How does your customers' (or the market) willingness to pay influence your product roadmap?

Customer willingness to pay is crucial. You can create a product, but if it's not seen as a must-have for your customer, they won't purchase. Focus on building a product that meets a real need, which is core to a business' toolbox. An easy way of prioritizing new feature development is to ask your customers. We have a customer/user community where we ask them to prioritize certain features and ask them why before we develop them. 

If you build a product and your customer doesn't purchase, you know you skipped the Voice of Customer phase.

Everything we build is because it will either increase sales, increase adoption, or increase customer satisfaction. Know the metric you want to impact before you build.

The mistake some Product Marketers make is to only think about net new revenue potential. For example, let’s say you are deciding between two features that will take equal amounts of development time. Do you build the feature that will help you attract new customers or one that will retain your existing ones? If you only considered net new revenue potential, almost everyone would recommend building the feature to attract new customers. This is because the feature that helps with retention won’t have any immediate revenue impact. Therein lies the mistake.

Many studies have shown that it can cost 5x as much to acquire a new customer than to retain an existing one. So when making product roadmap decisions, I would encourage all Product Marketers to optimize for the features that drive product stickiness.

For example, the Zendesk trends report showed that businesses were increasingly turning to messaging as a support channel. Instead of attempting to build features for an entirely new segment, we doubled down on ensuring that our existing customers had all the channels they needed to support their customers. So, we spent most of 2020 building integrations into various messaging services (such as Facebook Messenger, WhatsApp, and Instagram DM). This has increased product adoption and retention amongst our existing customers as they now have more ways to communicate with their customers.

"Be pragmatic"

Yes - sometimes, deals tend to have revenue opportunities linked to them, and the PMM-PM team needs to decide on the trade-offs about making changes to the roadmap that have revenue linked to them. In such situations, it is important to be pragmatic. Some of the questions to think about while considering revenue linked feature development are:

Customer and deal pipeline impact - How many opps and current customers will be positively impacted by building the feature now?

Timeline - How long will it take to meet the customer's demand. Can we meet to offer the customer an acceptable solution within the timeline promised?

Customer considerations: what will be the impact to the customer if we do not accept or agree with their contractual terms and timeline. Will, the customer consider other competitive solutions.

Internal Cost and roadmap impact: How much will this feature cost to develop, and can we offer a pragmatic(often nonideal) solution that meets most of the customer's goals.

Think long-term: How can we ensure we are not building a unicorn feature that only works for this customer. I.e. Should this be on the roadmap, or this better serviced via a professional service or consulting engagement.

Build extra timeline padding: Avoid pushing your organization into a box by over-committing on the timeline. There is probably a good reason why the feature does not currently exist in your product today, and contractually accepting this feature will likely force you to revisit previous decisions and deal with technical debt. Allow enough timeline padding for such ghosts.

Broader customer impact: Consider the broader impact of the feature on other customers. Over rotating a feature to meet the needs of a paying customer can end up in a sub-optimal experience for everyone else.

PMM impact: Think about how building the new feature will up-end the current pmm obligations. Can you develop new messaging in the timeline? Would you do a formal full-fledged launch for the feature? How will your pricing and packaging change? How will field enablement look like for the feature? How will broader customers have access to the feature?

Many things should play a role in shaping the product roadmap. That might include customer insights, market opportunities, current customer satisfaction, and beyond. 

Willingness to pay (WTP) should absolutely be among those considerations.

In order to determine how much it should play a role for your particular product, you need to first reflect on what the product strategy is. Are you more of an engagement-based product trying to get customers to interact (e.g., TikTok, Nextdoor, Instagram). In those cases, I wouldn’t get hung up on WTP because you don’t need customers to make a buying decision every time (or perhaps ever).

If, however, you’re trying to achieve something like accelerate customer acquisition or improve retention, then WTP should be used to shape the roadmap. Going after WTP here will help acquire and retain more people because they’ll find the product more valuable.

I’ve also used WTP research when building out a brand new category. When you’re defining your product offering for the very first time, it’s helpful data to make a decision on where to invest when there are many things you could do.

Lastly, I’ll point out that you want to balance WTP with total addressable market (TAM) for a given product or feature. If people are willing to pay gobs of money for something but it’s ultimately only a niche group, the revenue potential might not be worth it.

This all depends on both your pricing and company strategy, which together determine to what degree revenue opportunity should be weighted when making roadmap decisions. Are you currently focused on optimizing for usage, growth, or revenue? Only you can answer that.

In my experience, instead of focusing specifically on revenue, I prefer to prioritize based on "impact" of which revenue is just one measurable component. I could go into more depth on this, but the fine folks over at Intercom have a fantastic post on their blog on this exact topic–Ship outcomes, not just features, with the Product Impact Framework.