In a growing tech company, sales needs product management and vice versa, but, too often, these two functions don’t get along. The result can be disastrous: Misaligned products, missed sales goals, lots of finger pointing, and too much employee turnover. As you think about scaling your company, you should ask yourself this critical question:
How do we get Product Management and Sales working from the same script?
The answer has multiple elements. The rewards for getting the answer right can be life changing.
Intro to Sales vs. Product Management
The missions of sales and product management are very different. Sales managers and sales people think about quarterly and annual targets and incentives. Product managers think about the product lifecycle, market share, and competitive positioning. As a result, sales people describe product managers as “disconnected from customers.” Product mangers use terms like “coin operated” to describe sales people. And that’s on a good day! In reality, your product management and sales teams need each other to build and sell successful products. Let’s define the elements you need for a successful Product Management – Sales collaboration:
- Respect for the roles that product managers and sales people play.
- Create clear lines of communication and feedback loops that you actually use.
- Define the rules of engagement with customers for new products, feature enhancements, and customizations.
- Bond over an intense dislike of the competition.
- Align success measurements.
- Candidly evaluate successes and failures.
Respect for roles
Successful, scaling software companies need lots of different roles, and sales and product management are two of the most important. Sales people “bring home the bacon” – providing fuel needed to build new products and provide a good return to shareholders. In the software industry, really good sales people make more money than the CEO – thanks to the hefty commission checks they receive for making their number. Product managers shepherd products to market and manage them throughout their product lifecycle. Without product managers, there would be nothing to sell. Product managers also have visibility into the entire market and can often maximize the success of a product in ways that benefit an entire sales force. So both product managers and sales people bring great value. Kill the name calling, and, if it creeps back in, kill it again.
Communication and feedback loops
Product managers need input from the field, and sales people need to know what’s coming down the product pipeline. You need communication channels to exchange information. Informal communication between product managers and sales people is good; structured communications processes to serve a specific purpose are better. Here are some examples of structured communications:
- Add an interested and experienced sales person, who is good at articulating product needs, to structured product planning sessions.
- Ask for guidance from sales people on pricing structures that will win deals. Sales people go belly to belly on pricing with customers daily. They know the structures, pricing levels, and payment terms that work best. And some of them just love modeling out the price.
- Provide multiple channels for contributing product and competitive feedback. Examples include dedicated e-mailboxes. Slack channels, and a voicemail box. Check those channels every day, route the information to right person, and acknowledge the feedback quickly.
- Put product managers in the field frequently to visit customers with sales people in tow. Most of the time, these meetings aren’t pitched as sales calls but rather as information exchange sessions. Your product managers get information that will help create new and improve existing products. Sales people get to see their customers and prospects at work without the pressure of closing a deal. And deep bonds between product managers and sales people are forged. Sales people love it when colleagues in other departments devote time to making them money, and they don’t forget it.
Define the promises you can make to customers
You’ve absolutely got to define what sales people can and can’t say about your current and future products. And forget about promising those features you don’t quite have (and might not have for a long time), because this only gets your company in hot water with your customers and provides excellent ammunition for more disciplined competitors. Here’s a shockingly common example of what can go wrong:
- A competitor releases a new product that leapfrogs some parts of your product, although your product is still highly viable.
- Your next release, which leapfrogs the competitor, isn’t due for 9 to 12 months.
- Your sales team proposes customizations that provide kludgy versions of the desired features.
- Unfortunately, implementing those features requires the developers who are working on the next generation of the product.
- Sales signs a contract committing the company, but neglects to tell product management and the development team.
- The next release of the product is delayed for all of your customers, because the development team is diverted from the planned roadmap.
- Competitors take advantage of the delay to steal market share.
Let me outline a better way:
- You create an agreement between product management and sales about what to say about future releases. Companies always sell the roadmap, but there is a delicate balance between selling the vision and vaporware. Selling more than 3-4 months ahead of the curve almost always works against you for two reasons:
- Inevitably, some of the features don’t end up in the product, and customers are disappointed.
- Customers keep their money in their pockets and wait for the new product.
- Build your product to accommodate some level of customization. With enterprise software products, there are generally three areas where customizations occur: UI/UX, workflow, and integration with third party products. If you can accommodate these three types of customizations without breaking your product, you can accommodate between release feature demands. You also give sales people the ability to respond to customer needs, AND you get great feedback on what customers want to do with your product.
- Make sure product management owns the release of next gen product information to customers, but let sales play a key role. Plugged in sales people know which customers are likely to want a sneak peak new functionality as Beta testers. They also know who might be evaluating competing products and need to be reassured. Therefore, it’s in the best interest of product management and sales management to collaborate to seed information on new releases to strategic customers.
Competition is a uniting force
Competition steals the bread from the pockets of your sales people and makes your products look stale. Beating back competition is central growing a successful business. Sales people are natural hoarders of information, because, well, knowledge is power and makes them look good relative to their peers. You should create incentives for sales people to share competitive information with product management in an easy and informal way. Remember those addresses and Slack channels? They can be used to funnel info about competitors, too. If you have a pretty good sized sales force, one competitive nugget per month should do the trick.
Align your measurements
Product managers are generally measured based on a total revenue goal for their product. Sales people often have a total revenue goal, which, for larger companies, can be spread across several products. Therefore, product managers face a significant challenge: Getting enough attention from the sales force, so that customers will actually buy their product. It’s a hard, but necessary, problem to solve. Here are the key steps:
- Decide at a corporate level which products are most important to the company. You decide this based on:
- Projected market demand and competitive dynamics
- Revenue and and profit per product
- Projected length of sales cycle, which could vary widely by product
- Skills available in the company to sell and deliver the product
- Which products are in highly profitable maintenance mode and don’t require intense sales effort
It’s a safe bet that most of your new products are in the “most important” category.
- Next, based on this screen, create targets for each product in your portfolio.
- Then translate product targets into a plan for your sales team, so that the product and sales targets are aligned.
Here are some things to consider as you attempt to align your product and sales goals (Hint: A lot depends on how you compensate your sales people):
- You should pay more in commission for new products that are strategic to the company.
- You should consider both the length of the sales cycle and the Average Annual Revenue when you create the targets. Higher economic value + longer sales cycle = higher commission payments – especially for new products.
- You should also pay more for new sales than renewals.
- You should pay the minimum amount necessary to keep sales people interested for high margin products that are in “maintenance” mode. These margin calories fund the development of new products.
- In a growth company or above, a high performing sales force makes 80 percent of the total quota. Weak sales forces make 50 percent. Therefore, you need to set goals that are at least 120 percent above what the actual revenue goals are for your company.
- Generally, a product manager has a revenue goal equal to what’s in the company’s strategic plan, NOT the total target for the sales force. Nevertheless, when both the product managers and sales people have some form of aligned revenue goals, your products will generally perform better.
Evaluate success and failure
Once a product is launched, it can take many months or years to determine whether it is a success. Product managers are graded based on the overall success of the product, and sales people are graded on quarterly and annual sales of new and existing products. You need frequent check ins between product management and sales to gauge the performance of your products. The check-ins can come in several ways:
- Periodically include product managers in pipeline calls, where they can hear what’s going on in the sales cycle.
- Once a product has been released, convene feedback meetings with the appropriate product manager and a select set of interested sales people, where you track the performance of products at different stages of the sales cycle.
- If you get negative feedback or other suggestions that might drive more sales, don’t wait till the next release to act on them. Sales people are the voice of customer in your company, and you need to listen to and act on their feedback.
Finally, you’ve got to brutally honest about the performance of your products. The market changes constantly, and what works today won’t be viable three years from now. How many companies are still using Siebel for CRM or Netscape servers for delivering web pages? Not many. Product managers will love their products till they die, but they should love replacing them with better products even more. And there’s no better way to alienate a sales force than to deliver products that are unsellable, while continuing to flog them to the market.