Should You Let a Customer Subsidize the Development of a New Product?

When you’ve identified a new need in the market, it’s tempting to let the first enterprise customer subsidize the development costs.  Here’s a look at the pros and cons of that scenario, along with a recommendation.

Pros

  • There’s no better way to validate the need for a new product than to have a customer willing to pay for it to be built.
  • There’s also no better way to ensure it does the job it’s supposed to than to have a real customer who is looking to use it to solve a real problem (likely urgently, so don’t forget to release often, even in beta format, to get feedback from that first customer).

Cons

  • The customer thinks the product will be “theirs” and that they own your roadmap. Make sure you set the expectation up front that the product is intended to be a SaaS solution that serves other customers as well.
  • You build the product using only one customer’s use case, making it unusable/irrelevant for other customers.

So Should You Do It?

Yes, but just make sure you:

a. Make it clear to your first customer the product is not “theirs” but that  you value their partnership/feedback in being the first customer. (This means you can’t sign exclusives!)

b. Get out with your sales team to pitch the new solution to more customers.  Ideally sales is landing a second/third customer while the product is being developed, so that you can get more input on how it will do the same job for many customers.

Want to talk more about launching a new product? Drop me a line.

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