building your revenue model
TRANSCRIPT
REMEMBER?
-USD 120,000 LUMP SUM -USD 150,000 LTV (4 YEARS) -USD 70,000 LUMP SUM
USD 270,000 REVENUE
USD 225,000 SALARY COST (5 MAN-YEARS) MIN USD 300,000 OPPORTUNITY COST LOTS OF HEADACHES AND SUFFERING
USD 525,000 "LOSS"
1 “BIG" BRAND NAME -VALIDATES TECHNO -RAISE BRAND AWARENESS -HELPS (A LITTLE) SALES
FOCUS ON YOUR REVENUE MODEL!
WAIT !!!
REVENUE SOURCE
A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
REVENUE SOURCE
A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
VALUE
REVENUE SOURCE
VALUE
PRICE
A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
REVENUE SOURCE
PRICEPAYER
VALUE
A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
REVENUE SOURCE
PRICEPAYER
VALUE
A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
REVENUE SOURCE
REVENUE MODEL
Product Service
Production
Commerce
VALUE
REVENUE MODEL
▸ Customer value is the value received by the end-customer of a product or service.
▸ Customer value is conceived variously as utility, quality, benefits, and customer satisfaction.
▸ B2B Examples (not exhaustive) of value provided by a product or service:
REDUCE COSTS (DIRECTLY, INDIRECTLY)
INCREASE REVENUE (DIRECTLY, INDIRECTLY)
IMPROVED BRANDING (DIRECTLY, INDIRECTLY)
REVENUE MODEL
▸ Customer value is the value received by the end-customer of a product or service.
▸ Customer value is conceived variously as utility, quality, benefits, and customer satisfaction.
▸ B2B Examples (not exhaustive) of value provided by a product or service:
INCREASE # OF SALES (VOLUME)
INCREASE ARPU
REDUCE COSTS (DIRECTLY, INDIRECTLY)
INCREASE PERF., RELIABILITY INCREASE SECURITY
INCREASE AGILITY
INCREASE REVENUE (DIRECTLY, INDIRECTLY)
REDUCE PURCHASING COSTS
IMPROVED BRANDING (DIRECTLY, INDIRECTLY)
CSR ENVIRONMENTAL FRIENDLY
CUTTING EDGE, INNOVATIVE
FRIENDLY, ATTRACTIVE
PRICING
REVENUE MODEL
PRICING IS HARD TO DO AND EASY TO IGNORE.
Jay Goltz, “The price of Bad Pricing”, July 6th 2011, NY Times
REVENUE MODEL
AT LEAST MORE THAN 15 METHODS !
COST-PLUS / MARKUP
FULL COST
MARGINAL COST
TARGET RATE OF RETURN
COST DEMAND
SKIMMING
PENETRATION
WHAT THE TRAFFIC CAN BEAR
VALUEDIFFERENTIATED
CUSTOMER SEGMENT
TIME
LOCATION
PACKAGE / FORM
PREMIUM
DISCOUNTED
PARITY
COMPETITION
REVENUE MODEL
COST-PLUS / MARKUP
PENETRATION
CUSTOMER SEGMENT
PACKAGE / FORM
DISCOUNTED
PARITY
COST DEMAND VALUEDIFFERENTIATEDCOMPETITION
FULL COST
MARGINAL COST
TARGET RATE OF RETURN
SKIMMING
WHAT THE TRAFFIC CAN BEAR
TIME
LOCATION
PREMIUM
NO "ONE-SIZE-FITS-ALL SOLUTION"
example
REVENUE MODEL
example
REVENUE MODEL
#1 - Your price must be enough higher than costs to cover reasonable variations in sales volume
#2 - You have to make a living
#3 - Your price should almost never be lower than your costs or higher than what most consumers consider "fair"
MAKE EDUCATED GUESSES. EXPERIMENT. ITERATE.
PAYER
REVENUE MODEL
Source: http://fakecrow.com/free-persona-template/
REVENUE MODEL
▸ 1 persona will have a different role depending on the company/sector
▸ Personas will evolve over time as your company, product(s)/service(s) or market evolve and mature
▸ Your company will deal with multiple personas
decision maker persona evolution over time:
1. decision maker 2. economic buyer 3. recommenders 4. influencers 5. end users
API DEVELOPER INFRASTRUCTURE SENIOR SYS ADMINPRODUCT MANAGER
BUSINESS DEVELOPMENT
▸ 2 personas may have conflictual stated needs
Source: http://www.spikelab.org/blog/persona-development.html
REVENUE MODEL
ALWAYS PUT YOUR CUSTOMERS FIRST
April 2014 Source: https://saatchixlondon.wordpress.com/2014/04/30/the-best-brand-experiences-make-it-personal/
“Dear Ms. Avins, your wish is my command … within reason. XO Jenna” Creative Director Jenna Lyons
HOW TO CAPTURE REVENUE?BUT ONE THING IS MISSING…
REVENUE MODEL
CAPTURING REVENUE
COMMERCE AND RETAIL
SUBSCRIPTION AND USAGE FEES
LICENSING
AUCTIONS AND BIDS
ADVERTISING
DATA
TRANSACTIONS / INTERMEDIATION
FREEMIUM
AND MORE…
REVENUE MODEL
REVENUE MODELS BASED ON "FREE"
Source: Chris Anderson, "FREE"
PROFITSIDEALLY, TO MAKE
REVENUE MODEL
PROFIT ZONE
THE PROFIT ZONE▸ Customer Value (Value): This Profit Factor revolves
around how much value your product/service generates for your customers. The greater the value, the higher price you can charge.
VALUE
DELIVERY
PRICE TOUCH
▸ Pricing Strategy (Price): This Profit Factor revolves around your pricing strategy – either premium pricing with lower sales volume vs. discount pricing with higher sales volume.
▸ Marketing/Sales Performance (Touch): This Profit Factor revolves around: (a) how effectively you can reach prospects/customers; and (b) how cost efficient you can do this.
▸ Production Performance (Delivery): This Profit Factor revolves around how effective (quality) and efficient (cost) your company is able to deliver your product/service and operate the business.
Source: http://www.gpsexecs.com/in-the-zone-profits/
RECOMMENDED RESOURCESSOME HELP
REVENUE MODEL
▸ https://hackpad.com/Web-And-Mobile-Revenue-Models-final-EgXuEtSibE7#:h=Commerce
▸ http://entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy_2.htm
▸ http://www.womenunlimitedworldwide.com/pricing-strategies-the-top-10-mistakes-you-dont-want-to-make/
▸ http://blog.sotechmedia.com/how-much-can-bad-pricing-cost-you/
▸ http://www.spikelab.org/blog/persona-development.html
▸ fakecrow.com/free-persona-template/
▸ http://www.bmnow.com/revenue-models-quick-guide/
▸ http://www.bmnow.com/revenue-models-quick-guide/
▸ http://www.freemium.org/
▸ http://www.gpsexecs.com/in-the-zone-profits/
