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Service Model Thinking for Product Model Folks. Are you a chef or a grocer? By Rich Mironov at SVPMA Monthly Event April 2007
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Service-Model Thinking for Product-Model Folks:
Are you a Groceror a Chef?
Rich MironovSVPMA, 4 April 07
www.mironov.com2
An Unapologetic Product Guy
Consulting mostly to early-stage tech companies …and big companies needing some start-up energy Product strategy, market needs, business/service models
Repeat offender at start-ups iPass, Wayfarer, Slam Dunk (VP Mktg), AirMagnet (VP Mktg)
Early brand-name experience HP, Tandem, Sybase MBA Stanford, BS Physics Yale
www.mironov.com3
I’ve Been in Tech So Long…
www.mironov.com4
…Newsletter on Startups & Products
The secret life of Product Managers “Parenting and the Art of Product Management” “Goldilocks Packaging” “Sharks, Pilot Fish, and the Product Food Chain” http://www.mironov.com/articles/
Recent survey about PMs and service-versus-product http://www.mironov.com/more/survey_results/
www.mironov.com5
Service-Model Thinking
Most of us have grown up as “product” product managers
Service model: more than just hosting Responsible for user’s positive experience
So… are you a Grocer or a Chef?
www.mironov.com6
Licensed Enterprise Software
…is like delivering groceries
Enterprise IT is responsible for: Choosing the right items Combining them correctly Managing hours and uptime Serving and helping users Producing tasty results
www.mironov.com7
Hosted Software-as-a-Service
…is like running a restaurant
Serving complete meals Many customers Hours and availability End users interact directly Need repeat buyers One bad experience is
never forgotten
www.mironov.com8
Product & Service Models
Product Model One-time fee or license With or without maintenance
Subscription Service Model Monthly fee per user
Transaction Service Model Per fax, per download, per transplant,
per report, per hour, per update…
www.mironov.com9
Four Key Service-Model Lessons
Being the chef, not the grocer:
1. Build a multi-tenant infrastructure2. Expect slower, incremental sales3. Do continuous marketing4. Get real user feedback
www.mironov.com10
1. Multi-Tenant Infrastructure
Personalized experience, menu of options
“No excuses” availability
Privacy and security
Usage reporting and billing
Helpful written help with human back-up
www.mironov.com11
Not a New Idea
Well-designed software should be host-ableBut need to set priority for…
Details of user hierarchies Reporting, billing, invoicing Third party data
security obligations
See Luke Hohmann’sBeyond Software Architecture
www.mironov.com12
New Kinds of Service Metrics
You need an Operations team and new skill set
Uptime SLA (“Application up 99.95% of the time except…”)
Response Time (“98% of log-in take <1.5 seconds…”)
System Capacity (“Add CPU when usage >60%...”)
Support Escalations (“P1 first response within 15 minutes…”)
Reporting (“Billing reports showing all customer transactions…”)
Software Updates (“Push software weekly at 1AM Sunday with roll-back…”)
www.mironov.com13
2. Incremental Sales Cycle
Initial subscribers sign up more quickly, but… Easy, cheap trial is #1 benefit of service model Pioneers are really in extended trial First taste must be great
Revenue ramp is slower…upsell to more users…upsell premium features
www.mironov.com14
No More Shelfware
Purchased but unused software Product model: sell extra licenses now
Get revenue (commission) now Lock up the customer Screw future revenue
Much harder with service model
www.mironov.com15
3. Continuous Marketing
“Drop-and-run” licensing model Ship CD, recognize revenue, move on
New “shared success” service model We can’t grow your account
until you are happy
Constant upsell continuous marketing Touch users early, often and honestly Good news: you have actual user names
www.mironov.com16
Frequent, Helpful Contact
Friendly, low-pressure tone Topic of the month User profile (success
story of the month) New features FAQs Support contacts
www.mironov.com17
4. Getting Real User Feedback
Licensing model: second-hand feedback Customer meetings, third party surveys, sales
issues, annual user groups, online forums, industry analysts, product reviews…
What are their agendas?
Service model: your own log files Precise, real-time, unemotional What features are really being used? Error reporting
www.mironov.com18
www.mironov.com19
Dare to Taste Your Own Food
…use your own service if you can
www.mironov.com20
Take-Aways
“Wrapping It All Up” Service model adds new
responsibilities and requirements Initial revenue is slower Installed-based marketing
never stops You have actual usage data
You may be asked for a servicemodel soon. Grab your cookbook!
Q & A
PM Survey Recap
Time permitting… see http://www.mironov.com/more/survey_results.htm
www.mironov.com23
180 Responded to PM Survey
Pricing Model Product/license 48% Subscription 23% Transaction 19% Free, advertising, other 10%
Job Role Product (service) management 38% Product (service) marketing 12% Corporate marketing 7% R&D, sales, consultant, other 43%
www.mironov.com24
Top-Line Observations
Products slanted toward enterprises/government Services have more share of small/medium business
Subscription service sales cycles 33% shorter Transaction services 49% shorter
Service PMs make little use of app logs to understand customers 24% vs. 1% for products
PMs say that customers use only half of features We're dramatically overloading our offerings!
Service PMs use product registrations more than user profiles to identify users
www.mironov.com25
Selling and Upselling
33% faster close cycle for subscriptions Service tilt toward small/medium businesses
Different upsell models…
Product SubscriptTransxn
Selling new versions/upgrades 76% 46% 38%Selling more units 83% 46% 50%Higher-priced subscriptions 28% 83% 44%Adding more users 47% 68% 29%
www.mironov.com26
Understanding Users
“We know which features/functions ourcustomers use via...”
Product Subscript TransxnPersonal discussions 56% 49% 53%Tech support calls/cases 38% 32% 24%Enhancement requests 27% 17% 11%Transaction/activity logs 1% 24% 21%Sales team feedback 29% 24% 29%
www.mironov.com27
Over-Featured Products?
“I think my typical customer uses...”
Product: 48% of available features
Subscription: 48% of available features
Transaction: 52% of available features
Thank You!
Rich MironovSVPMA, 4 April 07