What is Product Consolidation?
Product consolidation refers to combining several products that sell separately but have overlapping functionality or user personas into one product.
Note: product consolidation has different definitions in different industries
If you research product consolidation, you will find it has different meanings according to the audience. For example, in the logistics industry, product consolidation refers to finding ways to store and ship products to maximize space and cost savings.
But we are discussing product consolidation from a product management standpoint: turning multiple products into one.
Why Would You Want to Consolidate Products?
There are several reasons for a product team to consolidate its products. Here are a few examples.
1. To charge a higher price point.
Let’s say your company sells enterprise SaaS solutions. Over the years, you’ve built several apps that solve different but related problems for your user persona. You are selling those apps a la carte, each at a low price point. That gives your enterprise buyer the chance to pick and choose. “We’d like that feature, but not that one.”
Now you’d like to earn a higher dollar amount for each sale. If you combine several of these tools into a unified suite, you can do just that.
2. To reduce product cannibalization.
Again, imagine you sell B2B software tools. Some of your newer apps overlap in functionality with your mature products, and these more unique solutions compete against your existing product line. By consolidating your portfolio into fewer apps, you can reduce your company’s risk of competing against itself for customers.
3. To create a more complete, consistent user experience.
Yet another reason to consolidate products is if your company has created inconsistent user experiences across your existing product portfolio. As customers buy more than one of these products, they will face different UIs, and they’ll need to learn how to navigate your apps differently. That could lead to confusion and frustration among your best customers—the ones who buy more than one of your products. Not a good look.
Consolidating products can create a better overall user experience. We’ll explain more below.
Can Product Consolidation Create a Better User Experience?
To answer this question, think of your smartphone. Imagine that instead of all the functionality you now enjoy on that device, you had only a few of the apps available on it. Let’s say your phone only lets you make and receive calls, text, and join a video conference.
But for real-time maps and driving directions, you’d need a different device. To play your Spotify playlist, you’d need another device. To pay a bill or transfer money? Yep, another device.
Here’s another way to understand this point. Your smartphone is an excellent example of product consolidation leading to a better user experience.
How Do You Create a Product Consolidation Strategy?
If you decide that consolidating products will benefit your company, you’ll need to develop the right strategy to execute the plan. That means answering a few key questions, including:
1. Will our target market pay a higher price?
You can consolidate several related products and create the ideal, end-to-end solution for your user persona. Your research might even tell you that, yes, your persona would be interested in the comprehensive solution you’re proposing.
But you also need to figure out if your market would be willing to buy this new solution with its higher price tag. If not, your product consolidation strategy is not viable.
2. What’s the right mix of functionality for the consolidated product?
Before you begin your consolidation, you want to review all related products in your portfolio closely. That includes all products built for similar personas and all related functionality products. You will want to find the right mix for your consolidation plan.
You don’t want to go to the trouble of consolidating several products but miss one with functionality relevant to the new solution. That could leave open the possibility of product cannibalization. A future buyer might see your consolidated app, decide it’s too expensive, and instead choose the one remaining standalone app that offers related functionality.
You also don’t want to cram too much functionality, or unrelated features, into one product just for the sake of consolidation. That could make your solution confusing and a turnoff to new buyers—especially if it’s more expensive than the ones you offered before.
3. How will we measure success with this product consolidation?
Finally, you’ll need to figure out what you want to accomplish with this consolidation. What are you trying to achieve? Before you discuss any of the questions above, in fact, your team should start by asking itself what your goal is for the consolidation. For example, you can ask:
- Are we hoping to increase the number of customers?
- Is our goal to increase the average dollar amount of each sale? (This could decrease the number of customers.)
- Are we hoping to free up development resources by concentrating our engineering department’s efforts on fewer products?
- Do we want to retire some of our older or underperforming products?
- We want to make it easier for our sales team to sell our portfolio—by giving them fewer individual products to focus on?