Motivated From Within®
Service-Model Thinking for Product-Model Folks:
Are you a Groceror a Chef?
Rich MironovSVPMA, 4 April 07
© 2007 Enthiosys 2
An Unapologetic Product Guy
• CMO at Enthiosys, a product strategy consultancy
• Consult 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
© 2007 Enthiosys 3
I’ve Been in Tech So Long…
© 2007 Enthiosys 4
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.enthiosys.com
• Recent survey about PMs and service-vs-product http://www.mironov.com/more/survey_results/
© 2007 Enthiosys 5
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?
© 2007 Enthiosys 6
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
© 2007 Enthiosys 7
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
© 2007 Enthiosys 8
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…
© 2007 Enthiosys 9
Four Key Service-Model Lessons
• Being the chef, not the grocer:
• Build a multi-tenant infrastructure
• Expect slower, incremental sales
• Do continuous marketing
• Get real user feedback
© 2007 Enthiosys 10
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
© 2007 Enthiosys 11
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
© 2007 Enthiosys 12
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…”)
© 2007 Enthiosys 13
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
© 2007 Enthiosys 14
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
© 2007 Enthiosys 15
• “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 à continuous marketing• Touch users early, often and honestly• Good news: you have actual user names
3. Continuous Marketing
© 2007 Enthiosys 16
Frequent, Helpful Contact
Friendly, low-pressure tone
• Topic of the month
• User profile (success story of the month)
• New features
• FAQs
• Support contacts
© 2007 Enthiosys 17
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 being used?– Error reporting
© 2007 Enthiosys 18
© 2007 Enthiosys 19
Dare to Taste Your Own Food
…use your own service if you can
© 2007 Enthiosys 20
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!
Motivated From Within®
Q & A
Motivated From Within®
PM Survey Recap
Time permitting… see http://www.mironov.com/more/
survey_results.htm
© 2007 Enthiosys 23
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%
© 2007 Enthiosys 24
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
© 2007 Enthiosys 25
Selling and Upselling
• 33% faster close cycle for subscriptions• Service tilt toward small/med businesses
Different upsell models…
Product Subscript Transxn
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%
© 2007 Enthiosys 26
Understanding Users
“We know which features/functions our
customers use via...”
Product Subscript Transxn
Personal 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%
© 2007 Enthiosys 27
Over-Featured Products?
“I think my typical customer uses...”
Product: 48% of available features
Subscription: 48% of available features
Transaction: 52% of available features
Motivated From Within®
Thank You!
Rich Mironov
SVPMA, 4 April 07
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