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

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I’ve Been in Tech So Long…

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…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?

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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

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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

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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…

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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

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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

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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

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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…”)

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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

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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

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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

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Frequent, Helpful Contact

Friendly, low-pressure tone Topic of the month User profile (success

story of the month) New features FAQs Support contacts

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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

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Dare to Taste Your Own Food

…use your own service if you can

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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

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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%

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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

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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%

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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%

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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