Getting Good at Competitor Analysis, and should we charge the Customer for that Feature Request?
In well-functioning product companies, product managers are strategic business partners who help companies make good decisions. It's a product manager’s job to challenge the status quo and to question the assumptions that underpin any initiative. In well-functioning product companies, this is encouraged.
In less well-functioning product companies, this can lead to accusations of negativity. Your questions can be seen as challenging the unchallengeable; the messianic leaders and subject-matter experts that shall not be questioned and have unshakeable confidence in their ideas. This can lead to product managers giving up asking questions and putting on their feature factory overalls.
I encourage you not to give up asking questions… it's our job to ask questions! But, ask the questions in a positive way, try to get as much context from your colleagues as you can, and try to get into discussions early. Also, it’s important to understand when to stop with the questions - but, importantly, “disagree and commit” only works if you get a chance to disagree first!
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New Podcast Episode: Getting Ahead of the Competition by Getting Good at Competitor Analysis
I recently spoke to Bethan Vincent, a marketing guru who has worked in a variety of firms before starting up Open Velocity, an agency that aims to help all sorts of companies with their marketing needs. We spoke about the importance of competitor analysis and some of the things you might want to consider when evaluating your competitive landscape.
Check the episode out on your favourite podcast app, or right here.
Just because a competitor is doing something doesn't mean they're being rational
Be aware of what competitors are up to, but blindly copying them is not a good strategy. You need to be in charge of your own destiny, be a leader and do things others can't replicate.
Should we charge our Customers for that Feature Request?
Anyone who has worked in a sales-driven B2B context is well aware of this scenario. The diligent product management team have pulled together a roadmap, based on a combination of “obvious” feature enhancements, stuff the sales team has surfaced in prospect discussions and maybe, just maybe, some initiatives of their own creation that have surfaced through direct customer contact and product discovery. However they got there, they have a roadmap.
But then, disaster! The sales team have a deal on the table with a prospect who wants something from the roadmap done sooner. It’s a huge deal so it gets escalated to the CEO, and now the team have to reshuffle the roadmap to accommodate the request. The product managers start complaining about feature factories again, muttering about “sales specials” and why we can’t “sell what we’ve got on the truck”.
But, the thing is, it’s not a “sales special” per se. It’s a good idea! It’s something you wanted to do anyway! You’re not building an integration to some special system that only one customer in the world cares about. It’s a widely applicable capability that will benefit a bunch of people… you just weren’t expecting it to benefit them yet.
So, if you’re going to do it, do you charge them for it?
I recently ran a poll on Twitter asking the same question and 62% of respondents said “yes”. But wait, aren’t we a product company? Why would we do that?
Some reasons not to charge them for it
It sets a precedent, both for customers and the sales team
Prioritisation becomes impossible; a bun fight with big customers throwing their wallets around and sales teams trying to re-order the roadmap deal-by-deal.
It gives the customer too much of a sense of ownership
Even if one customer wants a thing, we’re building it for everyone. If someone’s paying a few grand for a feature, they may expect an outsized level of impact on how it’s built, or even to get to sign it off. Generally speaking, customers don’t care if it works for other customers.
One-off revenue isn’t as valuable as recurring revenue
SaaS businesses love recurring revenue, and so do their investors. The occasional bit of one-off revenue might be OK, but if you make a habit of it then it might negatively impact your valuation. Might you be seen as a services company in disguise?
Some reasons to charge them for it
You generally have to pay for speedy delivery
Now, I’m not going to suggest that SaaS companies start charging an Amazon Prime-style “fast feature delivery” subscription (although… 🤔), but it’s not unknown for companies to charge a premium to get stuff to you sooner.
It makes customers feel more committed to the solution
Everyone’s aware of sunk cost fallacy, and the idea that you’d prefer not to give up on stuff you’ve invested in. Giving customers more of a financial stake in “their” solution may make them more likely to renew and lead to longer lifetime value.
Money is still money
Sales teams have targets. The board keeps a close eye on the finances. Companies still need to make payroll. We do have to accept that, despite all of the best product principles out there, at the end of the day we are all working for actual businesses.
So, what to do?
There is, of course, no perfect answer. From my perspective, it’s important to maintain flexibility and the freedom to build a solution that works not only for one customer but for all customers. If I can get some extra money out of one customer to build a widely applicable solution, I’m not actually against that. But with one-off money generally comes a statement of work, or a contractual commitment to do something exactly as specified. If you can avoid this scenario, consider taking the money.
Alternatively, is this something that can be wrapped in as a recurring fee? Probably not if it’s just an extra button, but if this is some new headline capability then you could consider adding a recurring subscription fee for ongoing access to it. On the other hand, if you keep doing this then your pricing calculator is going to very quickly become unmanageable.
But is this good product management? Ultimately, balancing short-term revenue targets with long-term strategic goals is an art, not a science. There’s no one right way. If this happens infrequently, there’s nothing particularly to worry about. If it happens all the time, you’re almost certainly going to have trouble delivering on your product vision. However often it happens, always try to keep as close to the core principle of “build for the many, not the few”.
That’s all, folks!
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Great conclusion and suggestions to judge your own feature acceleration requests!
Going to listen to the podcast for the first time. Excited to hear the competitor analysis takes.