RVNU #012: Product Leaders - Time To Be On The Hook For Revenue
And their jobs should be on the line if they miss.
Notebook LM AI Discussion of this Newsletter:
Introduction
One of the first questions I ask to gauge the strength of a product team is simple: What’s your gross revenue retention (GRR)?
In response, many in Silicon Valley reply with some version of, “Product teams don’t generate revenue; they build products. GRR tells you very little about the strength of a product team.”
I take that as an insult to my intelligence, and so should you. This response is akin to suggesting that product teams don’t actually build the product and that disillusioned customers, churning out of disappointment with the product, are an anomaly, disconnected from the product team’s decisions. It’s as though a ghost built the features or lack thereof that the customer just cited for churn abandoned.
The reality is that in SaaS, especially in product-led growth environments, product and engineering teams are critical drivers of revenue—more influential than many are willing to admit on both sides of the aisle. It’s time we acknowledge that every function in SaaS impacts customer outcomes and retention, which means every team has a stake in revenue.
If the answer to my GRR question is “over 90%”, I know the product team is closely aligned with market needs. If I hear “below 90%”, that tells me challenges exist within the product or engineering team—perhaps more so than in the go-to-market (GTM) organization. In a SaaS world increasingly driven by pay-for-performance models, it’s time to hold product teams accountable for the metrics that matter most: adoption, engagement, and satisfaction.
Why GRR Matters for Product Teams
Gross revenue retention is an excellent indicator of product-market fit. High GRR shows that the product team understands its customers and is building features they truly need. Conversely, a lower GRR suggests gaps in alignment, which often means the product isn’t delivering sufficient value, or it’s failing to keep up with changing customer expectations. In these cases, it’s not just the GTM team that’s accountable—product and engineering teams are equally responsible for improving customer retention through better product experiences.
GRR isn’t solely a sales or customer success metric. In a product-led growth environment especially, it’s a reflection of how well the product meets ongoing customer needs. Yet, for many companies, product leaders are rarely held accountable for retention metrics, even though these directly relate to how well they’re serving the market.
Solutions: Revenue Accountability for Product Teams
So, how do we bring product teams into alignment with performance metrics? Here are a few starting points:
1. Hold Product Teams to Revenue-Related Metrics
• Metrics like adoption rates, feature engagement, and customer satisfaction are direct indicators of how well a product meets customer needs. By focusing on these, product leaders get a tangible sense of the impact they have on customer retention and overall revenue.
• Set targets and provide visibility on these metrics, rewarding high performance and identifying areas that need improvement.
2. Start Small but Meaningful
• Don’t overwhelm product teams with an entire suite of revenue metrics from the start. Focus on one or two key indicators tied closely to their impact, like the adoption rate of new features or the Net Promoter Score (NPS) for recently launched functionalities.
• This approach allows product teams to adjust gradually and see the direct influence of their work on customer satisfaction and retention without creating a complete culture shift overnight.
3. Create Cross-Functional Incentives
• Compensate product leaders based on their contribution to revenue-affecting metrics such as GRR or expansion ARR (annual recurring revenue). Consider both the upside and downside potential of these metrics, ensuring product teams share the stakes alongside GTM teams.
• This alignment reduces friction between departments and fosters collaboration, as every team is invested in delivering customer value and reducing churn.
Wherever you land the goal here is creating a more holistic approach to performance-driven outcomes.
Overcoming Cultural Pushback
I know many product leaders reading this might recoil at the idea of being accountable for revenue. Product and engineering roles are traditionally distinct from GTM, and adding revenue-based compensation can feel like a shift away from core values. But consider this: aligning product compensation with revenue outcomes doesn’t undermine your work; it enhances it.
When product teams are measured on metrics like adoption, engagement, and satisfaction, they’re more connected to customer needs and less siloed. This alignment benefits not only the company’s revenue but also the product team’s ability to build a solution that drives real value for the customer.
There are two key takeaways for product teams here:
1. The Ultimate Judge of Product Value is Customer Adoption
• The real test of a product’s success is how well customers adopt and derive value from it. That’s directly linked to revenue and ultimately affects enterprise value. If product teams want to build solutions that matter, they need to be aligned with outcomes, not just completion of features.
2. Alignment Creates Efficiency and Reduces Friction
• When product goals are aligned with revenue-related outcomes, inefficiencies between departments decrease. It reduces the friction between sales, customer success, and product teams, allowing all teams to focus on creating a unified customer experience.
Conclusion: The Shift Toward a Performance-Driven Culture Across SaaS
Whichever way you cut it, especially in SaaS, all roads lead to revenue, whether you like it or not. It’s revenue that is the ultimate barometer of whether the connective tissues that bind a startup are healthy.
As SaaS companies evolve their pricing models, we’ll see a corresponding shift in how teams across the organization are evaluated and compensated. The move to outcome-based and performance-driven pricing means that every team now has a direct stake in customer performance.
This emerging performance-based culture creates a new level of accountability across SaaS, one that mirrors the high-stakes world of sales. Whether it’s product teams focusing on customer-driven development, marketing refining lead quality, or customer success incentivized based on retention, each function will increasingly share the weight of customer outcomes.
In the next chapter of the industry, this will transform SaaS companies from the inside out, fostering a culture where success is measured not by department but by the shared goal of delivering value.
A big and necessary first step, is getting product teams on the hook for this.
Wayne