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The Importance of Product Testing

Mary Grothe September 20 2022

Meet Host, Mary Grothe

Mary Grothe is a former #1 MidMarket B2B Sales Rep who after selling millions and breaking multiple records, formed House of Revenue™, a Denver-based firm of fractional Revenue Leaders who currently lead the marketing, sales, customer success, and RevOps departments for 10 companies nationwide. In the past year, they've helped multiple 2nd stage growth companies between $5M - $20M, on average, double their MRR within 10 months, resulting in an average ROI of 1,454% and an average annual revenue growth eclipsing $3.2 million.

 

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Hey, Revenue Radio®. This is Mary Grothe. Today, I'm by myself, a plant wall and a neon sign. For those of you that are just listening in and not watching on video, that is my current surrounding. But those of you watching are like, "Yeah, I can see it." "I already know."

Today, I'm bringing you something that's trending on LinkedIn. I love watching what's trending in the world of revenue. I love the revenue community on LinkedIn. I just saw an article that talked about the importance of product testing.

As a Chief Revenue Officer and CEO, I feel that's one of the most overlooked components. When a CEO is tasked with figuring out why a company has plateaued. For us, specifically, we prefer to work with second-stage scale companies. They're through startups scale, and they've hit a plateau. It could be 2, 3, 4, or 5 billion in revenue. What got them to that point is no longer working. So, "Hey, let's bring in a CRO" or "Let's task our existing CRO to figure out why this is happening." First thing, they go to sales. Let's figure out if we must have a sales problem if we've plateaued. Maybe our salespeople have become comfortable. Maybe they're not hitting their number because the buyer's shifted. Or we need to provide more training or figure it out.” They’ve lost motivation.

Fun fact. When I started this company almost five years ago, we started as Sales BQ® and were sales trainers. That is exactly how we were brought in because sales were down. We would get brought in, and the first thing we were doing was training salespeople. I realized so quickly, "Wait a second. We can train a salesperson. “Then, we're going to put them back into the ecosystem, which was probably the first reason why sales were lacking.

Sales training is amazing. I love doing it, but you can't train up the skills of a salesperson and put them back in the seat in the same ecosystem with the same tech stack that may or may not be the problem with the same target buyer. That may or may not be the problem with the same product or service that may or may not be a problem. You must survey and understand the full ecosystem to know where the root cause is. If you just go to the sales team and think, "Oh, we got to address sales." That may not be the problem, and you only address a symptom.

I saw this trending article, and it was all about selling shoes. New shoes wanted a launch, and they said, "Great, before we raise capital or align a lot of capital to doing a product launch, let's prove the market wants it. They said, "We need to sell 300 pairs of shoes at this price point within a certain amount of time. "If we're successful at that, great. “We have something the market wants." Well, are you selling 300 pairs of shoes in your business before you optimize the strategy? Or are you going all in without testing that's a problem.

Testing is so important whether you have a product company, a service company, or maybe a combination of the two. If you can, verify that the market wants what you sell in a controlled environment for a smaller budget. Doesn’t that sound like a no-brainer? Then, why aren't companies doing it? As COVID sped along, industry trends, the way the buyers buy, if you look, it sped up a lot of behaviors that maybe were forecasted five to ten years out. Things like same-day shipping. We’ve put in the hands of the consumer pretty much anything they want, when they want it, how they want it, at the price point. They want it in so many shifts.

Shifts happened in our community, the supply chain, and how people do business. COVID sped up a lot of behavior changes for buyers, but it also launched a lot of innovation. Any downturn or as we learned in the pandemic, it causes great entrepreneurs to get scrappy. You can get creative, and so much innovation can come out of those troubling times.

We have also seen new products and services emerge in the market that potentially solves the problem better than your product or service. Any time you've hit that plateau, you're thinking, "Well, how do we get past this?" Step number one is you must start doing research. You’ve got to audit data, people, and processes, get into competitive analysis, get into doing that secret shopping, and really understand how your competitors are going to market.

Don’t waste too much time trying to interpret data. Go to the source. Talk to your people who talk to your customers, whether it's salespeople or your service people or both. Then, ensure that you're serving primary market research like the buyer. Whether you're able to get a focus group together on your own, or you need to hire a third party to assemble that to get the primary market research. I think it's invaluable if you can figure out how the buyer wants to buy what they want to buy, at what price point, and why it's meaningful. If you can answer all of those, that's tremendous.

Then, the next step is proving it. That's why they call it proof of concept. Yeah, because you prove it. When you do all that research and come up with a hypothesis, an educated guess, data-driven, founded, good research points. You must prove that you were right. Do you skip that step in your company? I think a lot of people skip that step in their company. They think, "Well, we did all this research. “This was what the market was telling us." Great! But the smartest person out there still makes mistakes. The only perfect plan is the one still sitting on the shelf.

Nothing ever starts without a plan, but nothing ever goes to plan. You must follow this methodology. This is what we use. It’s tried and true. Use it today. Audit research, step number one. Build and test, step number two. Then, optimize step number three. And scale, step number four. When you look at audit research, I just rattled off a bunch of things you can do on the front end. When we go into build and test, the testing component is critical.

How do you run a great test? You have options, and sometimes your current environment and limitations will dictate your options for testing. Sometimes you have better capital or budget, or cash flow. You have a better runway. You've got a good team. You can do some profound testing and run multiple campaigns. You can put together a longer timeline, but it's important that you assess the variables you have and determine the right test for what we’re trying to accomplish.

Let me give you an example. Sometimes it's one thing you just talk through in theory. Other times it's good to have an example. The example I know the best is our own. I started this company, as I said, just about five years ago. When we launched, I found... I started a company before I even told anyone. So, talk about true testing. This was beta, beta, beta. Three brave CEOs were willing to bring me on as a fractional VP of Sales. I had this hunch that sales were hard for most people, and I thought, “If I could solve that problem, I'm going to have a business forever.

I love sales. Sales have been easy for me. I love the profession and have so much respect for it. I thought, "Okay, this is my hypothesis. I had done enough research because I've been in or had been in the industry for enough time at that point.” I thought, “I’m on to something.” I've got a hunch, but I had to test it. Of course, I also didn't have anything except for myself. I didn't build anything. I just had me and had to build it while doing it.

Three brave CEOs said, "Yeah, we'll hire you as a fractional VP of Sales. “They each paid me $3,000 a month. I’m making nine grand. I had no overhead. That was a third of the money I was making in a full-time sales career, but I didn't care. I was on my husband's health insurance. I said, "This is enough money to cover my expenses. “I’m fine. I'm going to give myself three months, hopefully, as a testing period, to figure this thing out and get it to where I can build the infrastructure, build out my processes, and build something that could be repeatable. That’s what I got excited about. That was my focal point: I put my head down and did the work.

For three months, it was a lot of work. So much trial and error, testing, figuring things out and trying to build a service model that would scale during that time. I was also experimenting with products because you have the technology in the world of sales. There are other components like a product you can sell like a sales playbook. Something that's tangible, not just your training. I started ideating and developing the products. What are the services, or how can I package this?

Those three brave CEOs were unbelievable to pay for my time while building it and being able to trial error, test, iterate, shift, and pivot, all while working for them. The good news is we got great results. I love them. I'm so thankful for them We had really good results. They had a heart for me as an entrepreneur. They were an entrepreneur. They were all founding entrepreneurs, founders of their companies. They knew, "Hey, we can give someone else a chance here. "Find the people that are willing to be in your test environment.

Pull together a client group if you're looking to launch a new product or service and already have good paying customers. Pull together a beta group. Tell them what it is. Talk about the hypothesis. Pull them together, put a beta testing environment, and see if it has legs. See if you can get proof of concept. See if you can get repeatable results and make sure it's not just by your own metrics; the clients agree that it's something they would pay for. Gather the data, build the pitch around it, and get your case studies testimonials. Then, you have something to go to market.

If you're fresh out of the gate and haven't done any testing, I recommend testing small. Test small. Until you have repeatable, consistent results, it’ll be the earliest semblance of product-market fit you can get. You can't get product-market fit until you can go through a full loop and cycle. Even though we had traction and proof of concept, that’s not a product-market fit. Proof of concept we had after 90 days. I built a company on it. We did half a million in our first year, but we didn't have a confirmed product-market fit until after our first year.

I needed a full cycle of seeing how our work impacted the salespeople in the teams and the companies we worked for. That feedback loop was critical because by tapping into what was working and what wasn't, what was producing results and what wasn’t, I was able to iterate and say, “Wait, we can't do it this way. “We must do it this way. Wait, this isn't working. “Something is off in the model. “Guys, this isn't scalable. “We’ve got to figure out. We have to fine-tune. “We’ve got to dial it in, dial it in, dial it in, and dial it in."

It was constant iteration. During that time, focusing on that constant iteration we had this unbelievable connection with our clients. They knew how committed we were to ensuring that we were delivering a great product. If our product was a great product or service, then they won. They mean more revenue. They were very incentivized to be on our team and on our side during the process. However, you can take this example, translate it for your current environment and figure out how do we test something new.

I have seen companies rapidly shift their entire product or service model to something new, and then it fails. Try to avoid that. I try to test in small environments with a subset or subgroup so that you can have a bit of a safety net in case it doesn't work. Maybe it flops altogether, and you just pull it out like...

Can I just tell you? We’ve had a couple of failed launches of our own as a company. One of them, specifically in 2021, we launched a marketing agency inside the House of Revenue. It was called Revenue Studio, and we realized it was already active inside our company. We would contract for a year for our clients and handle branding, marketing, sales, customer success, and revenue operations. We’d scale the company. We'd go to graduate them, and they'd say, "Well, we were highly dependent on your marketing department. “Can we just retain your marketing team? “We thought, “Well, why would we shy away from the revenue? “Okay. We said yes to, I don't know, 8 or 9 companies. Between those 8 and 9, we had a $1,000,000 line of business inside our company that we spun off into its own brand.

With that, "Well, let's make it its own company. “Let’s grow it. We're going to add clients to it. So, we started marketing a marketing agency, marketing only. We went in with the same team and frame of reference of how we scale companies from a Chief Revenue Officer standpoint. Guess what? The business that hires a marketing agency is not the same business that hires a strategic growth firm. They’re not. It’s not the same ICP. Our team was used to being up here, way up high on the pedestal, because our strategies were so innovative and what we were doing with our Chief Revenue Officer offering was cutting through their plateau. It was refreshing their go-to-market, refreshing their brand.

We felt that we had the same value to the organization. But when we were getting hired as a marketing agency, we were being treated like employees, production work. There was no value. We were being dictated to by executive teams of companies that didn't understand marketing what they wanted for marketing. One group told us the design they wanted for a trade show banner, and we were like, "What? That would be the worst banner you could ever create. “That’s not how you market at a trade show." They wouldn't listen to us. They wanted nothing to do with our opinions. We designed a banner that we didn't want our name on. We said, "This is what the client demands from us.” So, we built the banner and delivered it. Guess what? The trade show wasn't as much of a success.

Then, we realized our hearts are at a very high success rate, innovators and strategists. Our hearts are not in execution. “Where is House of Revenue®?" There's a healthy blend between strategy and execution in what we do. When we spun off this marketing agency, just because we could do the work didn't mean we should. We ran that agency for maybe 3 or 4 months and just phased it out. It’s not who we are. It’s misaligned with our ICP, who we want to serve. It’s misaligned with who we are as people with our core values. This is not working, so we shut it down.

I share this example with you really from a position of humility. I’m such an overachiever. I've covered up my whole life any time I made a mistake. I would be so fearful that anybody would find me out, like, "Oh, Mary is human. “I’ve done a great job. I’m covering up many of the mistakes I've made solely out of the fear that I was mortified, that someone would think less of me. But I've adapted. I’ve grown a lot as a human being. I'm sitting in the seat now. Let's allow me to share with you and reveal when things don't go right inside a business. Therefore, you do testing.

What a beautiful opportunity for us to do that testing and to be able to close it down before we put all our eggs in that basket. Or transition our entire business model or hire you to know, unfortunately, we did hire a few people for it that we did have to eliminate those positions. That part of it I hated. Thankfully, it was just a few people. It wasn't like, "Hey, we're spinning up a 50- person agency, going to market, and going for this massive scale. Then, we'll see if it works. We tested it in a very small environment on a small budget. Thankfully, we were able to phase it out when it didn't work.

How are you doing testing, and why is testing important? Well, we've also worked for a lot of companies. The big learning here is they want results today. They love our innovative strategies but have zero patience or tolerance for testing. They want our idea to be so good that it'll work the first time with 100% perfection. “Guys, what universe are we living in? “If we think that is how it goes? “We follow that audit research, build, test, optimize, and scale because it's tried and true. This is a proven methodology that has been used by hundreds of companies. It’s a methodology that it's out in the public domain. We didn't come up with it. One of our team members had read about it and brought it back in 2020. We've adopted it since then.

My recommendation for you is that you stop underrating the importance of testing. You must realize that this is something you must emphasize and focus on. You can do it at very small levels. It could be AB testing. It could be tested in a controlled environment with a customer beta. It could be a lot of different things. The value of testing is that you're able to prove that you have something that can gain traction and is sustainable. You don't put all of your eggs in that basket, and you're much more protected on the strategy. With that, good luck to you and your product and service testing. Until next time.

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