The entrepreneurship class on growth hacking was engaging with a lot of good questions from the students, but one question in particular stood out: how does a company identify the right monetization model?
It was a great question (kudos to the class!), because more often than not, the question from entrepreneurs and corporate executives is about what is the right model versus how to create the right model.
The goal is not the model itself, but rather the ability to achieve your growth goals including higher revenue, increased profitability and lower churn. This requires the right approach to identifying and building the right monetization model for your company.
Here are 3 things you should consider to get started.
#1: Your model is tailored to your company
If you ask three chefs how to cook the best steak, you’re more than likely going to get three different recipes. The same is true for your monetization model.
To continue the food analogy, you can have many of the same ingredients, you have to make the final product that meets your goals and will be receptive by your customers.
A common challenge companies of all sizes face is to find models ‘that worked’. Many things go into the success of any monetization model and often times, more so for startups and earlier stage companies, many of the dependencies for success (e.g. talent, systems) are not there.
Longer-term, the question is how well any current adaptation will work as your company grows and evolves. Some planning in these early stages will help the time and resources required to attempt to adopt or build an entirely new model in the future.
#2: Your model is evolving
As with pricing, there is a perception that monetization is static; you ‘set it and forget it’. But as any seasoned entrepreneur will tell you, no business looks exactly the same in year 2 as it did in year 1 whether it is the product or the company’s organization.
Like your product or sales process, the monetization model will change. Accept this truth. Then comes the fun stuff, the actual work.
A plan and process needs to be in place to enable your monetization model to evolve as your company and product(s) evolves. This starts with identifying the owners of monetization and pricing. Then will start to move to the processes and management to analyze and implement changes and manage monetization in the future.
These are all key areas that the company’s leaders must steer, leading to tip #3…
#3: Your model is top of mind for the leadership team
For entrepreneurs, there is a seemingly endless list of things to do but monetization and pricing should always be at or near the top. There should be time set aside each month or quarter to review progress and anticipate changes.
The last thing any entrepreneur wants is a missed opportunity, especially growth opportunities. Being proactive with your monetization model is one way to avoid this.
Longer-term, leadership will steer the ambitions of the company from market perception to revenue growth. Anticipating what monetization is required will require a close eye by leadership and can influence other parts of the business including compensation (e.g. sales team) or supply chain (e.g. consumer goods).
As entrepreneurs look to build companies that are fast-growing, sustainable and (one day) profitable, building the right approach to the monetization model can pay dividends in the long run.
Like all things worth building, an impactful monetization model requires thought, development and execution. This starts from the leadership team, but should be embedded throughout the company. Almost as bad as missing an opportunity is having to recreate the wheel each time pricing and monetization has to be reviewed and updated.
Interested in learning more?
If you or your team is interested in having a hosted session on your pricing and monetization model, please contact us at: email@example.com