How do you get new revenue? There are 5 ways
I said a few weeks ago that we software product managers are responsible for $5-$10 million in new revenue over the next 12 months. How do you get that? There are five ways your revenues can increase:
- Your market grows, and you grow with it naturally
- You beat your competitors more in your existing deals – that is, you increase your win rate
- You get into more deals and win them at your normal rates – that is, you increase your sales velocity
- You extend your footprint in your existing market by selling more to each customer – or increase your average deal size
- You start selling in a new segment or market
Those are the five ways to grow revenue. If you do enough of them, you might see your $10 million in incremental revenue in a year.
Read the rest of this post to learn how to use this information to start growing your product revenue today.
Natural market growth
Your responsibility as the product manager is not for this growth, per se, but for not losing this growth. To keep your revenue growth in line with market growth, you must continue to win deals at your current rate. You can’t do that by standing still. The competitors are always getting better. Just like Alice, you have to run very fast just to stay in one place, market share-wise. And even if your product continues to grow at the rate of the market, and doesn’t lose market share, you usually don’t get any product management credit.
Bottom line: growing at the market rate is table stakes, but it’s not winning.
Beat competitors more – increasing the win rate
This is also known as “taking away market share.” How do you do it? Especially if you have to do it right now and you don’t have the luxury of adding new features? This is all about go-to-market: helping sales and marketing tell the story of your product better, giving them better tools for objection handling and de-positioning the competition, creating the best possible demonstration. Bottom line, this is about convincing prospects that your product solves their problems better than the competitors do. If you can do that, you can win more deals.
Of course, over time you can also add features that help you in competitive situations. But you can’t do that today, so you need to use other tools in your quiver.
Get into more deals – generate more leads, increase sales velocity
How does product management have influence on more leads and faster closes? This is also a go-to-market issue. Many of the techniques you use for winning more deals can also help you get into more deals. Telling the story of your product better, especially using effective social proof showing how customers’ lives were improved due to your product, can have a big impact. And it’s a lot quicker than adding new features.
Decreasing the time to the second sale is another important goal for getting into more deals. (New sales to existing customers are among the most attractive of all deals!) How do you get to the second deal faster? By making sure the customer’s initial experience is so successful that they can’t wait to buy more! Again, what are your options? Over time you can add features and capabilities to make the initial experience better. But in the short term you can give them better training and documentation, focused on solving the business problems your product addresses. And you can offer online videos that show how to quickly and easily do important functions.
Increase average deal size
There are tactical ways to increase average deal size, and strategic ways. For example, you can focus your sales efforts on your biggest prospects, and not pursue smaller deals. If you can win either size of deal with a comparable effort, this makes a lot of sense as a tactic. This is not so much a product management decision, although of course you have input into some of these sales decisions.
Our focus as product managers needs to be more strategic than tactical in this area. Larger deals, especially in business software, are often dependent on “enterprise-level” features or capabilities. Those are longer term commitments from the you and the product team, and usually can’t make a short-term difference, despite their importance over the long term. But there are sometimes short-term workarounds. For example, a partnership with another vendor with a complementary product that addresses one of your enterprise-level shortcomings.
Get into a new segment or market
Now, this is where the real fun is! New products! New features! You’ve been working on keeping your product portfolio pipeline full, right? You have plenty of validated new product ideas to choose from, many of which will open new markets for your company. Some will be extensions of the existing product that will enable you to sell higher, or sell to adjacent markets. Some will be completely new products that will address completely new business problems.
Remember that for most successful product companies, 50% of their revenue comes from products introduced in the last three years – you have to keep that pipeline full and pumping out great new stuff.
Let’s make some money!
Our job as product managers is not to “make products” but to create solutions to market problems that people will buy. There’s only one reason people buy business software – to solve business problems. And there are only five ways to sell more of it.
Let me know what you think of this post. I’d love to hear your reaction – and how you’re handling this problem of making more money.