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Building ‘must have’ products in the B2B data & insight world

Developing and launching new products can be a risky business for B2B data companies. Successful launches can unlock millions of pounds in new recurring revenue, but failure can leave customers disappointed, and CEOs feeling like they have wasted their time and cash.

To make it worse, most CEOs face this challenge in isolation. So last week we invited ten B2B data industry peers to our latest “Unlocking Growth” roundtable to learn through each other’s’ experiences of what has worked - and what hasn’t worked - when trying to identify opportunities and build new revenue streams.

CEOs rarely have good new product ideas.

Most B2B data companies are founded by brilliantly curious individuals, who at one time became frustrated by the data within their industry, and so decided to jump ship and build their dream dataset. If put together in the right way, datasets built by industry experts can become extremely valuable over time as the go-to source of truth within a sector. We saw this with our former portfolio company The IWSR, which has become global benchmark for beverage alcohol sales.

As these companies build scale, CEOs look to accelerate growth by expanding their offering into new areas of data and/or functionality outside of their original dataset. However, the more time CEOs spend away from their previous life - the day-to-day work of their customers - the more detached they can become from the problems they are trying to overcome through data. This can lead to an inside-out approach to product management.

“I have never had a good new product idea. My Editorial Research teams are great at analysing datasets, but they haven’t had many good product ideas either. My sales teams are fantastic at winning new business, but they rarely have good ideas for new products. In fact, all the good product ideas that I have ever implemented have come from one source – customers.”

Neil Bradford, Co-founder & CEO at General Index

Realising returns on new product ideas.

However, even when the requirements of a single, or even several larger customers are identified, a CEO will need to make sure that the new product will form an attractive proposition to their broader customer base. All too often the voices of larger customers are the loudest, and products are built that are too specific to their needs, meaning that the potential for growth is limited and return on investment is low.

One way that businesses de-risk initial new product investment is by getting their larger customers to underwrite the cost of development. These customers receive a competitive advantage through early adoption, which they will often pay more to access. For example, during our time as investors in The IWSR, the management team identified adjacencies to the alcoholic beverage market, such as low-alcohol and airport retail, into which some their customers were desperate for insight. So, the team commissioned research projects in these areas, where their largest customers paid for data collection and analysis, which reinforced the core database and provided The IWSR with a new offering to sell.

Once a new product is developed, it then needs to be sold to existing customers. But convincing them to add a new SKU to an annual invoice can be difficult – sophisticated buyers can be constrained by budgets. It’s a common conversation;

“We love what you do, but we’ve been allocated £X to spend on your services, and no matter what we buy it has to fall into that budget”.

If this is the case, the question that a CEO has to ask themselves is whether they want to attempt to push the entire “desired” price of the product through as a standalone SKU, which comes with the risk of a large number of customers not purchasing it on day one. Or try to bundle the new product into the existing proposition, realising the “desired” price point through a series of incremental price increases that customers are more able to justify internally.

To consult or not to consult? A key strategic question.

When used carefully, consulting can be a powerful tool for data companies. However, many CEOs, particularly those with an eye towards a future sale, view consulting revenue with a degree of scepticism, as it can become a large distraction for their organisation and potentially dilute the valuation multiple applied to the earnings of the business.

Of course, a data provider’s core subscription revenue base should always be prioritised as the key driver of the business. But consulting revenue can provide benefits such as new product development (“paid-for market research”), customer stickiness (consulting is a particularly good way of building dialogue with senior individuals at customer organisations and helping day to day users use data more effectively), and of course revenue and cash flow.

In our experience, 10-15% of revenue coming from high-quality, value-adding consulting doesn’t dilute the value of a B2B data provider and can in fact have the opposite effect, by demonstrating the strength of industry insight.

We would like to thank Mark Meek (IWSR), Neil Bradford (General Index) and everyone who joined us last week for sharing their thoughts and experiences.

At FPE, off the back of our successful exit of The IWSR to Bowmark Capital in March 2021, we are actively looking for further opportunities to invest in the B2B data sector. If you are a leader of a data provider, feel free to reach out to Ben Cole (ben.cole@fpecapital.com) to join us at our next roundtable event, and/or explore a conversation.


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