Unlocking Product Success:
5 Key Drivers

Read on my website / Read time: 5 minutes

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Today, I'm going to give you a crash course in marketing and finance - two things most product managers ignore.

Every product has performance drivers - the metrics that have a material impact on the success of our products.

Unfortunately, most product managers - and product leaders - focus on lower-level local metrics (usability and heat maps) and process metrics (sprint velocity, burn down) and ignore the true indicators of product success.

What I'm talking about here are the drivers that directly impact the revenue growth and profitability of our products.

"But product management can't directly deliver revenue and profit," I can hear some protest.

On the contrary, product management has the most critical influence on the financial performance of the product.

I've talked before about how the #1 KPI for product management is Return on Invested Capital. There are two aspects to this:

• Net revenue growth
• Margin velocity (i.e., speed to profitability)

As product managers, we have the ability and the responsibility to drive revenue growth and margin velocity.

We're not directly delivering sales, running marketing campaigns, or taking customer support calls. Of course not. We're supposed to take a strategic view of these as they relate to our product strategy.

As such, we have MANY levers at our disposal to influence revenue and profit.

So, today, I'm going to break down the keys to product success into five key categories:

1. Positioning & Pricing – How we define value and extract it from the market.
2. Marketing & Sales – How we acquire, convert, and retain customers.
3. Direct Product Costs – How we control direct costs to improve margins.
4. Speed-to-Market – How we improve productivity and time-to-market.
5. Strategic Investment and Allocation – How we allocate capital, structure budgets, and prioritize initiatives.

Now, normally, I write about ground level tactics. Today, I want to focus on the big picture levers available to product management that drive results.

The goal is to get your wheels turning - to help you reframe aspects of your product's business and recognize which drivers are shaping your outcomes.

Once you've identified your key drivers, you’ll be able to integrate them into how you measure the success of your product.

Let's dive in.

1. Positioning and Pricing

Remember: the job of product management is to deliver monetizable customer value -

How our product fits into the market determines how much value we can extract from customers. (Some call this product/market fit.)

The key levers we can pull:

1. Product Differentiation – Ensuring our product stands out while meeting customer needs.
2. Pricing Strategy – Aligning price with (a) perceived value, (b) market demand, and (c) profitability.

The Differentiation Problem

Most product managers don't fully understand where their products sit in the market. Are you offering something unique or are you selling a commodity?

If your product comes across as the same as everyone else's, there's little incentive for a customer to buy it.

The key questions are:

• What makes your offering different?
• Does that difference justify a different price?

Thus, messaging and pricing alone can shift your market positioning and affect the perceived value of your product.

I love hamburgers. I can get one for $25 at a fine restaurant, $15 at a diner, $10 at a fast casual joint, or $2 at a fast food drive-through. Furthermore, I can choose between a number of fast casual places - Shake Shack, Burger 21, Big Buns, etc. I can choose between a number of fast food options - McDonald's, Burger King, Wendy's, In-And-Out, etc.

They all differentiate in 4 ways:

1. Quality of Offering: ingredients, preparation, and presentation.
2. Diversification of Offerings: McDonald's will offer a plethora of burger options. A fine restaurant will have just one.
3. Dining Experience: the ambience, the service, even the way the tables are laid out.
4. Messaging: Fast food brands invest heavily in TV ads that always feature young adults or families with small children. Fine dining restaurants rely primarily on word of mouth and organic search, and their imagery features an upscale experienced with a group of adults or a romantic couple.

Each of these are levers that can be pulled to communicate how your product is positioned in the market. They combine to create a specific brand experience, which translate to visual and emotional cues that will attract a certain type of customer to that business.

So it's vital that these levers are aligned with pricing to ensure customers feel like they're getting the right value.

For $2, I expect a no frills burger with no service. But, for $25, I not only expect a premium quality piece of meat cooked to perfection, but I sure as heck expect to be waited on and pampered with a high level of personalized service.

Even small businesses send signals. A contractor with an unbranded truck and no website tells customers: "I'm your guy, no frills." A polished brand with a clean online presence signals professionalism and will attract a different type of customer.

What this means for product management: Partner with your marketing team to make sure your product is being positioned correctly:

• How is the product being messaged?
• What benefits are being communicated?
• Why is it different than the competition?
• Does the messaging match the price?

Maximizing Monetizable Customer Value

Customers must feel like they’re getting more value from our solution than they’re paying for it.

So the goal is to price based on perceived value relative to other options.

• Walmart signals low price, which may mean lower quality, but that's the value customers expect.
• Whole Foods signals premium quality, justifying a premium price, which attracts a different crowd.

Is $25,000 a good price for a car?

• If I'm a premium brand, like Lexus or Mercedes, a $25,000 price point may, in fact, turn away customers. They may think they're getting short changed somehow. It just doesn't fit the perceived brand value.
• On the other hand, that price point maybe perfect for a value brand, like Kia.
• And my expectations will be different if I'm shopping for a used car.

Pricing isn't a one-size-fits-all equation. It's part finance, part strategy, and part art, and most product management teams don't give it enough thought. This needs to change.

Every decision about your offer, messaging, and pricing should reinforce a clear, intentional market position.

Start by refining your message. Then make sure your pricing is aligned with the value customers see in your product.

2. Marketing & Sales

How you attract, convert, and keep customers is the engine that propels product growth. It can mean you're either maximizing long-term revenue or not.

Too many product management teams ignore these, preferring instead to focus on feature delivery (because it's familiar and comfortable) in the hopes that features will propel product growth, when, in fact, that could be minimizing product growth instead of maximizing it.

There are 3 key drivers:

1. Demand Generation: Finding and reaching new customers cost-effectively.
2. Customer Acquisition Cost (CAC): Speed and cost to get a new customer and ensure it's profitable relative to lifetime value (LTV).
3. Retention & Lifetime Value: Maximizing revenue from existing customers through loyalty, upsells, and repeat purchases.

Demand Generation

Most PM teams ignore demand generation - "That's Marketing's job," they declare dismissively.

However, I've found partnering with Marketing to be one of the most powerful ways to understand our target market.

Your Marketing team is likely tracking a metric called Marketing Qualified Leads (MQLs). MQLs are potential customers who have shown a significant level of interest in your product, thus, indicating a higher likelihood of becoming a paying customers.

Understanding how this works can tell us a lot about:

• Where our target customers are.
• What type of messaging they are responding to.
• What their key concerns are when looking to make a buy decision.

Most PM teams focus almost exclusively on existing customers. Discovery should always involve prospective customers as well.

Looking at MQL data is a way to get insights into those prospects early in the buying cycle, which can have a big impact on our product strategy.

Customer Acquisition Cost (CAC)

Your CEO and head of sales are tracking this very closely. If it costs too much to acquire a new customer, there won't be a business.

This is another one that too many product management teams punt on - "That's for Sales to worry about," they brush off.

Wrong.

There are many things product management can do to help reduce this cost - for example, by helping accelerate the sales process.

At one company, our sales cycle length (average time to win a deal) was 25 weeks. Part of the reason was the time it took to stand up a customer demo. We worked on an initiative that allowed the sales team to configure demos on their own, no longer requiring an engineer or PM to do it.

This not only resulted in a savings of $50k per quarter or $200K per year at $1000 per demo, but brought down our sales cycle by an average of 2 weeks - a 9% economic improvement.

I talk about using sales velocity in this article and teach how to use it for strategic roadmap prioritization in my course, One Week Product Roadmap.

Customer Lifetime Value (LTV)

Customer Lifetime Value (LTV) is one of the most important metrics, but one I rarely see product managers understand.

LTV = Customer Value × Average Customer Lifespan

Example:

• A customer buys a $50 shirt, four times over two years.
• Their total value = $50 × 4 × 2 = $400
• If your margin is 15%, their value to the business is $60.

A slightly more complicated formula:

LTV = ARPU * Gross Margin * (1 / Monthly Churn)

Where ARPU = average recurring revenue per customer.

If Customer A is on a $100 monthly plan and they churn after 1 year, LTV = $1,200.

If Customer B is also on the $100 monthly plan and expected to churn after a year, but upgrades to the $150 monthly plan in month 4 and then again to the $200 plan in month 8, then LTV = $100 * 3 + $150 * 4 + $200 * 5 = $1,900 — a significant difference!

Understanding LTV gives a number of strategic levers for product managers:

1. Reduce churn. Get more customers to stick with the product.
2. Increase customer lifetime. Get customers to use with the product longer.
3. Increase ARPU. Get customers to spend more - value-added features, upsells, cross-sells, higher pricing, etc.
4. Improve Gross Margin. Reduce product costs and costs to serve customers.

Balancing CAC and LTV

If CAC is $30 and LTV is $60, your product is making $2 for every $1 spent on acquiring a customer and your product is likely to be successful.

If CAC is $60+, your product is losing money every time you acquire a customer and it will fail. Doesn't matter how many cool features you build into it.

3. Direct Product Costs

This one is often more intuitive for product managers because reducing costs is more directly tied to delivering their products.

Direct product costs directly hit margins (i.e., product profitability). So, a small reduction in product costs often outweighs large cuts in overhead. For example, negotiating a 2-3% decrease in supplier or 3rd party vendor costs can have a bigger impact than a 10-20% in process efficiency, because product costs often scale with revenue.

For example:

• Say the product gross margin is 40% and profit margin for the business is 15%.
• For a $1M revenue business, a 1% increase in gross margins adds $10,000 in net profit - a 6.7% profit increase ($150,000 → $160,000).
• On a $10M business, that same 1% shift means $100,000 in additional profit.

Small improvements compound as you grow. Getting these cost structures right makes scaling easier and more profitable.

For a software product, the main ways to optimize product costs fall into five categories:

1. Infrastructure & Platform Costs - for example, cloud hosting, security services, other software tools, etc.
2. Computing and Processing Costs - for example, transaction costs, data processing and computing costs (especially relevant for AI/ML or processing heavy products).
3. Vendor Costs - 3rd party vendor licensing fees.
4. Implementation Costs - costs to deploy / implement / configure your solution for any one customer.
5. Support Costs - costs to support the product, such as customer support requests and engineering support costs.

For a hardware product, the main ways to optimize product costs fall into three categories:

1. Supplier & Material Costs – negotiating better deals, alternative sourcing, and cost-efficient materials.
2. Production & Process Optimization – reducing per-unit costs.
3. Supply Chain & Inventory Management – avoiding excess costs related to logistics and inventory.

Each of these represent levers for product management to pull to improve product profitability. Key questions to ask are:

• Does this supplier / vendor / 3rd party still provide the best value at our current scale?
• Are there better pricing structures or service levels we could negotiate?

Revisiting your product costs regularly, especially as your product grows, ensures you're not leaving easy money on the table.

4. Speed-to-Market

This is all about how quickly we can get our product into customer hands.

The quicker we can do this, the faster we can satisfy customers and generate revenue.

Speed-to-market should never be about cutting corners and sacrificing quality. It's about having a strategic approach to how to get product to market.

There are 2 drivers of this:

1. Product development - how quickly (and profitably) we can develop the product, feature, enhancement, or bug fix and make it available to customers.
2. Product delivery - how quickly (and profitably) can we deliver the product to a paying customer so they can start using it.

​I've written extensively about this in this article, so I won't repeat it here.

The levers available to product management are:

• Scope - how much functionality do we really need right now?
• Timing - is there a way we can get this out sooner?
• Resources - how many humans, tools, and systems do we really need to develop this thing? (More doesn't always mean faster.)
• Process - what's the best process that helps us get this out the fastest?

5. Strategic Investment and Allocation

Your company is investing considerable resources in managing and growing your product. Given that product management's job is delivering monetizable customer value and its #1 KPI is ROI, product management is at the forefront of ensuring this investment is paying off.

This happens at 3 levels:

1. Portfolio Management (highest level) - deciding how to allocate capital to the highest ROI opportunities based on the top-line business goals and strategy. Typically led by the primary product executive(s).
2. Budget Allocation (mid level) - deciding how to allocate resources along strategic investments. Typically collaborative between product executives and middle management.
3. Strategic Roadmap Prioritization (line level) - how to prioritize individual product roadmaps and align them with goals and outcomes. Typically led by product managers with buy-in from product leadership.

Product Management teams should ask themselves: Are your product investments helping you grow, or are they holding you back? The answer will determine your path to sustainable product success.

Wrapping Up

Product Management teams are comfortable analyzing feature performance, technical workflows, usage patterns, user satisfaction, and even delivery metrics. While these are useful, none of them will tell you whether your product is truly successful.

It's only by going through the different business elements of your product that you can ask the deeper questions needed to analyze these success factors.

The specific variables important for your product may vary. There's no one-size-fits-all answer. This article presents a sampling to get your wheels turning.

Your Action Item This Week: What are the variables that impact your product's success?

That's it for this weekend.

Have a joyful week, and, if you can, make it joyful for someone else too.

cheers,
shardul

Shardul Mehta

I ❤️ product managers.

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