Watered down products typically fail ….


A company has success with its enterprise product. But the company wants to accelerate sales and increase the number of customers.

Someone says – how about small businesses? Of course, that is a large market. Why did we not think of them? We already have the enterprise product in the market – so building the small business version should be easy.

The CEO says “Get rolling, I want to ship a small business version next month.”

Everything is fast tracked – product management starts with the enterprise product, cherry picks features to turn off and voila, small business product definition is done. That was too easy. What about pricing? Hummm, let us see, how about 60% of the enterprise product? Done. Product ships, everyone is excited on launch. There is a party, the CEO is thrilled – the team delivered.

Roll forward 30 days – the small business product is not getting traction. Sales comes back to product management with requests for one-offs – “hey, I was talking to this company – they love the small business version, except they want this one more thing that is in enterprise version – do you think we can turn it on? After all it is there, should’nt it be just easy to turn that switch back on.” Sales applies pressure because they have to meet their numbers for the quarter and it is so enticing to do this because no new feature has to be developed – it is already in the product!.

Unfortunately, this is a common story and I have personally lived through months of the above. Welcome to the world of customization hell. It is worse than the enterprise product because what the company has essentially done is allowed customers to demand the enterprise product functionality at steep discounts, now that you have two products – the enterprise version and the small business versions. This is not limited just to small businesses. Enterprise customers get wind of the small business product and want the small business version but with feature X, Y and Z and at the small business price.

When building products for new market segments such as small businesses, companies often make the mistake of creating a product by turning off a bunch of features from their enterprise version and slapping “for small business” on this watered down product.

This fails for one of two reasons:

  1. The product even with some features turned off is still considered too complex by the small business users because the needs are different and also the persona of the target user in small business are different.
  2. Small businesses have the same needs as larger businesses and hence they find that the watered down product does not satisfy their needs.

Let us examine these two issues in more detail by considering two examples.

1) IT network monitoring product: Large businesses tend to have an IT staff in hand to set up their networks. These highly qualified staff typically are geeks and take pride in the fact that they have to use DOS prompts and unix like interfaces to get their job done. Now consider a small business which has to set up a similar network. Very often, in a small business, it is probably the owner that may be setting up the network – he is not an expert at networking, wants to quickly set up his network and get back to business and has no time or expertise to deal with DOS prompts and Unix like interfaces or to understand networking terminology to set up his network. He wants a very simplified interface that hides a lot of complexity, wants to select a few options and have the network up and running as quickly as possible.

Now let us take another example –

2) Performance review management software: Companies do performance reviews either on an annual basis (everyone gets their reviews done at the same time) or at the time of employee’s hiring anniversary date. The software vendor decides to offer these two options only in the enterprise version and turn off the capability to performance reviews at the employee’s hire date in the small business version. This does not work out because even small businesses have the need to do performance reviews based on the employee’s hiring anniversary date.

How to do this right?
So how do you avoid these two traps. Here are some ways to do this right –

  1. Clearly understand the needs of the small business user. It takes the same amount of time and deep understanding as the enterprise product to get it right.
  2. Clearly understand the persona of the user who will potentially use the product before you decide what the product needs to be. More often than not, you will find that usability tolerance to be vastly different between small businesses and large enterprises – not that large enterprises don’t like user friendly products, but they are a little more tolerant because of the resources they have to handle implementation and ongoing maintenance.
  3. Make your product offerings by balancing the needs of the users and your business goals. If the functionality needs are the same, make the product offerings different on other variables. For example, you can impose limits on the number of users who can use the product or by by pricing your product as per user. This way small businesses can get all the functionality they need, but pay less fees depending on the number of users they have. Or limit the amount of data they can store – for example, the enterprise version of a CRM product could allow saving unlimited number of contacts, but the small business version may allow only upto 1000 contacts. If it is a survey software, you could segment based on the number of surveys someone can run per month or by putting a limit on the number of responses you can get per survey.

In essence, simply watering down products is not the right answer.

Thoughts? Do you agree?

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2 thoughts on “Watered down products typically fail ….

  1. I agree w/ your assessment for enterprise products, AND if you are going backwards.

    But it’s common these days – more in the consumer space – to offer different packages – basic, full, premium [good/better/best].

  2. Startup :
    1 & 2: In a startup there is no time whatsoever in the chaos and therefore, being able to conduct customer interviews to find out what they really want (in terms of features) is almost impossible.
    3: The business goal in a startup is always maximizing revenue in the next release cycle!

    I really love your articles and follow them on a regular basis. I am a product manager at a software startup and would like to learn your thoughts on my comments. How will both my comments work harmoniously in a startup environment?

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