Q: I am considering metrics for an add-on new product launching in a well established company that makes equipment to test electrical cables (for the last 29 years). We are introducing a new product that is an add-on to existing products (it is only useful if used with the existing product). This is a project that was pushed by our founder and has been developed for the past year. We were able to get a little bit of feedback along the way from customers but not much.
I recently moved into the product manager position and one of the things I am trying to do with this project is set some metrics we can use to judge the success or failure of the project–something we have not really done before. This cheap product is not designed to make a lot of money itself, but the hope is that because of this add-on product we will be able to sell more of our main product. To that end I’m trying to come up with some way to help judge if that is really happening or not.
Below is what I have so far as possible options for key metrics to watch after we launch the product:
- Total units sold (I see this as one of the least useful, but it feels like it has to be there for completeness)
- Total Orders (i.e. how many companies are ordering them – goes along with units sold but tells more of the story)
- New Customer Orders (Orders from first time customers – sign that we won business because of the new add on)
- Orders with main product (These are orders from existing customers, but for new equipment with the add on)
- Orders without main product (These are orders from existing customers without new equipment – implies retrofitting)
- Repeat orders (Orders from customers who previously purchased the add on – implies they like the add on)
- Website Interest (Individuals who navigate to the information page – implies right marketing message, compare to sales numbers)
- Win/Loss Mentions (Number of times add-on product is mentioned as a influencing factor in a successful sale)
My questions are:
- Are these actionable metrics?
- Will these really provide me insights into the success of the project or help me to know when we need to change something?
- Do you have better suggestions for metrics? Which are the best to focus on?
A: At a high level, there are two sources of sales growth for an existing product:
- Selling more units to current customers (perhaps because they find additional uses for your primary offering or your add-on removes a blocker or dissatisfier for use in new areas).
- Selling units to new customers who have not purchased from you before. Here again you should look for attach rates – how often was the secondary offering included in the offer.
I think the metrics you outline are well thought out and would enable you to assess whether or not the addition of the new product is either driving greater adoption in existing customers or adoption by new customers. Here are two additions to consider:
- Measure not just first order but a re-order from a new customer as a rough proxy for satisfaction in the same way you measure re-orders from existing customers (or split re-orders as from established or recent customers)
- You don’t mention customer satisfaction or net promoter score; you might want to include those in your assessment (in particular if you can do a “before and after” to judge the impact of your add on offering).
One thing to probe for in conversations is what do current (or new) customers stop buying, stop doing, or stop wasting as a result of buying your add on. What are you replacing or substituting for (either with the primary product or the combo product). That might give you some additional insights into the total value of the combo offer (old plus add on). This is initially more qualitative but you may be able to create categories or metrics as you continue to engage. See “The Early Bird Already Has The Worm” for some additional suggestions on this.
One final thing to consider would be to create a bundle that can be purchased if you can message for a category of customer applications/needs/use-cases that would benefit directly from the combo. In the beginning this could simply be bundling into the same shipment but if there is enough distinct demand it may be worth considering creating a single package or an integrated product that blends the combination. The theory here is that over time the retro-fit orders will subside and customers will either order the single or the bundle but not the add on stand alone if they understand it’s value for one or more applications.
Taking a step back the real question is what to design next, not whether to kill the add on product or not. The development costs for the add-on are sunk. Putting it a different way, you should have a consistent approach for evaluating whether to kill/obsolete/end-of-life any of your products that you are applying on a regular basis depending upon average or expected product lifetimes. Your competitors are hard at work attempting to obsolete your products as well as their own. Detecting when they have been successful or planning for how to beat them to the punch is worth doing systematically.
Proving the founder/owner wrong conclusively (or right) may be a less valuable use of your time than addressing the real issue: what are the top problems you need to solve to continue to grow your business. If you can, get the founder to expose the thought process and the data and customer stories that were examined or formed the context for designing the add on. See if there are additional insights for new products to be investigated. Also, I would not be too quick to discount practices in a company that has lasted 29 years: your firm is undoubtedly doing a number of things well and you want to take care not to break what’s working as you instrument the product management process and potentially start to kill products.
If you spend all of your time trying to measure decisions that were made before you took the role it’s not as useful pushing for additional conversations with customers, non-customers (who you believe might buy from you), your sales team, your support team, and channel partners. As a product manager you need to help the firm determine where to invest engineering/design efforts to address key opportunities. Of these the harder conversations to target are with non-customers (either ‘no longer customers’ or ‘never were customers). See “Non-Customers Are Where Important Changes Often Start” for some more on this.
I think the original question points up the need for an ongoing assessment of “product/market fit,” even by mature or established firms with established products. Here are two related posts that suggest the search for a scalable business model does not have a finish line, all businesses must revisit this challenge periodically:
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