The best product management framework can be wrong if you don’t consider the product lifecycle
Some time ago, I led a project to relaunch a successful product that was in danger of losing its market share. The product is a payment product that some e-commerce platforms develop themselves, while others buy it from Fintech companies.The payment product allows customers to decouple the purchase from the payment. Customers pay after they receive the goods, and in some cases they can defer payment or pay in installments.
To be successful with this product, a company must master two key skills: The first is effectively predicting credit losses. Companies must pre-qualify potential customers in seconds to determine if they are creditworthy. Companies must also combat organized crime rings that are out to get the goods and not pay in the first place.
As important as risk management may be, it is not the only component that matters. The second component that matters is a great user experience. If payment is not completed at the same time as purchase, the process becomes more complex. Customers may need to return a product, recalculate the amount due, and remember to proactively pay a few days after purchase. Anything can happen along the way. Customers can forget to pay because they don’t remember to pay the bill. They can miscalculate and pay with the wrong amount. Returns can take longer than anticipated, and the company can get the impression that a customer is delinquent when in fact they have returned the product and the transaction is complete.
The product had been extremely successful in previous years. The company had a very good handle on risk management: credit losses were really low, stable and predictable. The product contributed significantly to the success and growth of the e-commerce platform. However, over time, other players in the market developed innovations in the area of user experience, and the company was unable to catch up. If the company did nothing, it ran the risk of losing market share.
You do not need a big acute problem to loose product-market fit
Because I had much more experience with pre-product market fit situations, I was initially biased in my approach. I was looking for acute customer problems to solve, and after digging for more than a few days, I was surprised to find that there were none.
The first question I asked myself was: If there were no major problems to solve, did it make sense to relaunch the product?
After I did a competitive analysis, the final question was a resounding yes. After all, the product was starting to lose ground to the competition. Doing nothing could mean losing more market share and recovery would be very difficult.
But why was the company at risk of losing market share when customers had no acute problems with the product?
In the end, I realized that it doesn’t take a major problem to hurt an established product. Several minor customer issues that go unresolved for a while can add up to a big problem for your product, especially if there is disruptive competition.
It’s a well-known fact that the fit between product and market is not immutable. Consumer preferences evolve as does the competition, so ultimately a company must provide additional value to stay in the product-market fit zone.
The logic is the following. A product increases its value until it exceeds a threshold sufficient to generate strong demand in the market. This is the area of product-market fit (PMF). For a while, the company does not change its product, but due to changing consumer preferences and competitive pressures, the threshold to stay in the Product-Market-Fit zone becomes higher and higher. Eventually, the company falls out of the product-market fit zone because it is unable to add value to the product or keep up with innovations in the industry. The chart below illustrates this dynamic.
Note: The chart above is an adaptation of a charge used by Ravi Metha in the Reforge product strategy program.
This is the dilemma that many established companies face and several books have been written about it.
From a product management perspective, the main challenge in this situation is deciding what issues to tackle.
In this case, we knew that payment products are typically a means to an end for consumers. The payment experience itself is not something consumers look forward to. What they enjoy is buying or using a product, and they have to pay for it. Two of the most important attributes customers look for in payment products are convenience and security.
So, to look for problems in payments, it’s always a good shortcut to look at issues of security and convenience in payments. From a more general standpoint, it is always good to look for issues that may negatively affect the core value proposition of the product, or that prevent new customer segments from taking advantage of said value proposition.
In this case, the product was very secure, but there were several indications in previous customer surveys that pointed to convenience issues.
The next challenge is to decide what issues to tackle, and how to solve those issues. Although in product management you usually try to understand a problem well before jumping into a solution, there are often standardized features used across an industry to solve common problems. The features you are missing and that are making your competitors successful are quietly pointing you to the most important problems to address.
The rest is not as complex. If your company is data driven and you have access to data and customer insights, you can probably quantify and prioritize the problems. If this is not the case, you will try to use proxies or conduct additional customer research to fill in some gaps.
The right product management framework depends on the phase of the product through its life cycle.
An interesting insight is how much product management work changes across the product life cycle.
If you are starting from scratch and need to achieve market readiness for your product, there are usually two requirements. First, you need to address an urgent and acute customer problem. Second, you must be able to find and deliver a solution to that problem that either doesn’t exist yet or is much better than anything that does exist.
It’s about finding the right product that contains the right combination of features that work well enough on their own and together in one product. To do that, you’re going to be iterating a lot, because even if the user problem is clear, the right solution isn’t straightforward.
Once you get over the hurdle of product-market fit, the challenge is usually growth. Growth is a complex thing, but ultimately it’s about removing barriers to improve new customer acquisition and increase retention of existing customers. Additionally, you may optimize pricing in order to grow revenues and profits. So you’re usually more concerned with smoothing out the rough edges of your product than substantially increasing its functionality..
However, once your product is mature, your attention turns back to features. At this point, you’ve probably already fixed most of the flaws, so continuing to iron out the product usually isn’t as worthwhile as adding additional features. However, customers have become accustomed to your solution and may even be spoiled. New competitors may try to penetrate your market through innovation. Therefore, you need to add additional features that solve new problems that arise after the basic problem is solved when you reach product-market fit. None of the new problems is usually as big as the problem that enabled your product to reach PFM in the first place, but when neglected they add up. This was the type of scenario I was describing at the beginning of the article.
The chart below illustrates the process. You may go back and forth several times between adding features and focusing on growth on your journey to manage the product through the product life cycle.
