Product Strategies for Transition Costs

Translation of the article prepared in advance of the start of the course “Product Manager IT-projects”.

In his previous article We talked about three categories of transition costs: financial, procedural, and relational.
How can I use the transition costs to add value your product? You have two options:

Reduce the costs that your customer must incur when switching to your product.
Increase the costs that your client must cover when moving to competitors.

In the end, if you reduce the cost of moving to your product, you will provide more value, where value is the ratio of benefits to costs. When you reduce costs, you increase value, even if you do not increase the benefits that you provide.

If you increase the cost of moving to competitors, you reduce the value of your competitors. Since value is the ratio of benefits to costs, increasing their value will reduce the viability of their value propositions.
Let’s deal with both options now.

Reduce the cost of switching to your product

When you remove all the contradictions and costs that appear when switching to your product, you provide your potential customers with a more valuable offer.

That is, reducing the cost of switching to your product should be considered as a sales tactic. You are clearly targeting an audience that hasn’t yet used your product.

Let’s look at the three main categories and look at examples of successful products that have lowered the cost of conversion for each category.

Lower financial transition costs

Consider using a model for your product to reduce the financial cost of the transition. freemium.

For example, Slack did a fantastic job by making it easier for users to access their paid usage plans. Initially, Slack is free and allows a limited number of users to cooperate. This means that users can test using Slack without any negative financial consequences. Once the user is convinced of the value of Slack, he can pay for the expansion of functionality and attract the rest of his company or organization to Slack.

Similarly, you can use trial periods for your product, thereby lowering the cost of conversion. Although free trials do not reduce the final cost of a customer’s transition, they at least allow them to try out your product before giving money for it.

Another way to reduce the financial cost of the transition is to make an incredibly time-efficient product setup.

For example, most email clients (Google, Outlook) provide a .CSV importer that allows you to import all your contacts. Instead of spending hours entering each contact individually, you can simply drag and drop the file to configure your contacts in the new system.
Please note that our transition cost classifications are not mutually exclusive, so the data import function also reduces relational costs. That is why Facebook and LinkedIn have the function of importing the address book so that you can quickly build familiar communications within their systems. Data importers are not considered some outstanding features, but they are very valuable!

Reduced procedural transition costs

To reduce procedural costs, carefully consider grocery onboarding.

What user experience does the client receive when they first interact with the product? How fast can you orient users so they know what to do next? For example, Trello onboarding tells how to use a product through the product itself:

Source: www.useronboard.com/how-trello-onboards-new-users/?slide=40

Simplifying learning processhow to use your product, you simplify the user’s transition to you and reduce the likelihood that he will leave you or give up.

Another way to reduce procedural costs is to provide external support. Many Product Managers lose sight of the importance of lowering the procedural cost of moving with tools outside the scope of the product!

User guides, forums and emails with tips and tricks are all great ways to present help beyond the product. For example, MailChimp has beginner’s guide, which allows users to quickly understand how the product works.

You can also provide external assistance through customer support.

If you have an implementation team or a team of instructors, you can reduce the procedural costs of setting up and maintaining your product. This tactic is especially good. works in B2B sphere.

For example, Intercom Allows users to get technical support directly from their product, which reduces the pain and inconvenience of moving to a new product. Similarly, Salesforce has dedicated consultants to help customers implement Salesforce.

Another strategy to reduce conversion costs is to use in the product familiar UX patterns.
For example, the “next” buttons should be oriented to the right, and the “back” buttons should be oriented to the left. If you swap them, you use templates unfamiliar to your user, which makes them adapt.

Another example is the sites of online stores that use the shopping cart icon so that users can go to their “shopping cart”. It is a storage area that reflects the goods that customers want to purchase, but have not yet paid for them.

Do not fantasize or reinvent UX if you can take advantage of existing UX patterns. You run the risk of giving your users an extra headache and reduce the likelihood that they will switch to your product!

Lower Relational Transition Costs

As for reducing relational transition costs, I have never encountered cool ways to reduce the cost of changing ownership. Each time, when switching from one brand to another, the user somehow pays morally.

The only principle that you should keep in mind is that no matter what brand you decide to create, make sure that your brand is suitable for the target audience that you want to attract. For example, Snapchat will never attract grandparents, because the Snapchat brand has nothing to do with their interests.

However, we will consider relational transition costs in the context of increasing the costs of moving to competitors.

Increase the cost of moving to competitors

Increasing the cost of moving from your product to some other is essentially a retention tactic. You are clearly targeting your current customer base, not potential customers.

It goes without saying that we must provide our customers with more and more advantages, but we should also consider defensive tactics to prevent our customers from moving to competitors, which means that we need to increase transition costs.
Ultimately, if the transition to a competitor is too expensive, the value proposition of your competitor is less than yours, because we remember that value is cost-benefit ratio. By increasing costs, you are reducing the value of competitors.

So, let’s go back to our three main categories of transition costs and look at examples of products that have successfully coped with the increase in transition costs.

Increase financial transition costs

To increase your financial transition costs, consider introducing a reward system within your product.
It’s unlikely that you will switch to Philz Coffee if you have many starbucks starsthat allow you to get free coffee at Starbucks. The same logic applies to your product. If you reward regular customers with financial incentives, such as coupons and discounts, they are less likely to turn away from you.

Another option for a reward approach is gamification, even if they are not financial incentives. For example, health apps know how important it is to gamify a user experience with achievements, scales, badges, and high score tables. Personally, I prefer Fitbit, because of its achievement system, I don’t want to switch to other health trackers such as Samsung Health simply because I will lose these achievements.

Increased procedural transition costs

To increase the procedural costs of the transition, you need to make the transition a difficult operation.

For example, you cannot easily export your contacts from Facebook to another social network. Facebook was very successful in attracting and retaining users, because it has the ability to import the address book, but not the ability to export it, therefore, users are “locked” into Facebook without the possibility of exit.

And yet, for example, you cannot install any specialized Mac programs on a Windows computer, or vice versa, which makes it difficult to switch between the two systems. The same applies to smartphones on Andriod and iPhones, to the Xbox and PlayStation.

Another way to increase the procedural costs of the transition is to integrate among themselves several functions to create an ecosystem.
Creating an ecosystem means that if your user gives up one of your functions, he loses all the synergistic effect of the ecosystem.

For example, Salesforce has done gigantic work to increase conversion costs. Their lead tracking CRM is linked to Sales Cloud, which allows sellers to actually work with leads, and Service Cloud, which allows support staff to develop non-finished leads.
If you switch from Salesforce to another CRM, you lose both cloud services.

That is why many companies choose some main product, and then the infrastructure stands idle around it, which allows providing instant value and increasing transition costs.

Increase Relational Transition Costs

To get high relational costs, create a strong brand.
People are emotional in nature, they bind those products that they use with their own identity.

Therefore, you need to make sure that you clearly understand what your existing customer base is like in order to build a brand in such a way that it matches it. For example, Nike’s customer base is full of athletes, so Nike’s “Just Do It” tagline resonates well with it.
In addition, you can increase user affection with the help of badges and certificates. Again, let’s talk about Salesforce: their countless certificates guarantee that users will not want to refuse them and thereby lose all their certificates.

Another way to increase relational costs is to create a community.
For example, consider a program Elite squad from Yelp. The events that Yelp arranges for its most active users are a guarantee that these users consider themselves to be the elite of Yelp. In addition, as yelper’s get to know each other, their desire to switch to Foursquare will decrease.

Another way to create a community is to add social elements to your product, if appropriate. For example, Tik Tok allows users to share your videos on QQ, Weibo and WeChat, which means that users have become more active in investing in their identity on the Tik Tok platform.

Summary

Look at the table below to recall briefly what we talked about.

	Lower transition costs	Increase cost transition
purpose	Attract potential customers	Save current customers
Financial expenses	Freemium model Trial period Data import	Reward system Gamification
Procedural costs	Onboarding User guides Support Services User support Familiar ux	System incompatibility Ecosystem of related products
Relational costs	Target segment brand	Target segment brand Certificates and Badges Communities and events “Word of mouth”

For your product to be successful, you need to build a convincing value proposition, and value is determined by the ratio of benefits to costs. Most Product Managers know how to build benefits for their user base, but forget to consider costs.

Reduce the cost of moving to your product to increase the value of the offer. Increase the cost of moving from your product to another to reduce the value of the offer of your competitors.

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