Companies that have historically held significant market share in their respective industries have faced increasing existential threats over the past few decades from start-ups that better meet their customers’ needs with digital technology. To maintain and regain industry leadership, large organizations have begun partnering with digital product agencies: companies that offer end-to-end strategy, design, development, and growth marketing for digital products such as websites, mobile applications, IoT, voice applications, and more.
Forrester recently released its Now Tech report of digital product development services for Q1, 2020 (Now Tech: Digital Product Development Services, Q1 2020, Forrester Research, Inc., February 11, 2020). We’re incredibly proud to be included in this group, alongside firms we believe are similarly dedicated to launching new, valuable digital products and helping traditional incumbents compete with new start-ups.
While “digital product” is a term we use everyday, it can sound somewhat amorphous to those outside of the tech world. Forrester’s research and excellent exploration of the importance of digital products is the perfect opportunity to discuss what the term actually means, and why digital products matter to your business and your consumers.
What is a Digital Product, and Why Do Companies Need Them?
A digital product describes any interface through which humans and technology interact.
A digital product combines software, hardware, and/or middleware to accomplish any of the following:
- Create new sources of customer value
- Boost revenue and profitability
- Deliver a differentiated competitive advantage
(Now Tech: Digital Product Development Services, Q1 2020, Forrester Research, Inc., February 11, 2020.)
Creating new sources of customer value
Value-adding experiences, delivered through technology, not only enhance loyalty of current customers, but can help attract new customers as well. Nimble, digital-native start-ups disrupt traditional industry giants by fulfilling a need that has been generally untapped by incumbents.
For example, fintech organizations that focus their product experience on delivering high-value, personalized financial advice threaten larger financial institutions by fulfilling a need that has not been met by traditional banks. Although 58% of customers would like to receive advice and guidance from their bank through a digital channel, only 12% are getting it — so they turn to fintech companies that not only can deliver this value, but base their entire business model around it.
How can traditional financial institutions create new sources of customer value to compete with disrupters? Industry incumbents have the advantage of a wealth of data and resources, which, combined with expert technical capabilities, can produce a digital product that creates incredible value for users.
Bank of America’s Life Plan product introduces innovative financial planning and advice within their app, anchoring the bank’s relationship with their users in their personal life plan and goals. Building a sustainable and value-driven relationship with the customer is what Bank of America’s head of digital banking calls, “the holy grail in financial services.” As more and more financial products become available, margins shrink on individual products, but better relationships with users create more lifetime customer value as they become more likely to engage with multiple digital products.
Boosting revenue and profitability
Digital products can also drive direct revenue by creating new channels through which customers can make purchases, especially in sectors like retail, food services, and entertainment. The Regal Entertainment Group’s mobile app, for example, enables the movie theater chain to better compete for business with other market leaders like AMC, and with digital-first platforms like Fandango. After updating its mobile product experience across iOS, Android, and tvOS, Regal saw a 290% increase in mobile ticket purchases. Their digital product offers an additional, often faster and more convenient channel, for users to achieve their desired outcome and make a purchase — plus includes gamification and loyalty programs that drive more frequent purchases over time.
Delivering a differentiated competitive advantage
Forrester characterizes the constant addition of competing digital experiences as ultimately resulting in a level of “digital sameness,” that requires companies to deliver entirely new products in order to gain a competitive advantage (Now Tech: Digital Product Development Services, Q1 2020, Forrester Research, Inc., February 11, 2020).
Moen is creating a differentiated experience with connected home products, including the U by Moen™ voice-enabled faucet. The faucet, which debuted at CES 2020, supports Alexa and Google Assistant commands to dispense water in specific quantities at specific temperatures. It functions in tandem with other Moen products such as a Wifi/cloud-based digital shower, a smart water leak detector, and an ecosystem hub mobile app that create a connected home experience that has never existed before.
Today, almost anyone can build software. But the fact remains that 84% of software projects fail — the software gets built but it doesn’t get built on time or within budget, or it doesn’t work the way users need it to. To build a truly outstanding and successful digital product, you need nimble teams whose expertise extends far beyond coding and who bring a holistic approach to your product — from conducting targeted research into users’ needs, to emphasizing UX in both design and development, to building in analytics and SEO considerations from the outset.
We know there is truth in the quote from Steve Jobs,
“A small team of A+ players can run circles around a giant team of B and C players.”
WillowTree’s team of digital experts cultivate a deep understanding of your business, your customers, and your vision to differentiate your digital product, and ultimately your brand, in the marketplace.