Once Again, Great Product Management Wins

By Avi Deitcher

2015 Apr 3

I often notice the incredible value of great product management. Unfortunately, it is something many experienced people do not get, simply because it is the one area of a business, and especially a startup, that cuts across the company. Every other group has a clear line of responsibility:

Engineering builds the product.
Marketing defines who will buy it and drives awareness.
Sales sells it.
Customer support supports it.
Finance manages the cash, P&L and balance sheet.

And product management... "manages" it?

The response I hear most often is, "What the heck does that mean?" Because of this lack of understanding, many companies hire "product managers" - only because their Board tells them they need it - without really understanding the purpose and goals of the job.

The results are predictable. I have seen product managers who:

Would be great scientists, but are clueless about product.
Do not understand a thing about product, but would do fine in marketing.
Really just want to be building product as engineers or designing them as architects.
Actually do get how to do product, but have no authority because the CEO who hired them doesn't get it.

Product management isn't where you do the skunkworks projects; it isn't a place to do advanced R&D or patent writing; it isn't where you build marketing plans, or architect the product.

Product management is where you define the product. What needs to be in the next release and when? Why? How does that impact the market and sales, in the next quarter and in the next 60 quarters? What does it mean for the CFO? What different versions and tiers of product should we have, and how will it impact our ability to sell?

Product management is the nexus and ownership of everything related to a product in the company.

Just this morning, I came across another great example. While working with a company building an online subscription-based product, we reached the point where it was time to decide what features will be in different tiers.

Everyone had a different perspective:

Engineers wanted to see all of the features used, and can build anything.
Marketers wanted to market all of it.
Salespeople wanted whatever structure will allow them to sell more of it.

No one perspective, though, focused on the company's growth as a whole. As Patrick Campbell from Price Intelligently shows repeatedly, especially here and here, knowing what to offer and what not to offer, and anchoring prices, can have an enormous impact on number of sales and value per sales. These combine for a much higher revenue and much higher recurring revenue, which combine for more cash in the bank and a higher valuation... even - or perhaps especially - when no one will buy the lower or higher tier.

The key to this morning's issue was precisely that: anchoring. Only a great product manager would recognize the need for 3 different price points (plus free trial) in this particular situation, and what needs to be in each offering. For example, the Basic plan needed 1 unit of capability per time period, the Advanced plan needed 3 units, and the Pro plan 7 units.

Further, despite the fact that there is very little value in an additional feature, removing that feature from the Basic plan but making it available in the Advanced and Pro plans. Doing so creates an important higher perception of value in the higher tier plans, which drives more customers towards those plans.

In order to recognize it, we had to understand:

What was possible and how complex it would be: engineering.
The sales impact: sales and finance.
The customer psychology, whether it would drive customers into the Advanced plan, or drive them away entirely, and at what price points: psychology.

This nexus of technology, sales, marketing, finance all comes together in product management.

Summary

Great product management, whether in the role of a product manager or as provided by an advisor who truly gets all of the moving parts, can be the difference between rapid growth and happy customers on the one hand, or slow growth and disappointed customers on the other.

How much of your product set is well managed? How much revenue growth are you leaving on the table? Ask us.