A digital product can transform your business. A digital product provides a unique way to build scalable recurring revenue and high company value around your specific expertise and services. Distilling your business know-how into a digital product is not just a technological leap; a digital product changes your strategy, your go-to-market strategy, your operations, and your finances.
Despite the big leap, many business owners and leaders are drawn to digital products because of their incredible potential for reach, recurring revenue, and scale.
But the hard truth is that most digital products don’t succeed. While failure is always a possibility, far too many digital product ventures fail because they’re created in ways that lend themselves to failure. While it is much quicker and easier to launch a digital product to market than it was a decade ago, the marketplace is much more crowded today and user expectations are at an all time high.
In this guide, we’ll share our expert know-how from over 20 years of experience creating and selling digital products the right way.
What are digital products?
As the name suggests, digital products are usable offerings that help users fulfill a particular need using only a digital interface. Unlike physical products, digital products are created once and then sold over and over again.
Types of digital products include:
- SaaS (Software as a Service) – instead of downloading and/or installing software onto your device, SaaS products deliver software solutions online. SaaS has become the dominant form B2B digital products, and are extremely common in B2C as well. Examples include cloud-based tools like Canva, Slack, Salesforce, Google Docs and many more.
- Digital services – while some services can only occur in person, there are many that can be provided over the internet. They include medical consultations, online education and training, banking, and digital marketing services.
- Digital content – various forms of content are made available on digital platforms, like audiobooks, music, videos, classes, and podcasts. Then there are assets that people want to utilize, including stock photos, presets and fonts. Digital content providers include Netflix, Spotify, and Masterclass.
- Platforms & marketplaces – these encompass social media platforms like Facebook, e-commerce websites—selling everything from groceries to digital art—and online marketplaces like Amazon and Etsy.
- Software applications – stand-alone applications are less popular today, having been superseded by the SaaS model, though applications do still exist both for work and play, such as graphic design tools and gaming. Examples include Adobe Photoshop, WordPress and most video games.
Why create digital products?
We’ve seen company after company find success in creating a niche digital product that leverages their unique industry expertise and positioning. There are multiple ways a digital products can boost your business:
Reach a wider audience
You can reach so many more potential customers with your own digital product than traditional products and services. This scalability is one of the key benefits of online business offerings. It’s relatively easy to start small and scale up.
A digital product creates an efficient and effective way to scale and monetize your expert know-how with your target audience in a new way, without overwhelming your team.
Create recurring revenue
Once you’ve successfully launched your digital product, it’s available for purchase 24/7. While launching and maintaining a digital product is work, it’s still the ultimate business model for recurring revenue and passive income. You create a product once and sell online multiple times.
Say you’re a B2B educator, delivering tutorials, webinars and courses to professionals. If you conduct your session face-to-face, you can only teach a limited number of students as you have limited time. Pour your knowledge into creating an online course with digital tools like workbooks, worksheets, printables and templates, and your services become available to a much broader audience. Many more people can access and purchase your digital offering than you’d be able to teach in person.
Unlock new customers
Chances are, you’re only working with a small proportion of your potential customers. That may be for geographic reasons if you provide a service face-to-face. Or it may be that you choose only to work with larger businesses that can afford to pay for your full service offering.
A digital product expands your customer base. You can reach a wider, global audience. You can also create a more affordable offering via a digital product and a subscription model, enabling you to meet a different audience’s needs - such as small and startup businesses rather than only large organizations.
Augment your current service offering
It’s not all about reaching new customers. A digital product can extend your current services to your existing customers. It can be an additional income stream, alongside your core business offering.
For example, a physical therapy business offers PT sessions for patients but capacity is limited and PT sessions can be costly. In addition to PT sessions, they may have an app or membership site with exercise routines, video instructions, and progress tracking that its patients can access anytime.
Create more value in your company
For conventional service providers, a digital product can bring a more reliable revenue stream, greater profitability, and more attractive valuations for investors. You don’t have to transform into a purely online business, but you can translate an appropriate aspect of your business into a digital product or useful online tool that meets your audience’s needs.
A typical digital product company has gross profit margins of 75-80% or more, compared to 50% or less for most services companies. And when digital product companies have sold in recent years, they typically sell for 5-8x of annual revenue.
Relatively low startup costs
The barrier of entry to creating digital products has gone down considerably in the past decade . The upfront costs for launching an online business, or augmenting an existing business with a digital product business model, is more increasingly more affordable. This is particularly appealing to startup entrepreneurs and new business owners.
Examples of digital products
How Archer Career Services evolved into an online business
The founder of Archer Career Services was a career coach for undergraduate college students. She developed a step-by-step process to help students prepare for interviews and applications.
The limitation was that she could only work with a few dozen students at a time. She approached Highland with a digital product idea to distill her service. Highland helped Archer develop a successful digital product that could be sold to colleges and universities and serve an unlimited number of students. Now a purely online business, Archer Career Services serves over 20,000 students.
How Genioo extended its reach with an innovative digital product
Genioo is a global management consultancy, working primarily with large organizations.
Genioo saw the potential for a new kind of project management app, combining best practices with access to resources and expertise. They wanted to reach a broader customer base with this app.
Working with Highland, Genioo developed a subscription-based project management product based on their extensive expertise and distinct from competitor offerings, creating the ability to serve more types and sizes of businesses than Genioo's existing consulting clients.
Phases of digital product creation
Highland’s methods for building successful, profitable digital products relies on a tried and tested, evidence-based approach. We link research, strategy, design, and development into a single digital product innovation process.
There are three main phases in our digital product creation process: Opportunity Exporation, Concept Creation, and Digital Product Development. Let’s take a closer look at each of these phases: how they work in concert with one another, why they matter, and what they deliver.
Opportunity exploration
When you’re considering a digital product, it’s important to get a handle on whether it’s worth pursuing in the first place. 75% of failed digital products fail because they solve a need that customers don’t care enough about. Without an audience need, your product plans may be wishful thinking.
Opportunity exploration involves identifying these needs and pain points, and making sure they matter enough to your customers to take action, ideally by buying your product. In this phase, we work to gain an unvarnished view of your target customers’ behavior and mindset.
After in-depth market and behavioral research, we create:
A customer needs and insights report: defining potential customers, their current behavior, prioritized needs and contextual insights.
An opportunity framework: an objective view into the digital product opportunity.
Opportunity sizing and ROI calculation: identifying the addressable market, attainable market, and pricing to estimate the potential revenue opportunity.
Concept creation
Guided by the data and information gathered in the opportunity exploration stage, the concept creation phase begins to bring your product into clearer focus with brainstorming, ideating, prototyping and testing.
Concept creation rapidly sharpens the value and purpose of your product, how it compares to competitors, and why it’s a better tool for your customers. This generates momentum and excitement among internal leaders and external funders, providing something for them to rally around.
As the product starts to get really clear through prototyping and testing, we can turn our attention to product roadmapping, business case creation, and go-to-market planning.
The result is:
- a validated product concept
- a business case
- an MVP roadmap
- a go-to-market strategy.
Digital product development
With a clear plan and focus, it’s time to build, develop and launch your digital product idea. The software build is an iterative process, with constant refinements being made. Digital product ideas, functionality, and designs are tested regularly with potential customers and their feedback informs product development. The development itself should focus on high quality, using good coding practices and automated test coverage to ensure the product can evolve and grow safely in the future.
Sales and marketing activities start happening in this phase well before the product is ready to go live. You’ll need to stand up your own website to support and promote your offering. Then it’s all about digital marketing to for reach and conversion.
The process will vary for a B2B or B2C product, but the cornerstones are the same: start early, run small tests, measure performance, and adapt quickly.
Your marketing strategy will outline the ways in which the right people will find your new product. This could include:
social media: determine which platform your target audience use (eg LinkedIn) and reach out to them there
email marketing: compile an email list of potential customers and existing customers to inform of your new product
SEO: conduct keyword research and create optimized content to drive traffic to your own website
content marketing: promote the content that you create on the appropriate platforms
bloggers and influencers: invite key influencers in your industry to share their experience of your new product to their followers.
Create a successful digital product with Highland Solutions
Distilling your unique business experience into a useful, usable, niche digital product could transform your company.
Highland’s industry expertise and evidence-backed approach to product development can give your company the best shot at creating and launching a successful digital product.
If you’re interested in discussing how a digital product can take your business to the next level, we’d love to hear from you.
