A Three-Step Product Commercialization

Launching a new product is one of the most of the core activities a product manager must do. Launching a product is both costly and risky for any business, and that’s why specialists – called as product managers are brought in.

In order to take a product idea into a successful product, there are several stages of development. Customer requirement, use cases and value to customers has to be identified – and often this is the easy part. Then comes the tougher part – how to commercialize the product. 

Launching a new software product has become very complex. The notion of what denotes a ‘product’ and what denotes a ‘service’ is getting rapidly blurred. In addition, the commercial & monetary aspect of software is incredibly complex. The options run from pay-per-use models or annual license fee or one time license fee or even freeware.

The complexity of pricing and commercialization can make anyone go crazy. 

In this article, I will go over a simplified 3 step plan for product commercialization. Going through this will help you identify and access the business risk & help develop better plans.

Step-1: Create a purchase process map

Step-2: Get a Beta Customer

Step-3: Analyze all sales deals.

Pricing of the software has major impacts on several aspects of productization: Packaging, Distribution, After-sales support, marketing and lifecycle planning. It is therefore very important to incorporate the product commercialization plan right at product design stage. (See: Building World Class Products)

1. Create a purchase process map

As part of product design, one needs to think on how any customer will buy this product. I call it as a purchase-process-map which details every aspect of the buying process. Product Purchase-process-map is a very powerful tool that will help gain deeper insights on what the customer really wants to buy and how you can develop a product around it.

Start with customer research that provides great insight into customers' needs and identifies the factors that motivates customer to buy. Once customer motives are known, you can develop a sales & marketing strategy for the product. 

The first step in developing a purchase-process-map is to get an answer to “WHO” questions:

·        Who orders the product?

·        Who inventories the product?

·        Who will use the product?

·        Who influences the decision to buy?

·        Who controls the budget?

·        Who will dispose of the product?

Learning about all the players who have influence over the purchase is very important. When selling complex enterprise products, companies use dedicated Account managers or Account teams whose main focus is to work out the customer purchase maps and then sell products. So, when developing new products, it will be good to have representatives from sales or account teams who understand customers. 

The purchase-process map must be as accurate as possible and it explains the customer buyer-behavior. Do not make the mistake of assuming that you know the buying patterns of customers based on similar products purchased by customers. Always base your product purchase map on facts and not assumptions.

For example, a software company did a voice of customer research and identified a need for unified data center resource management software. However, the purchase-process map revealed that there were no real users of this product as customer operations were still distributed with servers, network and storage being managed by separate teams and no single team or member was looking at the entire data center infrastructure. Identifying this problem helped to avoid developing a new product. Instead, the company was able to cobble up different software tools and offer it as suite. This learning saved several millions of dollars in development costs and at least one year of development time. 

2. Get a beta customer commitment

Traditionally, beta customers are used for product testing. But Beta customers are also very useful in developing financial aspects of the product. It is best to co-develop a product with a real customer and they can provide valuable feedback on the financial aspects of the purchase process.

In many cases, Beta customers expect a big discount on the purchase price, they can provide inputs on various monetization schemes such as:

1.    Paying for using the unit – one time license fee.

2.    Paying for annual license fee including support

3.    Paying for installation of the product

4.    Software is free, but customer pays for support.

5.    Software is free, but is supported by advertisements

6.    Software is free, but developer can collect & use customer data

Beta customers can also help in product marketing & sales by:

·        Agreeing to give written analysis of the product

·        Agreeing to endorse the product

I have worked on several new product development projects with customer and in most cases, customer was very much interested in developing a monetization model for the product. In one instance, customer helped develop the product and also defined the product cost.   

3. Analyze all sales deals  

Initial sales of the new product must be analyzed against the purchase-process-map. For every item in in the purchase-process-map, there must be a corresponding sales or marketing activity. The review verifies whether each of the sales and marketing strategy actually delivers. This also helps to identify weak links in the marketing program that needs to be corrected. 

Analyzing sales deals is very important for new products. Failing to address key customer needs can impede the product adoption process. Identifying issues early in product launch will help keep up sales momentum.

Remember that if sales efforts stalls, and sales reduce, distributors and sales team will simply turn their attention to other products. Sales team will not analyze why the product is not selling. Once the momentum is lost, it is much harder and more costly to get the new product back on track. To ensure success, review all initial sales deals and periodically review deals to identify any roadblocks that could jeopardize the new product introduction.

Closing Thoughts

The stakes are high with every new product introduction. The company reputation and product manager’s reputation is on the line. The best way to see a product’s success is to follow this three step process and incorporate this into product launch plan and sales strategy.    

Remember addressing product issues early on and eliminating product adaption barriers, you will be setting up the path for success and build products with a healthy revenue stream.

Use this 3 step plan for product commercialization. Going through this will help you identify and access the business risk & help develop better plans.

Step-1: Create a purchase process map

Step-2: Get a Beta Customer

Step-3: Analyze all sales deals.

Remember addressing product issues early on and eliminating product adaption barriers, you will be setting up the path for success and build products with a healthy revenue stream.