Marketing invariably gets the blame if the product launch doesn't hit prescribed revenue targets. How should we in product marketing set our launch revenue targets and validate our sales team's forecasts?

1/3 of new product launches do not meet their revenue targets. Why? Combination of poor co-planning by sales and marketing, aggressive competition, changing buyer trends, in addition to being overly optimistic. Listen, I'm not saying to be pessimistic or conservative, but be realistic with your launch aspirations against your resources, budget, capabilities, as well as your market, competition and buyer dynamics.  

One way to improve your launch revenue target forecasts is to incorporate independent reviews from outside sources to ensure an objective, rigorous and unbiased market perspective.

Your product marketing and product management teams (along with your market and competitive intelligence teams in larger companies) should collectively come to the table with quantitative assumptions. These include the number of prospects in the target market, the number of prospects your sales resources can engage with, the average length of a sales cycle, and their sales team's ability to convert prospects or existing customers, and average deal size. Within my company, channel partner sales, upsell conversion rates (esp for products with free trials), limited-time price discounts, existing revenue cannibalization and other contributing factors need to be analyzed alongside your sales leaders. 

However, despite all this analysis, teams struggle to take a realistic outside-in view on their forecasting process. The TAM/ SAM might be too large if you failed to segment down to the target buyers broken down by company size, industry, geo, job role or persona. Your estimated conversion rate is always too high, or your sales cycle length too low (esp if the product is perceived as complex by your prospects). 

As such, build in time to validate your forecasts and assumptions with objective 3rd party analysts, influencers, customer advisory boards, channel partners, and your peers.

These folks regularly speak with your buyers and potentially use your competitor's products, as such, allowing them to provide you with a complete picture of the market. Further, analysts are trained to develop forecasts, provide forecast assumptions, analyze hypotheses, and probe for flaws.

This depends if you're a B2C or B2B company. 

For B2C, you're likely embarking on a product-led growth strategy (if not already). And in this case you should be on the hook for hitting prescribed revenue targets... because you have direct control over the purchase experience.

For B2B, instead of hitting the revenue target set the right pipeline target 30, 45, or 60 days post-launch (depending on your sales cycle). This will force you to think of an integrated campaigns plan at launch, across paid, social, ABM, press, webinars, events, etc. and mobilize all relevant marketing channels in order to drive pipe. Work with your demandgen colleagues to set the right targets here, and work with your sales leaders for proper enablement. In a B2B setting, PMM is not going to have direct impact on sales but you can set the right process & plan to impact.

Two fundamental issues with this blame game:

1) A product or feature launch and a revenue target are two different things, with different time horizons!

2) Marketing should have a seat at the table when the revenue forecasts are created. They shouldn't be "receiving" "prescribed" revenue targets and forecasts from sales.

Let's dive into each issue:

A launch is generally for a new product or feature, which means that there's less precedent for adoption and revenue. Yes, we can look at historical benchmarks, adoption rates for current features and products, and the predictions made prior to launch. But ultimately, those are predictions about signups, upgrades, cross-selling, etc. That's different than an overall revenue target. You might see that signups are strong, but it takes longer than expected for an account to upgrade to paid seats. A launch might have different goals around attracting net-new customers or retaining existing customers. Both result in revenue, but the time horizons differ. And revenue builds over time for SaaS companies (the mix of net-new customers, account expansion, upsell or cross-sell, and churn), so the revenue "at launch" is not indicative of the revenue over time. Set time horizons and track the trends to make changes to the strategy and tactics, but you need to see how it performs over time.

The sales forecast is usually tied to existing pipeline, with the likelihood of closing the deals in the pipeline. While most of these forecasts turn over at the end of the quarter and/or fiscal year, realistically, it's a moving target. If a deal doesn't close in Q4, it's still possible for it to close in Q1, so the "forecast" in Q1 might start higher because of lagging deals from Q4. This has little to do with launching a new product or feature. And if that deal falls through, the team would miss the forecast, but potentially make up for the revenue with a new deal. Marketing should have a seat at the table for these discussions, and leaders should set reasonable targets for quarterly quotas and long-term revenue. The revenue is a mix of factors over a longer period of time, and a single launch shouldn't "miss" in a short time period after the launch. Sales leaders should not be telling marketing about revenue targets. Leaders from across the business should come together to set the targets based on growth trends, investments in key areas, market insights, etc.

I don’t think product launches should be directly tied to revenue targets, especially if the product doesn’t have its own SKU. Product launches are all about making a big splash with something new. They focus on introducing a new product or a significant update to the market. And the primary goals for launches are immediate market penetration, driving adoption, and generating sales momentum (e.g pipeline). 

If your organization is a big proponent of attaching revenue targets to launches, I would advocate for it to be a shared KPI across the GTM teams. PMM (and marketing) shouldn’t get the blame if the organization doesn’t hit revenue targets since it’s not something that’s directly in our control. However, you can still be the strategic DRI in helping the business get there. So it’s critical that you’re bringing leaders from sales, customer success, marketing, revenue operations, and product together to align on launch objectives and KPIs. This should help you get the right benchmarks and historical data to align the group on what’s realistic. Plus, you'll have buy-in from XFN leaders like Sales so that if you're not hitting revenue targets, you can easily initiate a conversation about why that's the case and pull the right levers to get things on track.

In my opinion, you need clearer goals of who is responsible for what, before you go into a launch. For example, our team specifically focuses launches on marketing driven trials of a product. But product retention is on Product to build a product that is good enough to keep users. So similarly, you'll want to look at what your business goal is (assuming its a revenue number) and then map across the journey to get to that number what teams come into play to hit that goal. Example: Marketing is accountable for a leads quota or a specific conversion rate from first meeting to second meeting, etc. Other departments also need to own their own metrics (product retention, sales conversion, forecasting, etc.).

In terms of validating forecasts, you need to understand where the numbers are coming from. For that, I'd suggest you get into the weeds on other sales opportunities. What numbers attributed to the forecast itself?Where did customers drop in the journey? etc. My guess is you'll probably find a range of reasons like where pricing was off, where one sales rep didnt deliver the pitch as well as another one does, where marketing overpromised but the product couldnt deliver, where the product just wasnt good enough to keep users, and so on. As you explore that, youll start to get a sense of what's reliable vs what isnt.

There are a few dimensions to consider when setting targets -- revenue, channel performance, downstream adoption, leading and lagging indicators are some of them. Targets can look different based on the launch. There is a tendency to default to revenue and in that case, it is necessary to look at applicability of the product with the existing customer base i.e. upsell motion and for prospects, evaluating if one segment (like enterprise or SMB) is more likely to be interested. Adoption is often times a target that gets left behind.