On monetising consumer experiences

At this weekend’s Product Camp in Berlin I held an interesting session on Monetising Consumer Experiences. The discussion was good and we had great input and perspectives from everyone in the room.

Here are my notes from the session:

Why do we care?

Every product manager needs to understand their business model. Remember, an idea is not a product – and it’s certainly not a business. Irrespective of who ‘owns’ business strategy in your organisation – whether it’s you, your CEO or a distant corporate strategy department – it’s critical that you understand the complete business model your product is a part of. A customer’s journey through your product doesn’t just start at the welcome screen of your app, website or whatever.

Monetisation models

  • User pays
    • Pay once per app/device/download
      The user pays one fee for each device they install the app on. Example: Angry Birds. The three main mobile ecosystems all have payment platforms built in, but beware: they’ll all take their 30% pound of flesh on every transaction.
    • Pay once for all devices
      The user pays once, and can use the app on any device they choose. Example: Diablo 3, or generally media content like eBooks or music.
    • Subscription
      The user pays a recurring fee which generally allows the user to access the app or service on any device. This model is most often seen with services, such as Evernote – but also traditional apps like Feedly have adopted the model.
  • In-app advertising
    The mainstay of traditional app monetisation. All three major mobile ecosystems offer an ad platform as part of the SDK, allowing app developers really easy access to ad content and revenue.
  • Demo/Trial
    Make your app available to users for free with a limited feature set, for a limited time, or a combination of both. The idea is to make the value of your app available in advance to make it easier for users to know what they’re in for and to help with the purchase decision. This method is great for apps or services where the value is hard to imagine/quantify without actually experiencing it.
  • Freemium
    In contrast to the demo/trial model, the freemium model aims to give all users a fully-functional, completely free app or service. The monetisation lies in the percentage of users who are willing to pay for a premium level of service. Here Evernote is another great example. Everyone has access to the basic app and service model, all for free. Those interested in the range of ‘power features’ pay a yearly subscription fee. Another example is Spotify.
  • Commission/Referrals
    • Lead generation
      If your product can identify sales leads for another organisation, you might be able to sell those qualified sales leads to other interested parties.
    • Affiliate model
      Take a commission/fee for forwarding a consumer who makes a purchase. There are many examples of this in the travel industry, where websites or products referring consumers who purchase a flight or a hotel take a percentage share of the revenue. Another example is Amazon, where as an ‘Amazon affiliate’ you can earn a small commission when you refer an Amazon product to a customer who buys it. This is also a model being used by Pinterest to monetise, where by the Pinterest experience is used not just as a product discovery portal, but also connects consumers with retailers (online and offline) who sell the product.
  • Content/Data monetisation
    If you can generate market insights through the usage of your data, you might be able to sell that to other companies or advertisers.
  • Bundling
    Group additional similar services together to increase the overall value, such that you can reach a point where a consumer is more likely/able to pay. A great recent example: Amazon’s planned Matchbook service, which bundles traditional print copies of books with their eBook equivalent for free or for a nominal fee.
  • Donations
    Popular among indie developers, you can try appealing to your users’ sense of charity.
  • Licencing
    If your product can fill a need within another company’s product portfolio, perhaps you can provide your app or experience as a white-label offer for a licence fee.

Whatever strategy you use, each requires you to understand where the value is, and what value a user is likely to be willing to pay for.

Also remember to ‘zoom’ out and look at the broader ecosystem. Who else is benefiting from your product? Who else should, or could, pay?

Challenges

  • Everybody wants free.
  • You need traffic before you can monetise it.
  • Changing or updating existing business models can cannibalise existing business.
  • Advertising
    • Old methods of presenting online or in-app advertising are becoming less effective.
    • UX designers and even product managers generally don’t like advertising in their products (ok, this is a gross generalisation), and there is often a perception that in-experience advertising degrades the quality of the experience for the user.
    • Hyper-targeted advertising appears to be the silver bullet for marketers, but is it all it’s cracked up to be?
      • Effective targeting is hard. Real hard. Even if you’re facebook – and most of us aren’t – the best targeting is nothing more than an estimated guess. The mobile marketer’s wet dream is the case: It’s 8:30am and sunny. You’re on the way to work. We know you like coffee in the morning, and there is a cafe just one block away that your friend really likes, and they have a deal right now. Ping! Your mobile sends you a notification that solves your need not only for coffee, but a new cafe, before you even knew you were thirsty. The problem? We don’t know that you want a coffee – we can only guess. If you don’t want a coffee right then in that moment, then that notification is just more noise that you’re likely to quickly disable.
      • Do people really want to be hyper-targeted? Lots of evidence and many studies point to increasing consumer distrust of services who try to know people better than they know themselves, especially when that knowledge is used to push products and services.

Monetisation at ProductCamp Berlin 2013

UPDATE: Added Amazon Matchbook service as example of Bundling.

The solution to online media piracy

Pirate Bay logo

The solution to online media piracy doesn’t really have to be so complicated. It’s actually quite simple: make it easier for a consumer to watch, hear or read legal material than it is to find high-quality pirated copies.

Simple.

Some say that the music industry is failing to keep pace with emerging technology and consumer trends. While it’s certainly true that music was late to the digital party, so to speak, the industry has made huge progress in the past years.

The music industry, along with the book publishing industry, has solved the critical requirement to meaningfully combat piracy: it is easier to download or stream music legally than it is to pirate it. Starting with iTunes, and continuing with Amazon, Spotify, Last.fm, Pandora, Nokia Music and countless others – there are so many options to legally hear music – many totally for free, or nearly – that there’s just no point downloading anything illegally.

The Newspaper industry (with a small handful of notable exceptions) is still leagues behind in this regard, as is the film industry. Outside the US the options for streaming films online are pitiful, and even in the US the latest cinema blockbusters are not available to stream until the theatre run is over. Why wouldn’t you download it from BitTorrent? Yes, changing this requires upheaving nearly a hundred years of Hollywood legacy – but what good is legacy when your consumers have already gone elsewhere? (Just ask Blackberry…)

For television, it’s even harder to legally watch the shows you want. Again, even in the US the industry is fragmented over a multitude of different streaming providers, cable providers and tv stations. Outside of the US you can mostly forget it completely.

People are creatures of habit and, most of all, creatures of comfort. If there’s an easier way to do something, it’s immediately attractive. The statistics on online media piracy prove that by playing the moral card alone (you wouldn’t steal a car, you wouldn’t steal a movie…) the media companies can only prevent a tiny percentage of the piracy. People clearly don’t relate to the story of the poor, undervalued Hollywood celebrities being robbed of their daily bread by heartless and immoral video pirates.

If the media industry wants to solve the issue of piracy and meet consumers’ evolving expectations, we still need to see big changes in the way content is produced, but certainly how it is distributed.

My tip: make it so easy to pay, that piracy just isn’t worth your time.

An idea is not a product

In idea is not a business; and it’s not a product. An idea is just an idea.

What makes an idea ready to become a product?

Facts.

An idea made up of only opinions is just that – opinions.

Don’t get me wrong: opinions are often sensational places to start a product from. Some of the most ground-breaking and innovative products started with an epiphany, a flash of inspiration or a daydream. The trick to being successful as a creator of products is to figure out which ideas are productisable – and which aren’t – before you build and launch a product and watch it fail.

Identify the intrinsic assumptions that exist within your idea, and then test them.

Avoid making product decisions on ideas or opinions alone. Testing the assumptions behind the great ideas is the only way to know you’re investing your time and money into the right product.

The answer is not inside the building

Too many of us spend far too much time in the building.

We sit at our computers and read blogs and write emails; we discuss in conference rooms and over coffee, sometimes even at the cafe down the street. But how much time do we actually spend outside the building?

Your customers are not in the building. You won’t find them lurking by the water cooler and you probably won’t see them at Starbucks.

I don’t know exactly how much of their time a product manager should spend outside the building – but my gut tells me it’s something like 20 or 30%. How else can you get close to the needs and wants of your customers, first-hand and in-the-flesh?

If you’re looking for insights into your market, you’re really not likely to find them by reading blogs or watching Twitter. Sure, some gems come along over the social channels, but the real insights are waiting for you out there – with people.

Do yourself (and your product) a favour and get out of the building this week. Go and talk to a customer or meet an industry partner. Run a panel, inviting some of your most vocal advocates (or detractors!). Attend a think tank or a networking event relevant to your industry.

Because the answer to your problem is probably not inside the building.

A FlashBuild – the Flash Mob for product development

Customer involvement and user feedback is at the core of building great software experiences that people want and love.

It’s a bit old now, but I just stumbled on this impressive way to build an app with customer feedback at the core. Nordstrom innovation lab built an iPad app in just one week to help people pick sunglasses. To better involve customers and user feedback in the development process, they built the app in a sunglasses store!

Check out the vid:

This is how you involve customer feedback in your development cycle!

The users lose

When the giants of the tech world play the game of thrones, it’s the users who pay the blood price.

About two weeks ago Twitter removed the Instagram inline preview of Instagram photos, meaning Twitter users can no longer see Instagram photos their friends have posted directly in the twitter stream: users now need to click the Instagram link, and open the Instagram site in another browser tab to view the photo.

Why? Due to hostilities between Twitter and the now Facebook-owned Instagram that can most likely be traced back to bad vibes stemming from some sneaky dealings during the company’s acquisition.

This is just the latest example of the user’s experience suffering as successful and loved products start to feel the investors’ pressure to focus on monetisation and revenue. LinkedIn users felt a similar blow when tweets stopped appearing on people’s user profiles as Twitter tightened up access to the API back in June.

The very open philosophy of APIs and data exchange that helped to build companies like Twitter is slowly getting left by the wayside in the search for sustainable monetisation strategies for “Web 2.0” products.

Where does this leave users?

Application experiences are increasingly taking place behind walled gardens – meaning that all, of the majority, of user’s interaction with the service is taking place within the proprietary application interfaces (twitter.com and the official twitter apps, in Twitter’s case, for example). This will lead to less choice and fewer options for users in terms of where and how to consume content and interact with the service.

Moreover, the products and services created by 3rd party developers leveraging APIs such as twitters have heavily driven innovation in the core products and the surrounding ecosystems.

When the first web mashup was born seven and a half years ago when Paul Rademacher reverse-engineered Google Maps to put craigslist rentals on a map it set a precedent that influenced, maybe more than anything else, how the web would develop for the following years. The social web as we know it today, led heavily by product companies such as Twitter, Facebook, Tubmlr, Foursquare, WordPress and many others have been built on a philosophy of openness, hacking and mashing up diverse data assets into new and compelling experiences.

As more and more of the power on the web is drifting toward more closed and walled-up product ecosystems like Facebook, Google+ and others, we need to call on these companies to remember the philosophy of openness that built the web that allowed them to succeed. Data should be becoming more, not less, available and sharable, and the pillars of the modern social web are in the position now to set the precedent for the next 7 years of innovation on the social web.

The “tweet pitch”: an elevator pitch in 140 characters

What’s the one sentence that describes your product?

We all know about the Elevator Pitch – the 30 second pitch that you would deliver to your CEO or to an investor whom you meet in an elevator, where you have until the elevator doors open to pitch your great idea. I’ve written before that it’s essential for every Product Owner to not only have his or her elevator pitch always ready and prepared, but even to practice it so that every opportunity you have to deliver it is as good as it can be.

In our modern world of constant interruptions, short attention spans, skim reading and ever-faster elevators, however, you might not get 30 seconds. You certainly won’t get 300 words.

I think what we need to understand is the tweet pitch. What is the core essence of your product, in 140 characters or less?

It’s an interesting exercise because, like preparing an elevator pitch, it forces you to boil your product down to the fundamental core.

For sure, you can’t say everything about your product in 140 characters – you can’t describe your vision, your market segment, your business model and your strategy – but that’s precisely what I like so much about the tweet pitch. It forces you to get to the core.

Several other products (probably) do the same thing or something similar. So what is important about you? What makes your product different?

Every product has a market segment. But is that what is unique about yours?

If you only had 140 characters to sell your idea – which characters would you choose?

(I cannot claim that I coined the term “tweet pitch”. It’s been written about before at least here and here, and I have to give credit to Timm for putting the idea in my head this week).

Microsoft gives all its employees a new phone, tablet and PC… and I think that’s real smart

Geekwire reported on Friday that Microsoft announced at their annual employee conference that every full-time employee will receive a brand spankin’ new Windows 8 mobile device, Windows 8 computer and a new Surface Tablet – for work and private use.

With over 90,000 full-time employees, this is not an inexpensive exercise… with a generous estimate of $1000 (cost price) per head for a phone, a PC and the Surface tablet, it’s over 90 million bucks. So why would they do this? (And why do I think it’s probably one of the smartest ways to spend 90 million bucks?)

  • It shows they are committed to their product – that they believe in their product – and it will help the employees of Microsoft remain focussed and passionate about their mission. Microsoft are coming late to the party when it comes to the mobile and tablet space, and the Windows Phone ecosystem is at a critical stage where it needs to really take off, and quick – and the whole team at Microsoft will have to keep true to the mission to make it happen.
  • It’s a sign of confidence to the outside world. Microsoft is saying; “we can afford to have all our employees using these – they will be successful”.
  • It also shows commitment to their employees, and will be seen as a nice bonus gift by everyone.
  • It turns every single one of their employees into an immediate marketer and ambassador. Sure, they all are (or should be) anyway – but when they actually have the physical product in their hands to show their friends and family, it is quite something else. Every Microsoft employee will be an expert ambassador, and will spread the word and passion to the rest of the world. It’s seeding the market with 90,000 highly engaged customers.

A company’s best and most passionate ambassadors should be the employees themselves. Making sure they are up to date with the latest products is a smart way to make every employee a vigorous promoter.

Plus: $90 is small change relative to Microsoft’s 261 billion market cap.

ALE 2012: My presentation: “The Product Owner – The Accidental Profession”

The Stork and the PO

Here you can find the slides from my presentation at the Agile Lean Europe 2012 Unconference in Barcelona this week.

Download the slides

Thank you to everyone who attended and gave feedback!

A brief memoir of my days as a barkeeper (and why ex-barkeepers make great employees)

Cocktails
Cocktail Group – by kurmanstaff.

Over the years since I finished high school I’ve had the immense good fortune to work with a handful of remarkable people who have inspired me deeply; who have mentored me and taught me an incredible amount about myself.

The first of these was not a CEO or a VP; he had, in fact, nothing to do with the technical career I was then aspiring to pursue. He was a barkeeper.

A cocktail maker in fact; “Chief Cocktail Maker”, if such a title existed. His name was Ted; he was in his mid fifties then and had worked in the same piano bar in Sydney’s inner southern suburbs for something like 20 years.

The cocktail bar was part of a large lounge and bar complex, filled to overflowing with glittering poker machines and rowdy teenagers. In the midst of this sea of lights, noise and excitement, Ted’s little cocktail bar was an island of quiet and still.

There were many bartenders working at the club; maybe 40 or 50 at any one time. Ted was feared by some, awed by many; and respected by everyone. Something of a legend in the cocktail business, his skill with a boston shaker and hawthorne strainer was renowned.

Ted had worked in that dimly lit bar behind that lotus-green marble countertop for as long as he could remember, and as far as I know he’s still there now, mixing up his classic appleseed martini. And yet I learnt from Ted a few fundamental things that have stayed with me through my career as a Product Manager and helped define who I am and how I work.

How?

Firstly, Ted taught me the value of understanding the customer experience. When you come into his bar, you are not there just for the drinks. What you pay for is the end-to-end experience. This is something any good restaurateur understands: the quality of the meal itself is only as good as the quality of the experience surrounding it.

The same is true of software products. When you pay for a piece of software (either with cash, or with your attention), it’s not just the source code that you obtain – it’s an experience. And the experience doesn’t end with the user interface of the product. The sales process itself is part of the product, as is the customer support line, the warranty process, the packaging, and so on. And the user’s perception of every part of this experience influences their perception of everything else.

Ted taught me about this experience. The guest’s experience starts when they enter the bar and see how the room is lit, how the chairs are organised, what music is playing. It continues when they order their drink: the menu, the options. How a cocktail is prepared and presented to the customer is almost more important than how it tastes; in fact, mixing the ingredients in the right way is the easy part – the true artistry comes with the flair with which it’s prepared and the quality of the presentation in the glass. (The artistry involved in creating new drinks is quite something else, but that’s another story).

This brings me to the next critical skill I learned under Ted’s tutorage: attention to detail.

Cocktails
Red Stools – by Jack Zalium.

Ted was obsessed with orderliness, and every stool and every table needed to be perfectly positioned and perfectly aligned. He was known for walking through various parts of the club with a ruler, measuring the distance between the chairs and tables, as well as rigorously enforcing other standards of excellence, such as ensuring coasters laid out on the table were positioned so the text would be the correct way up for the seated guests, or that every bottled product served to a customer should be served with the label facing the guest (something actually every bartender knows and continues to do intuitively when placing bottles on the table, long after their bartender career has ended).

Details come in all forms great and small, and the ability to keep your eye on the details while maintaining the end-to-end view is, I believe, one of the chief virtues of incredibly successful people.

To understand the impact of these two things, consider the packaging of an Apple product, whether an iPod, MacBook or an iPad. Every aspect of the package has been considered; the colour, the use of images and type. Bold in its modesty, an Apple product stands out among the clutter through its thoughtful minimalism and stark beauty.

Attention has been paid to every aspect of the end-to-end experience, from what the product looks like on the shelf to the experience of taking the product out of the box and using it for the first time.

In every product I work on I come back to that which I learned during those long evenings in the Skyline cocktail bar. But Ted taught me more than that.

Cocktails
Library Bar – by ZagatBuzz.

Ted’s obsession with orderliness didn’t end at the alignment of the chairs and tables. If he saw a dirty table, he’d be the first to grab a rag and a spray bottle and he’d be off to clean it. If an ashtray had ash in it, he’d empty it, or if there as litter on the floor, he’d pick it up.

It didn’t bother Ted that he was actually the bar manager. He could have called the cleaners; he could have delegated to a more junior bar staff member. It didn’t matter that it wasn’t his job: if something needed doing, then he’d do it.

Ted, of course, expected nothing less of the people who worked for him, and the result was a culture where “not-my-job” thinking just didn’t exist.

Every team has issues that don’t get resolved as quickly as they probably should – old, un-refactored code, unanswered customer support queries, lingering bugs. But when these things start to stack up into ever-increasing piles, I’ve found that it’s often due to an established “not-my-job” attitude, and changing this attitude once it’s ingrained in a team is very difficult.

On top of all that, my time in Ted’s cocktail bar taught me that hard work is rewarding work. It might sound like a socialist slogan, but when I fell into bed at 4am after making cocktails all evening, I fell asleep exhausted, but fulfilled. I’d had fun at work, I’d learned something (which I did nearly every day), I’d met interesting people and helped serve an experience to our guests that they appreciated and told their friends about.

You might not believe it, but it’s truly amazing what you can learn in a bar.

Cheers!