Podcast Summary
Discussing product market sales fit: Technical founders must shift focus from technology to user and customer adoption, understanding key milestones, frameworks, and potential levers like services or pricing for both product development and marketing.
For enterprise and B2B startups, especially those with technical founders, finding product market fit requires a strong sales strategy. The relationship between product and sales is tight and informs each other in both directions. During the pre-product market fit phase, focusing on user adoption and engagement is crucial. Engineers may be obsessed with technology, but without good UI, UX, and user adoption, it doesn't matter. After product market fit, the challenges shift to selling and scaling sales organizations. However, for many enterprise businesses, selling involves finding users in the first place, making it a chicken-and-egg situation. In the conversation between Jyoti Bansal, Peter Levin, Satish Taluri, and Hosonal Chokshi, they discuss key milestones for both product development and marketing, frameworks for different phases, and the role of additional levers like services or pricing. The conversation goes beyond the typical discussion of product market fit to product market sales fit, which impacts product design, services, pricing, and product management. Technical founders need to shift their mindset from focusing solely on the technology to understanding the user and customer adoption.
Starting with both product features and go-to-market strategy: Identify target market's pain points, design product with go-to-market strategy in mind, essential in today's market, not just about product-market fit, but also product-market sales fit, build a product that effectively addresses customers' needs and scales business.
When building a business, it's crucial to consider both the product features and go-to-market strategy from the beginning, rather than viewing them as separate phases. This is particularly important for technical entrepreneurs targeting small to medium-sized businesses. By starting broad and identifying the target market's pain points, entrepreneurs can then narrow their focus and design their product with the go-to-market strategy in mind. This tight coupling of product and go-to-market is essential in today's market, where sales, marketing, and product development are increasingly intertwined. As one entrepreneur shared, it's not just about product-market fit, but also product-market sales fit. In other words, it's about finding the right market, the right product, and the right sales strategy that works together. By following this approach, entrepreneurs can build a product that effectively addresses their customers' needs and scales their business.
Aligning product features, target audience, and sales motion: Identify potential buyers, their budgets, and involve sales teams to understand user pain points. Freemium strategies may not work for complex products. Product must solve a significant problem or offer substantial improvement to appeal to customers and secure budget allocations.
The alignment between a product's features, the target audience, and the sales motion is crucial for success, especially in the early stages of a business. Freemium strategies may not work for complex products, and the product should reflect the target market and sales strategy. Founders need to identify the potential buyer and budget for their product, even in new markets, and involve sales teams to understand the user and their pain points. The product must solve a significant problem or offer a substantial improvement to appeal to customers and secure budget allocations.
Learning from sales calls to identify customer needs: Engineers joining sales calls helps in understanding customer needs, improving sales process and creating effective business cases. Adopting a bottoms-up or tops-down sales strategy can be effective depending on the product, market and business goals.
Breaking down the barriers between engineers and customers is essential for understanding the sales motion and creating effective business cases. At AppDynamics, engineers were encouraged to join sales calls to learn the sales process and better understand the customer's needs. This approach helped the company monetize their technical product by identifying and addressing pain points within organizations. Navigating sales strategies in complex enterprises can be challenging, as different departments may have varying budgets and decision-makers. Companies can adopt a bottoms-up approach, starting with individual users and expanding organization-wide, or a tops-down approach, targeting decision-makers and larger budgets from the beginning. AppDynamics employed a "sandwich strategy," combining both approaches, allowing for free use of their product for end-users while also targeting larger deals through traditional enterprise sales. Ultimately, the most effective sales strategy depends on the product, market, and specific business goals.
Services as a Driver of Growth and Customer Satisfaction: Services lead to larger deals, higher renewal rates, and increased customer satisfaction through successful implementation and utilization of the product, as well as custom features.
Services play a crucial role in enterprise sales and adoption, despite the initial perception that they reduce margins. Services can lead to larger deals and higher renewal rates, and they provide value to customers by ensuring successful implementation and utilization of the product. From a product standpoint, services enable the inclusion of custom features that may not fit into the core product. Ultimately, the balance between product and services should be carefully considered to maximize adoption and revenue. Services are not just a necessary expense, but a driver of growth and customer satisfaction.
Balancing customer needs and future growth: Product teams should prioritize 2/3 of their resources towards existing TAM and 1/3 towards future expansion, while maintaining a balance between addressing immediate customer needs and investing in future growth.
Product development and sales are closely interconnected, and both influence each other significantly. When it comes to the early stages of a company, customer feedback plays a crucial role in shaping the product. The product team should listen carefully to understand what features will help them secure their first customers. Once the customer base grows, priorities shift towards addressing customer needs to ensure their continued success and adoption. However, there's also a need to expand the product to cater to future customers and markets. This requires a balance between addressing immediate customer needs, keeping existing customers happy, and investing in future growth. The product team should invest 2/3 of their engineering resources towards their existing Total Addressable Market (TAM) and 1/3 towards expanding it. Changing both the product and sales motion simultaneously can lead to disruptions, so it's essential to leverage existing sales motions where possible to expand the portfolio.
Treat new products as startups within a company: To ensure success for new products, isolate them from existing sales teams and allocate separate resources for dedicated sales focus and expertise
When introducing a new product in a company, assuming the existing mature sales organization can handle it may lead to failure. This is due to the different market motion and sales process required for a new product. Companies like AppDynamics learned this the hard way when they tried to have their mature sales team sell their second product, only to have them struggle and reject the new product. To overcome this, it's essential to treat the new product as a startup within the company, with a separate sales team and sales learning curve. This allows for the necessary focus, expertise, and attention to be given to the new product, increasing the chances of success. However, this comes with added costs, as new hires and resources are required. The analogy of isolating one variable in research studies applies here, as diagnosing the specific problem of the new product requires focus and dedication. Ultimately, the success of a new product depends on its own unique sales learning curve and the ability to provide it with the necessary resources and expertise.
Introducing a new product to a sales team: Plan carefully, involve experts initially, create a SWAT team, focus on key areas, and recognize successful sales to build momentum.
Introducing a new product to a sales team requires careful planning and execution. During the initial stages, it may be beneficial to have product management and other experts sell the product to establish a strong foundation. However, as the product matures, the existing sales force can take over. Creating a SWAT team to sell the new product and train the rest of the salesforce can be effective, but it's important to focus on a few key areas and not release too many products at once. This can help maintain productivity and focus within the sales team. Additionally, recognizing and promoting successful sales of the new product can help build excitement and momentum within the team.
Prioritizing initiatives for a startup's success: Determine long-term revenue goal, find intersection of organic and inorganic growth, consider engineering resources, addressable market, new opportunities, speed to market, and competitors.
Focusing on a clear and prioritized list of initiatives is crucial for a startup's success. The process of determining this list involves considering engineering resources, serving the currently addressable market, and exploring new opportunities. A helpful method is to work backwards from a long-term revenue goal and determine what the business would need to look like to reach that goal. This requires finding the intersection of what can be built organically and what must be acquired or licensed to meet the revenue objective. Additionally, the discussion touched upon the importance of considering speed to market and competitors when deciding between building from scratch or acquiring existing solutions. In summary, prioritizing initiatives and finding the right balance between organic and inorganic growth are essential for a startup's path to a significant revenue goal.
Simplify and Measure Pricing for Smooth Sales: Founders should price based on business value, use simple, measurable pricing, justify value to customers, avoid complex pricing models, and provide certainty for enterprise customers.
When it comes to pricing and packaging for a product in a go-to-market strategy, simplicity and measurability are key. The speaker emphasizes that pricing should be based on the business value and that it should be easily explained in a simple, measurable way to customers. He suggests that founders should price higher than they think they should and be able to justify the value to customers. The speaker also advises against creating overly complicated pricing models and instead encourages using models that are familiar to customers. Additionally, he highlights the importance of providing certainty and predictability in pricing for enterprise customers. In essence, the simpler and more measurable the pricing, the smoother the sales process will be.
Implement a structured sales process with a business value assessment: Understand customer's current state, potential savings, and ROI to price products appropriately, enabling sales to convey premium positioning and internal champions to continue advocating for value, leading to higher premiums.
Founders should ensure they're not leaving value on the table when selling their product or service by implementing a structured sales process that includes a business value assessment (BVA). This process involves understanding the customer's current state, potential savings, and ROI to price the product appropriately. The value to the customer is best defined by asking them how they would justify the business case to their boss. By enabling sales to convey the premium positioning and playing back the ROI, internal champions can continue advocating for the value, helping to extract a higher premium. While the value may be the least measurable one, understanding it is crucial for product-market fit. By looking at competitors' offerings and how customers have budgeted for the overall technology stack, founders can gain insights into defining the value they're providing.
Communicating Superior Value to Customers: Effectively selling a product's value to customers justifies higher prices. Understand customers, build a sales team, and use the marketing mix to define product aspects.
Understanding and articulating the superior value of a product to customers is crucial for setting the right price. The speaker emphasized that customers are willing to pay for value and that charging more than expected can be justified if the value is clearly communicated. He also highlighted the importance of having a sales organization to effectively sell the value of a product to customers. The speaker's experience at Abnodynamics, where they resisted downward pricing pressure and charged higher than their competitors, is a testament to this approach. The pricing strategy should not be considered in isolation but as part of the marketing mix, which includes product, pricing, promotion, and place. A good product manager should have an intimate knowledge of the customer and use that understanding to define these aspects. The ideal product management team composition depends on the audience, but the first job of a product manager is to understand the customer and be their voice.
Balancing customer empathy, business acumen, and execution skills in product management: Founders should focus on mastering essential skills for their company's current stage, adapting to evolving needs as they grow.
Effective product management requires a balance of empathy for customers, business acumen, and execution skills. Product managers need to understand customer needs to define products, collaborate with sales teams to position value and pricing, and work with engineers to execute and deliver products. However, these skills can be quite diverse, and it's common for product management teams to consist of individuals with complementary strengths. Founders, especially those in the early stages, should focus on mastering the skills necessary to reach the next milestone rather than worrying about future product iterations. As companies grow, the required skills and organization change, and founders should focus on excelling in each stage before moving on to the next. Jyoti's advice emphasizes the importance of iterating and adapting to the specific needs of each stage in a company's growth. By focusing on the present and mastering the necessary skills, founders can build successful products and teams that evolve with their companies.