Sales of digital products, digital content, online courses, online stores, a product solving a particular problem, and an ebook. What do they all have in common?
They are all digital products.
In our articles, we often use the 'digital products,' leaving its meaning, scope, and definition implicit.
The concept of digital products (e.g., digital file sales) seems intuitive enough, but is it really?
Today, we will look at the issues related to digital products. We will discuss their specific nature, characteristics, and categorization. We will answer the question: What is a digital product?
According to the Digital Transformation Market Size Report, the global digital transformation market was estimated at almost 610 billion dollars in 2021.
This means that digital products are on offense today. Each year, the digitization of business processes expands its scope, and this trend will continue for a long time.
Digital products more and more frequently function as alternatives to traditional products or services (e.g., online shopping vs. brick-and-mortar shopping). In many cases, they have successfully replaced their offline analogs.
When talking about digital products, you cannot forget about their user experience.
The digital revolution is also a revolution in the awareness of the role, function, and benefits of User Experience.
And more and more often, UX is an important issue for websites and mobile applications and for software, games, and digital services.
And rightly so, because this means that we will live in a much more user-friendly world where usability will be an important quality criterion.
And where a digital product is more and more often the synonym of a product as such. Therefore, it is particularly important that it is tailored to the user's needs and expectations.
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Digital product - what is it?
Digital products are products and services (frequently provided in the form of SaaS, Software as a Service) whose distinctive feature is their intangible nature.
Digital products do not have a physical form, although sometimes they are still sold on physical media.
Most often, however, digital products are offered in the form of digital files and accounts purchased through the Internet on various platforms (e.g., online stores, social media, …).
Digital products offer users specific functionalities based on a clear benefit-sharing relationship.
The intangible nature of digital products and the different methods of their offering, distribution, use, sales, and ownership give rise to a number of issues:
- Legal
- Logistic
- Technological
- Commercial
- Business
- Cultural
- Market
- And even ecological.
Online business and digital products also have their specifics expressed in a completely different lifecycle and new customer expectations.
The method of their creation, placing on the market, development, optimization, growth, maturing, and going down in history is quite different from the traditional material products.
It requires expertise that was not needed for the preparation of material products. Digital products are also characterized by a distinct nature.
The digitization of products and services also influences the digital business transformation covered in our article “Digital Business Transformation.”
The contemporary business landscape differs significantly from the scenery of half a century ago.
A good example of this change is the presence of Bill Gates and Jeff Bezos, digital business owners, in the top ten of the richest people in the world.
The article “WTF is ‘Digital Product’?” by Jules Ehrhardt sheds a slightly different light on digital products, indicating deeper and deeper penetration of digital products into our daily activities.
The presence of digital products is so prevalent and concerns such diverse devices as a computer, phone, watch, TV, fridge, or car that it is necessary to introduce the concept of digital touchpoints.
Digital products increasingly function not only as applications with a mouse- or touch-controlled interfaces, but they are offered as a kind of conversation (e.g., Amazon Echo).
The interaction effect also changes.
Digital products not only provide information, enable the users to perform tasks and achieve goals, and are not only tools but are increasingly becoming partners to the users.
Digital products - examples and key features
Digital products are intangible goods sold and made available in digital format.
What are digital products? They are usually divided into:
- Digital media: radio stations, TV channels, streaming platforms
- Digital applications: web, mobile, desktop
- Educational platforms
- Digital product sales platforms
- Service platforms
- Gaming platforms
- Social media platforms
- Digital articles (e.g., ebooks, digital files, ...)
- Digital means of exchange (e.g., cryptocurrencies, tokens, ...)
- Digital identities (e.g., e-IDs)
- Digital subscriptions
- Digital tools.
Apart from their intangible nature, the common features of digital products are:
- Scalability
- Universal access: no time and spatial limitations, which is the essence of digital product sales, and which has been and still is limiting the sales of traditional products
- Very good cost-to-profit ratio
- Capability of easier automation of multiple business, organizational, and frontend and backend processes
- Flexibility
- Multi-channel offering: usually, digital products function in a number of distribution, information, and communication channels.
In his article “Digital Goods and the New Economy,” Danny Quah adds a few more characteristics for the sake of completeness.
According to him, digital products, or digital goods, are:
- Nonrival
- Infinitely Expansible
- Discrete
- Aspatial
- Recombinant
Goods are nonrival when their use by one user does not compromise their usability for other entities.
An online product is infinitely expansible, as any quantity can be ‘manufactured’ fast and without extra costs.
A digital product is discrete because it always functions as a copy.
Digital goods are aspatial, as they are both everywhere and nowhere at the same time.
Digital products are recombinant, meaning they are cumulative and are formed by a combination of components prior to the new variant.
All these qualities make them extremely attractive in terms of business and desirable for the customers, which is as much a symbiotic combination as it is opulent.
A digital product enables you to get a much higher profit in a very short time and at a much lower investment cost.
Mainly due to their scalability, digital products have the potential to offer the possibility to obtain much more for much less.
Creation of digital products - a competitive digital product
Digital products, e.g., in the freemium version (more about business models of digital products you can find in the final section of this article), must always constitute a value for the users and must respond to their needs.
They must provide a desirable type of experience, high usability, and be characterized by added value, making them irreplaceable for a long time and unbeatable in the eyes of a given user.
To that effect, we must create digital products that are:
- Customer-oriented
- Consistent
- Concise
- Measurable
- Compatible
- Cool
- Contextual / Customized
A good digital product solves one unique problem and does so in a very attractive way for its target audience.
By the way, the most influential design trend currently is the user-oriented design focused on their needs, abilities, and experience.
We covered this issue in more detail in the article "Human-Centered Design vs. User-Centered Design."
A good digital product is consistent, which means that the experience it provides is the same regardless of the channel (e.g., the introduction of a product to desktop and mobile online stores must involve the same benefits).
A web application and a mobile application should offer the same type of experience and provide the same results, capabilities, sensations, and satisfaction.
A good digital product is concise. Therefore the way it operates, communicates, and solves problems should be as simple, fast, and attractive as possible.
A good digital product is measurable, so it must be quantifiable in terms of its features, functions, and results.
A good digital product is compatible when in the process of its design, creation, and development, the best design patterns and recommendations have been used, ensuring a very positive User Experience and high usability.
A good digital product is cool when in addition to keeping the promises made in Value Proposition, it is also attractive.
It is aesthetically pleasing and creative and evokes strong positive emotions, e.g., strong attachment.
A good digital product is contextual if it enables the user to adapt its mode of operation to individual needs in real-time and predicts future preferences based on a set of predictors, e.g., behavior, preferences, transaction history, and location.
Furthermore, some authors complement the above list with additional features and attributes that a digital product must have.
According to general expectations, good digital products must also be characterized by the following:
- Usability
- Utility
- Reliability
- Efficiency
- Desirability.
A good digital product is usable when it is understandable, easy to learn, and adapted to the user's language.
A good digital product is useful when it fulfills the customer's needs through the innovative use of innovative technology.
A good digital product is reliable when it is free of fatal flaws and offers a long-term stable and trouble-free use.
A good digital product is effective when it enables the users to achieve their goals quickly and efficiently, taking into account the conditions and limitations of a typical user context.
A good digital product is desirable when it is aesthetically pleasing, emotion-evoking, and creative.
All the features mentioned above constitute constellations of interconnected characteristics that determine one another.
Without utility, we cannot talk about real, satisfactory usability. In turn, without usability, no product will be perceived as attractive.
If a digital product is not attractive, it cannot provide a superior and desirable User Experience.
Digital product lifecycle
The specific nature of digital products, clearly distinguishing them from the offline world, is their continuous change in time.
The subsequent versions (e.g., WhatsApp version 2.22.11.82) not only indicate the current status of a digital product but also suggest its past and announce its future.
Digital products are not just static products. The changes introduced in them are of continuous, regular nature.
Moreover, the scope, nature and results of the introduced changes are not always directly visible to the users (e.g., because they do not use specific functionality or use it too rarely to notice the change process).
Metaphorically speaking, a digital product is always a work in progress. The digital product creation process does not even assume achieving an ultimate goal or the final shape, the definitive form.
Digital products are constantly evolving because they must maintain adequate sensitivity, flexibility, responsiveness, and adaptability to the changing market, business, technological and frequently even social or cultural conditions.
However, this does not mean that they are not subject to laws and do not function in a cycle. As with any product, digital products also go through certain phases.
From the most standard perspective, a digital product:
- Comes into existence with an idea, a concept, which is expanded, and complemented by a vision, motivation to develop a digital product, strategy, market and user research, budgeting, and the definition of Value Proposition.
- Next, it enters the design and development phase in which prototypes are created, first studies are made, the first MVP (Minimum Viable Product) is developed, and usability tests are conducted.
- Then, a digital product enters the growth phase in which it is confronted with assumptions, imperfections are discovered, and modifications are introduced.
- In the next phase, the maturity phase, we are dealing with keeping the market position gained and with the need for continuous development that allows us to update and adapt the product to the changing expectations and needs, thereby protecting it against aging
- In the downward phase, the product loses its appeal and market position; it is not able to meet the new expectations.
Strategic digital product management requires not only the awareness of the evolution it will undergo but also appropriate prediction, customer research, and measurement of changes, for example, using proper metrics.
The goals of digital product evolution, of course, vary and include the following:
- Raising brand awareness among customers
- Increasing the number of users, customers and subscribers
- Extending brand and product loyalty (Retention)
- Development, optimization and improvement of functionalities
- Increasing usability and security
What are the types of digital products? Digital product business models
Business models and methods of offering digital products are, of course, very diverse.
They depend on business goals, the nature of the product itself, as well as the customer and user habits and expectations.
E-Commerce Model
The pioneer of this model is, of course, Amazon which has become synonymous with a digital product, enabling sales and purchase online.
Amazon is at a completely different point today, but it initially offered products that it had physically.
Ecosystem Model
Amazon, Alibaba and Apple are examples of the most prominent digital ecosystems with transnational, global reach.
The core of this model is to multiply digital services and products which are more or less interconnected, which results in customer dependence on the provider.
The cost of leaving the ecosystem and resigning from services is so high, discouraging and exceeding the potential benefits, users rarely decide to do so.
Experience Model
In this model, the digital experience usually constitutes the extension of the physical product customer experience and is complementary to it.
In many cases, the digital experience is the critical component without which it is impossible to use the physical product.
Free-Model (Ad-Supported Model)
The free model should, of course, be treated conventionally.
The essence of this model is to provide the users with a digital product without the need to pay for a subscription.
However, the price is to make the user himself/herself a product being sold, whose value is expressed in the data generated and left in the form of a Digital Footprint.
The customers are simply products.
In the second variant of this model, the user must view advertisements to use an application free of charge.
Freemium Model
This model has been popularized by software companies providing their customers with very basic application functionalities for free.
More advanced functionalities are available for (regular or one-time) subscriptions.
Hidden Revenue Generation Model
The hidden revenue generation model usually means earning revenue by charging license fees.
On-Demand Model
It is most commonly used in streaming platforms that offer access to digital content (movies, podcasts, music, libraries). The customers pay for time-limited access to a selected item.
Open Source Model
Due to its non-commercial nature, the Open Source Model can be questioned as a business model, but it definitely is a model of offering, sharing and distributing digital products.
Most Open Source digital products are used and developed pro bono.
Subscription Model
The subscription model consists in purchasing time-limited access to a product or service.
In the duration of access, the customers can use the product in the full version that is being updated. A subscription is usually offered monthly, semi-yearly, or yearly.
What are digital products? Summary.
- Digital products are becoming increasingly popular, and the digital business transformation expands its scope and gains importance.
- Digital products are products and services distinguished by their intangible nature.
- Digital products are offered as digital files or accounts purchased through the Internet on various platforms.
- The lifecycle of digital products, of their creation, market implementation, development and optimization, is entirely different from physical products.
- A digital product not only provides information, enables the user to perform tasks and serves as a tool but increasingly becomes a partner to the user.
- A digital product enables you to earn much more at lower costs and in a very short time.
- Digital products must be customer-oriented, consistent, concise, measurable, compatible, desirable and customized.
- A good digital product solves one unique problem and does so in a way that is very attractive to its target audience.
- Without utility, you cannot have real and satisfactory usability. And without usability, no product can be perceived as attractive. If a digital product is not attractive, it cannot provide an excellent impression and desirable User Experience.
- The specific nature of digital products is their continuous change in time.
- The digital product creation process does not assume the development of its definitive version, shape, or form. The customers do not expect it either.
