What Can You “Sell”?
Episode #4 of the course Intro to Product Management by Ellen Chisa
Once you feel like you have something people want or need based on research, a Product Manager needs to assess what will be viable.
There are two primary ways this works.
(1) In most business-to-business software, the Product Manager evaluates what people will pay for. If you can sell a spreadsheet prototype of your product to a customer, chances are you’re onto something. Some consumer scenarios work basically the same way. While consumers are unlikely to pay for a spreadsheet, there’s lots of consumer software that people are willing to pay for.
The simplest way to test this is to actually sell something. If you can build something simple and customers are already willing to pay, that’s great. Another option is to test if customers would be willing to pay later. Hemingway App, a writing tool, added a button for “$5 to buy the desktop version.” Enough users on the free website version tried to download that it was worth investing in the desktop product. Oftentimes, when you see a product that’s “out of stock” indefinitely, it’s a PM testing if people are willing to pay.
The next level of this is making sure customers are willing to pay enough. A PM should be thinking about how much a customer costs to acquire (CAC) vs. how much money the customer will generate for the company over their lifetime (Lifetime Value, LTV).
(2) The other option is in consumer software that isn’t focused on direct monetization. This is based on generating a large user base that’s valuable to advertise to.
In this case, you should be more concerned with the metrics around getting more users, not metrics around payment. The most common set of metrics used for this is “AARRR”— Acquisition, Activation, Retention, Referral, and Revenue, as coined by Dave McClure.
Keeping track of users as they go through this process is considered funnel analysis. A PM will focus on where and why people are dropping off. If you have lots of users visiting your site but no one signs up, your value proposition might not be coming through. If you see lots of users sign up, try the product once, and leave, that’s another problem.
No matter which model you’re using, a PM figures out what’s happening to users as they sign up and pay for (or just use) the product. If the company isn’t meeting its goals, the PM figures out where the problem is and how to resolve it.
Product Marketing for Pirates: AARRR! by Dave McClure
“The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” by Eric Ries
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