Growth is a make or break measurement for products and companies. Investment is often determined by expected value, which is based (in part) on expectations of growth. When you create a product, there are aspects of growth – how many people can use your product, and how many people do use your product. When dealing with a freemium business model, there are two elements of use - paid use and free use.
Three Goals of Growth
You can think about growth in terms of three goals – increasing your servable market, increasing your market share, and increasing your paid market share.
- Servable Market – The number of customers that could potentially use your product.
- Market Share – The percentage of the market (or of the servable market) that does use your product.
- Paid Market Share – The percentage of the market (or the servable market, or your users) that use and pay for your product.
As a product manager, when you consider capabilities to add to your product, you need to understand which goal your capability is designed to address. These are all inter-dependent metrics, so it can be challenging to stay focused on each. For example, if you have a 1% conversion rate from free customers to paying customers with your freemium business model, you may assume that by increasing the number of free users, you will automatically increase the number of paying customers. That might be true, it might not. Ultimately, you want to increase the number of paying customers – so that is part of all of these decisions. When making each decision about prioritizing the next capability to add to your product, make sure you understand the primary growth goal you are affecting.
To keep the language from being too contorted, in the rest of the article, I’ll talk about users and customers as people, and not try and differentiate companies and people. Users are people (or companies) that use your product or service. Customers are people (or companies) that pay to use your product or service. Your product could be a physical product, a software product (or license), software provided as a service, or a service. I’ll refer to it as a product.
Growing Your Servable Market
The pedantic definition of your servable market is all users who could use your product. A better way to think about your servable market is all people who experience the problems you’re trying to solve, who have reasonable access to your product. People who don’t have those problems are not part of your market. People who have those problems, but can’t reasonably use your product are part of your un-servable market.
Imagine you build a product that only runs on Windows Vista. Windows XP users are not part of your servable market – they could upgrade to Vista and use your product, but they haven’t yet. There’s a barrier to entry that they have to overcome. Perhaps you have a pizza shop that delivers within a 10 mile radius and allows customers to place an order for pick-up and drive to your store and pick up the pizza. If your shop is in Mountain View, technically people could drive from downtown San Francisco to pick up a pizza – but there’s a barrier to entry (the time and expense of driving to Mountain View) that makes those downtown San Francisco people part of your un-servable market.
The size of your servable market reflects the potential number of users you could serve. Your focus on growing your business can include changes designed to increase the size of your servable market. You can write (non-functional) requirements that express this goal. One type of non-functional requirement is platform support - supporting different operating systems; supporting netbooks (with less-powerful processors) as well as laptop computers; supporting devices with slower network connections; and supporting visually impaired users through your user interface. Sometimes, the requirement to support a particular platform is represented as a constraint (e.g. you must provide support for linux users).