Why T&M Contracts Work Well for Your Product's LTV

Your product’s lifetime value (LTV) depends on the choices made during development and after application release. Continuously improving your product’s LTV means sustainably delivering quality and discovering new customer needs that help grow the user base.

T&M contracts work well for your product’s lifetime value because they give you the flexibility to change project requirements as per your ongoing discovery activities. In other words, when the development starts, the scope isn’t fixed — you can swiftly adapt to trends and emerging customer preferences.

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T&M Contracts Work Well for Your Product's LTV

The Benefits of Being Agile in Product Development

Rapid response to changing consumer behaviors

Trends come and go. What was once a lucrative idea for an application, can become irrelevant in a matter of months. The most recent example is how Covid-19 has influenced many areas of living and consumer behavior, e.g., the increase in the use of digital tools.

In T&M contracts, you approach the scope for your product’s features agilely. For example, if halfway into the development you want to include a feature that engages your target audience, it’s easier to implement it.

Daily communication

In T&M, the vendor’s team is almost like your internal staff. You communicate daily, and the team shares status updates.

Daily communication helps talk over any issues or ideas that might crop up. When there’s an opportunity to look for alternative solutions that can cut the development time or otherwise add value to the product, swift communication is key to fast implementation.

Real-time developer suggestions

This one ties in with communication. As the team works on the product, they know it inside out. They can suggest simpler ways to achieve a given goal. Also, when a better solution or a library appears on the market during development, the team gains additional means to decrease development time.

Transparency into development

In agile products with a flexible scope, you’re a part of the project. That said, you can check the progress of your app via project management platforms or move a step forward and ask for a CI/CD approach to see how your app evolves daily.

Whenever you spot an issue, just communicate it to your team so that they can deal with it comprehensively. When the software agency deals with issues poorly or delivers low-quality solutions, you can end the contract before losing any more money.

Financial stability of your partner

T&M contracts ensure cash flow and keep the software agency healthy. It’s the foundation for business continuity that promotes long-lasting partnerships. 

Quality guaranteed with senior developers

When you work in a T&M contract, there's no economically driven reason to exchange the team for less experienced and therefore cut the provider's service cost. You can verify the quality of the code during two-week demo releases, where you check how the product works. Whenever you feel the product underperforms, you can react and, for example, strengthen the team.

Less stress for the development team

With good and frequent communication where the development team acts as a partner who can suggest solutions and features based on their experience, the team becomes more invested in the project. Developers feel they’re doing the right things and doing things right.

Positive relationship dynamics encourage the team to suggest solutions that cut implementation time or improve the product. The team is focused on quality development instead of a fast release to get the buffer.

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Ongoing Discovery for a Continuous Product Improvement

A product’s LTV increases the more it continuously delivers high-value functionalities. To ensure your team implements these high-value functionalities, they need to stay in touch with customers during every stage of development.

By employing a variety of methods designed to get to know the end customer better, teams can focus on continuous product improvement and value delivery. These research activities should be part of the development process and decision-making.

Customer interviews bring out valuable insights directly from customers. Rapid prototypes and experiments help introduce these insights and see how they affect a product’s value.

In Waterfall projects, there's little space for experiments when the product is in development. The scope is fixed.

Time and materials contracts support ongoing discovery activities.

Why Waterfall projects inhibit continuous product improvement

In fixed-price projects, once you do customer preference research before development, this activity rarely gets repeated in the later stages of development.

To be able to continuously deliver value and improve your product to increase its LTV, you need to involve the customer in the decision-making — in an ongoing capacity.

Digital projects are rarely finished with the first release. Take Instagram or Strava for example. Both applications have evolved tremendously over the years, with numerous new features and user interface modifications.

There’s always something that can be improved to deliver new value for the customers. These improvements can be ongoing, without the need for scope reevaluation — think of these improvements occurring every week or even every day.

With proper analytics set up, you see how those tweaks in the product perform.

Being close to the customer lets you discover how they perceive the product — in effect, you can make efficient decision-making where customer input drives the product.

Using the Latest Tools and Technologies

With an agile approach to product development, you can introduce new tools and technologies whenever you feel they will bring value to your product. Whereas in fixed-price and fixed-scope contracts, you decide what's in the tech stack at the start of the project.

Adding new tools can also improve development itself by offering the team easier ways to do tasks and solve issues. In other words, new tools can shave off development time.

Also, some technologies offer superior capabilities in terms of future customization and extension options. This is important because, after release, you’ll have to maintain the product. For example, introduce updates, bug-fixes, and features for different platforms. It’s therefore good to consider scalable technologies where the codebase is easy to maintain.

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