Product Monetization is the process of generating [[revenue]] from a product or service by researching, analyzing, and leveraging [[customer needs]] to develop [[product strategy]] and tactics that maximize profits. This includes using data to determine the optimal product mix and pricing points, evaluating the [[Pricing Strategies]], and [[Loyalty Program]], and utilizing digital channels for marketing and sales. ## Product Monetization Tips & Tricks ### Just take the user's money I know a couple of dozens of free apps of different themes, which were coded by my friends and acquaintances and which are still afraid to take money for their installation or just a one-time lifetime access to the PRO version (in contrast to their competitors). They don't claim huge markets and the time/speed of development for their products is not so important, which can't be said about money. Nevertheless, they consider that free should be their main key feature. It is a mistake. First of all, the trap is that free and the competitive advantage based on it will never be long-term and there will always be a company that will offer the same product for $1 cheaper or... make it free as well. This is a dead-end strategy. Second, free has a downside — in the product a completely different audience is formed and concentrated, monetizing which in the future will be EVEN HARDER, simply because it is not ready for it. And if your users are not ready to pay $0.99 for installation right now, they are unlikely to pay in the future. It is much more useful to immediately sell access, proving the value of the product, including through its price and taking responsibility for the services provided for money. A pleasant bonus of all paid or in-app purchases apps — the chance to be featured (get to the main page or AppStore selection) increases several times. Apple, however, must earn its 30% commission. ### Sell the product as a human service Another common misconception (especially in B2B) is "we don't provide and don't sell services and our employees' time to work for you through our product". Well... why not? Especially if the customers are asking for it and are willing to pay for it. Back in distant 2016, when we launched B2B marketing platform, we almost fell into the same trap - customers were impressed by the potential of social networks and advertising with influencers and asked us to run their advertising campaigns in manual mode for money. Gradually, a specially hired account manager developed into a full-fledged advertising agency with its own staff and a classic commission of 15% to 30% of the client's advertising budget. ### Extended Subscription Classic, which is gaining new variations with each passing year. Pay for monthly or yearly access to the product and PLUS charge for additional actions or entities within the product. This is especially true for B2B products that often add additional costs above the standard subscription. These are calculated: - by the number of participants working with the product; - by the number of created and stored entities within the product (for example, the number of user contacts). The most successful example is everyone's favorite Intercom. Just take a look at this beauty: ![[Pasted image 20230316130954.png]] Linking the monthly subscription to the number of active product users looks like this with Mailchimp: ![[Pasted image 20230316131010.png]] This format allows you to scale revenue from the customer, tying it to the most simple and obvious thing - the scale of activities they are conducting. ### Reduce Plans Few pay attention to it, but many successful products (with already proven user value and a stable monetization model) use only two subscription periods: monthly without a discount or annual payment with a discount. Many companies have progressed so much in understanding their monetization that the annual tariff is completely hidden and can only be seen / obtained when contacting the support or sales department (by the way, this is a lifehack on how to save money on SaaS). > [!NOTE] > This is done for one single purpose - the business is already more important money as VALUE, which can be earned more in monthly plans without discounts, while annual plans are made for long user retention. But if you know that the user will stay with you for at least a year, why promote a plan where you give him a discount and earn less? ### Splitting a Product to Sub-products and Subscriptions It's the same as a subscription but with one distinguishing feature -- the base product is divided into several hypothetical sub-products, each of which performs a strictly limited function, for which the user pays. This is typical of products that are aiming for big tasks and helping users achieve their main goal(s) by completing smaller component tasks that may complement each other but may not necessarily be linked in one process. ![[Pasted image 20230316131828.png]] It's the same Intercom. they just took their coolest features and put them in separate add-ons, for each of which they also charge money (of course, on a monthly basis). ### Purchase of an Internal Service Unit as a Charge That is, a unit of some key entity within the product that a user can use to obtain the product's key service. A simple example is ChatGPT Tokens, where you can now buy the amount of tokens you need to work with the bot. As you can see from the example, the peculiarity of this monetization model is that it is strictly linked to the main event within the product. This format is easy to understand, quickly deploy, and scale transparently. Such models are usually used on the late stages, when the product already has a stable core audience and has already convinced that the product successfully solves a clear user problem. ### Selling access to software or API solutions The perfect example, as seen in Amazon Web Services (AWS). At some point, Amazon realized that its internal software and solutions were so efficient that they could be sold to other companies. ![[Pasted image 20230316132246.png]] Of course, to sell something you need to have it, and it needs to be in demand. ### Cross-Sales, Extras & Addons Capitalistic business approach is well known for allowing you to not only sell a main product, but also offer supplementary services: insurance, premium or 24/7 support, personalized analytics of a user's activity in a product, advice on how to improve it, discounts from other services (collaborations with other businesses are discussed below), in general, the list is only limited by your imagination and verified user needs. ![[Pasted image 20230316132506.png]] An example from RentalCars is more like a proof of concept of what else you can offer and sell to a user who came "just for car rental". ### Sales of advertising Yes, you heard right — many startups are entering into partnerships/collaborations and simply selling traditional media advertising within the key pages of their websites and applications. ![[Pasted image 20230316132803.png]] In the photo is a promotional pop-up of a new burger from a well-known fast-food chain on the first screen of one of the popular travel apps, for which the owners of the app receive $50,000 (fifty thousand dollars) daily. The peculiarity of this format lies in the maximum accuracy of hitting the target audience and the partner’s KPI, and most importantly — good relations with such a partner. ### The Sale of Personal User Data Something that all users disagree with, but something that every company secretly dreams of - selling and buying user data such personal identificators, social contacts, etc. I won't discuss the ethical side of this issue right now, but I assure you - all IT giants, without exception, officially (but confidentially) sell and buy user data. And for very, VERY big money (millions/tens of millions of dollars annually). ### Conducting and Selling Research Results Don't want to secretly sell users data? There is an honest way to do this. Another unusual format of monetizing a product and its audience is conducting social research and surveys of your product's audience for a third-party company. Be extremely careful with this format, because the research client often turns out to be... your competitors under the guise of other companies. Another option is when the product conducts such research in its own interests to better understand its audience, after which it anonymizes, repackages and sells such data to other interested players. ## Additional Proudct Monetization Tips - Forget the Silicon Valley legends and myths about "first build the user base and then monetize it". The sooner you start testing monetization, the better. - Don't overdo it on monetization right off the bat. Until you find that core model, experiments with it should be done either on small and non-overlapping user segments, or across the entire audience with a cancellation of the previous monetization model (unless it's purchased user lifetime PRO access). - In an ideal world, monetization should amplify and evolve the user experience and be directly integrated into the customer journey map, acting as the key that unlocks the door, shortening and easing the path of your user to their goal. - Paid subscriptions show better results after a free period (at least one day, depending on your product and the speed at which the user gets tangible results from working with it). The sale of a cost per event (selling a key product unit or charge) is higher when you offer several such free units to test. - Don't forget to think about the possibilities for scaling any monetization format (as well as the growth of resources to support it). # Unleashing the Potential: A Guide to Product Monetization Strategies In today's competitive business landscape, product monetization is a crucial aspect of maximizing the value of your offerings. Whether you're a startup, a SaaS company, or an established enterprise, implementing effective monetization strategies is essential for sustainable growth and profitability. In this article, we'll explore various approaches to product monetization and provide insights to help you navigate this critical aspect of your business. Let's dive in! ## 1. Understand Your Value Proposition Before diving into specific monetization strategies, it's crucial to have a deep understanding of your product's unique value proposition. Clearly articulate the problem your product solves and the benefits it offers to customers. This understanding will guide your monetization efforts by ensuring that the pricing aligns with the perceived value your product delivers. ## 2. Choose the Right Monetization Model Selecting the appropriate monetization model is key to effectively monetizing your product. Some common models include: ### a. One-Time Purchase This model involves customers making a single payment to access your product. It is suitable for products with a fixed lifespan or for those with limited updates or ongoing support requirements. ### b. Subscription In a subscription model, customers pay a recurring fee to access your product. This model provides a predictable revenue stream and is suitable for products that offer ongoing value, continuous updates, and support. ### c. Freemium The freemium model offers a basic version of your product for free, with the option to upgrade to a premium version with additional features or functionality. This model can help attract a larger user base and convert a percentage of users into paying customers. ### d. Usage-Based A usage-based model charges customers based on their usage or consumption of your product. This model is commonly employed in industries such as cloud computing or telecommunications, where customers are billed based on usage metrics like data storage or minutes of usage. ### e. Marketplace In a marketplace model, you act as an intermediary, connecting buyers and sellers and charging a commission or transaction fee for facilitating the transaction. This model is prevalent in e-commerce platforms and app stores. Consider the nature of your product, target market, and customer preferences to determine the most suitable monetization model for your business. ## 3. Price for Value Setting the right price for your product requires a careful balance between capturing value and attracting customers. Conduct market research, analyze customer segments, and evaluate your competitors to determine the optimal pricing strategy. Consider factors such as customer willingness to pay, market demand, perceived value, and your business objectives. ## 4. Implement Tiered Pricing Tiered pricing is an effective strategy for offering customers different levels of product access based on their needs and budget. By creating multiple pricing tiers, you can cater to different customer segments and capture additional revenue from customers willing to pay for premium features or enhanced support. ## 5. Upselling and Cross-Selling Leverage your existing customer base by implementing upselling and cross-selling techniques. Upselling involves offering customers the opportunity to upgrade to a higher-priced version of your product, while cross-selling encourages customers to purchase additional products or features that complement their existing purchase. These strategies can help increase the average revenue per customer and drive additional growth. ## 6. Leverage Data and Analytics Make data-driven decisions by leveraging analytics to monitor and optimize your monetization strategies. Track key metrics such as customer acquisition costs, customer lifetime value, and churn rates. Use this data to identify areas for improvement, test pricing experiments, and refine your monetization approach over time. ## 7. Embrace Partnerships and Alliances Explore partnerships and alliances with complementary products or services to expand your monetization opportunities. Strategic collaborations can enable you to bundle products, offer joint promotions, or access new customer segments, thereby increasing your revenue potential. ## 8. Continuously Innovate and Adapt Product monetization is an ongoing process that requires continuous innovation and adaptation. Stay attuned to market trends, customer feedback, and evolving industry landscapes. Regularly assess your monetization strategies, experiment with new approaches, and remain agile to maintain a competitive edge. ## 9. Provide Excellent Customer Experience Delivering an exceptional customer experience is paramount to successful product monetization. Ensure that your customers receive value beyond the product itself through excellent support, regular updates, and personalized engagement. A satisfied customer is more likely to stay loyal, refer others, and continue generating revenue for your business. By implementing these strategies and staying attuned to your customers' needs, you can unlock the full potential of your product and drive sustainable monetization. Remember, there is no one-size-fits-all approach, so be open to experimentation, learn from your experiences, and refine your strategies to optimize your product monetization efforts.