Talk to any product manager and they can tell you, when a new product gets introduced, the product manager becomes a part of the sales team for at least awhile – that’s almost a part of the product development definition. What this really means is that you are going to get caught up in the process of talking to and helping to prepare estimate / RFP responses for prospective customers. Is this really the best way for you to be spending your time?
Cost vs Benefit
The reason that we’re having this talk today is because one of my readers reached out to me with a common product manager complaint. His point was that he believed that he was spending way too much time working with prospective clients because only a small number of them ever actually turned into paying clients in the end. This wasn’t something that he was going to be able to add to his product manager resume.
We got to talking and he admitted that he was grateful that his product was generating enough interest that he had this problem. However, he was wondering if he (or his sales team) was doing something wrong because they weren’t able to convert more of these prospects into customers.
We got to talking and my first question to him was “what is your conversion rate” – how many of these prospects are you turning into customers? He reported that he was only able to turn about 21% of these prospects into customers. Well now – it turns out that his product must be a fantastic product because every product manager’s goal should be to turn one out of every 5 prospects into a paying customer – and he was doing better than this!
My reader indicated that he was spending his time in a number of different ways. He’d talk with customers when they first expressed an interest in his product (sales would hand them off to him because the product was so new). He’d create an estimate for them as the next step. If the prospect liked the estimate, then he’d create a full blown proposal for them. He would also follow up with the prospects who received an estimate but who didn’t request a proposal.
How To Get The Best Return On Your Time
I spent some time with my reader going over how much time each step in his process was taking him. We figured out how much his company was paying him per hour and did some rough back-of-the-envelope calculations.
What we were trying to do here was to figure out just how expensive it was for him to be spending his time working on those estimates and proposals that were not resulting in a paying customer. In the end it turned out that these lost prospects came out to be roughly 7% of the sales of his product.
Now 7% of the sales of your product may or may not seem like a lot of money to you. I would ask that he not view this as lost money. Instead, it’s better to view it as being a type of investment – perhaps a specialized type of advertising that is helping him to acquire the 1 out of 5 customers that he is getting.
However, there was one key learning lesson to be had from all of this analysis. He was spending too much time trying to reach out to the prospects that got estimates but who did not request a full proposal. His efforts to contact them were not really having any positive results and he already had enough customers. This was clearly not the best use of his time. If his company thought that it was important to do this, then have the sales teams make those calls.
What All Of This Means For You
Product managers will often get drawn into the sales process when a new product is introduced. Although this may not be a part of your product manager job description, it turns out that this is only natural because we are the ones who know the most about the product. However, this can take up a great deal of your valuable time.
What product managers need to do when they are feeling overwhelmed is to run some numbers. Take a look at how many of the prospects that you are dealing with are turning into actual customers. If you are anywhere near the 20% mark, then consider yourself lucky – you are right where you need to be.
If you are spending your time trying to chase the prospects that “got away”, you may want to rethink your actions. Depending on how close you are to the 20% conversion point, it may not be worth your time to be chasing these potential customers. Take a look around your company and see if there is any other department that might be better suited to taking on this task.
Question For You: If you are not converting enough prospects into customers, what’s the first step that you think that you should take?
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What We’ll Be Talking About Next Time
One of the joys of being a product manager is that our products are always getting better. What this means for our customers is a never ending cycle of upgrades. Something that is probably not talked about enough is the issue of how to get your customers to upgrade (although we do this so often that it really should be part of the product development definition). You really don’t want to have to support old versions of your product for very long, but customers fear change. What’s product manager to do?