Sales Decisions
Making data-driven sales decisions is crucial for optimizing your sales-led growth strategy.
Here’s how to leverage data effectively:
- Track Key Metrics: Monitor important sales metrics such as conversion rates, average deal size, and sales cycle length. These metrics provide insights into your sales performance and highlight areas for improvement.
- Analyze Customer Data: Use customer data to identify patterns and trends. Understanding customer behavior and preferences helps you tailor your sales approach and target the right prospects.
- Implement Sales Analytics Tools: Utilize sales analytics tools to gain deeper insights into your sales processes. These tools can help you identify bottlenecks, forecast future sales, and make informed decisions based on data.
- Continuously Optimize: Regularly review and optimize your sales strategies based on data insights. Test different approaches, measure their effectiveness, and refine your tactics to improve overall performance.
By following these steps and leveraging effective sales tactics, customer relationships, and
data-driven decisions, you can successfully implement a sales-led growth strategy that drives significant business growth.
Hybrid Approaches: Combining PLG and SLG
Benefits of a Hybrid Model
Combining product-led growth (PLG) and sales-led growth (SLG) can create a powerful hybrid model that leverages the strengths of both approaches.
Here are some key benefits:
- Balanced Growth: A hybrid approach allows businesses to balance the scalability of PLG with the personalized touch of SLG. This combination can attract a broad user base while providing tailored solutions to high-value clients.
- Enhanced Customer Experience: By integrating PLG and SLG, companies can offer a seamless user journey. Users can explore and adopt the product at their own pace while accessing personalized support and guidance from the sales team.
- Efficient Resource Utilization: A hybrid model optimizes resource allocation. While the product drives initial acquisition and engagement, the sales team can focus on nurturing relationships and closing deals with enterprise clients.
- Improved Feedback Loop: Combining PLG and SLG enhances the feedback loop. Insights gathered from user interactions with the product can inform sales strategies, while feedback from sales interactions can guide product improvements.
When to Use a Hybrid Approach
Deciding when to implement a hybrid approach depends on several factors:
- Complex Products: A hybrid model is ideal if your product is complex and requires a high level of customization or support. PLG can attract users and demonstrate value, while SLG provides the necessary personalized assistance to close deals and ensure successful implementation.
- Diverse Customer Base: A hybrid approach is beneficial when serving a diverse customer base. For example, small businesses may prefer the self-service nature of PLG, while larger enterprises might need the tailored solutions provided by SLG. This model allows you to cater to both segments effectively.
- High-Value Clients: Combining PLG and SLG can be highly effective when targeting high-value clients or enterprise organizations. The product can attract interest and provide initial engagement, while the sales team can focus on building relationships and negotiating large contracts.
- Market Penetration and Expansion: If your goal is to penetrate new markets or expand your reach, a hybrid approach can help. PLG can drive broad adoption and brand awareness, while SLG can secure key accounts and partnerships, facilitating market expansion.
Choosing the Right Growth Strategy for Your Business
Factors to Consider
When deciding between product-led and sales-led growth, several critical factors must be considered to ensure you select the best strategy for your business.
- Nature of Your Product: Consider the complexity and nature of your product. If your product is straightforward and can be easily understood and adopted by users, a product-led growth (PLG) strategy might be more effective.
Conversely, a sales-led growth (SLG) approach could be more suitable if your product is complex and requires significant customization.
- Target Audience: Identify your target audience. PLG is typically effective for businesses targeting many users, including small to medium-sized businesses (SMBs). In contrast, SLG is ideal for targeting enterprise clients who require a personalized sales approach and tailored solutions.
- Sales Cycle Length: Assess the typical sales cycle length for your product. SLG may be more appropriate if the long sales cycle involves multiple decision-makers. If the product can be quickly adopted and has a shorter sales cycle, PLG might be the better option.
- Resource Availability: Consider the resources available to your business. Implementing a sales-led strategy requires a skilled sales team and significant investment in sales and marketing efforts.
On the other hand, a product-led strategy relies more on the product’s ability to drive growth, which can be more cost-effective.
Assessing Your Business Needs
To determine whether product-led growth vs sales-led growth is right for your business, start by thoroughly assessing your business needs:
Customer Acquisition
- Evaluate how your customers currently discover and engage with your product. If your product naturally attracts users through its features and functionality, PLG could be a strong fit.
- SLG might be more effective if your product requires a more hands-on approach to demonstrate its value.
Retention and Expansion:
- Consider how you retain and expand your customer base. PLG strategies often excel at retaining users through continuous product improvements and a seamless user experience.
- SLG strategies, however, may be more effective at upselling and expanding within large accounts due to the personal relationships built by the sales team.
Market Positioning:
- Think about your market positioning and brand perception. PLG can position your brand as innovative and user-friendly, attracting a broad audience.
- SLG can position your brand as a trusted partner for complex solutions that appeal to enterprise clients.
Making Data-Driven Decisions
Making data-driven decisions is crucial when choosing between product-led growth vs sales-led growth.
Here’s how to leverage data effectively:
- Analyze Customer Data: Look at how people act, what they like, and what bothers them using data. Then you will see which types of customers prefer to try out a product themselves versus having someone sell it to them.
- Track Key Performance Indicators (KPIs): Monitor KPIs such as customer acquisition cost (CAC), lifetime value (LTV), conversion rates, and churn rates. These numbers will show if what you’re doing to grow is working and help you figure out what to focus on more.
- Conduct A/B Testing: Experiment with both PLG and SLG strategies through A/B testing. Compare the results to see which approach yields better outcomes in terms of user acquisition, engagement, and revenue growth.
- Gather Feedback: Collect feedback from your customers to understand their preferences and experiences. Use this feedback to refine your growth strategy and ensure it aligns with customer expectations and needs.
Conclusion
Choosing between product-led growth (PLG) and sales-led growth (SLG) depends on your business needs, product complexity, and target audience.
PLG excels in scalability, lower customer acquisition costs, and enhanced user engagement, making it ideal for straightforward products and broad audiences.
Conversely, SLG is perfect for complex products requiring personalized sales efforts, targeting enterprise clients, and building strong customer relationships.
Combining both strategies can offer a balanced approach, leveraging the strengths of each to maximize growth and customer satisfaction.
To grow your business, look at your product, who buys it, and what’s happening in the market. This helps you figure out the best way to move forward.