The digital world is increasingly becoming freemium and self-service — from Atlassian to Zoom via the New York Times, Medium and Spotify. As a result, generating revenue is often becoming a core component of the product experience, and squarely within the remit of the product team. But where does one begin when building a product that solves real problems while also guiding potential customers through a decision to buy? Surely there is more to it than annoying pop-ups or paywalling off parts of the experience? To help when tackling these questions, I like to break monetisation into five pieces: the value, the message, the offer, the pitch and the conversion.
#1 the value, where the story starts.
No product appears fully formed in the world, complete with a price tag and a loyal customer base. They are the output of dedicated teams which have invested time and effort — and no small measure of blood, sweat and tears — into solving a problem. The solution to this problem is the engine of value and generally the primary focus of a product manager’s effort. As thoughts turn to revenue and monetisation, it pays to keep this value front and centre. The value is the reason customers use — or want to use — the product. However, not all value is created equal: a lightning-fast site has value, but no one will pay for that alone if it does nothing of use. What is essential when translating value into revenue is identifying the monetisable value. The monetisable value is what the product does that customers want to buy. If you don’t know what your monetisable value is, identifying that should be your first step. Once your monetisable value is clear and compelling, the next step on the path to creating revenue is crafting what I call the message.
#2 the message, how you position the value.
The message is the foundation for what your product stands for. It is how customers perceive its value and, ultimately, the impetus for why they should give you money. The message is the central thread to your story and is closely tied to your value — as that’s the thing customers are getting. But the message isn’t for you — it’s for your customers and therefore should be captured from their perspective. It should reflect not the solution you are giving them, but the better person you are enabling them to become.
“People don’t want a drill, t̶h̶e̶y̶ ̶w̶a̶n̶t̶ ̶a̶ ̶h̶o̶l̶e they want to feel proud of building something”
A powerful example is the Guardian, which, despite being completely free, has convinced tens of thousands of readers to become contributors, generating millions of dollars in revenue every year. The Guardian’s message is compelling: free, independent, liberal journalism is a sustaining force in democracy. It acts as an essential check on those in power — and it needs your help to defend it.
The Guardian’s message resonates because it mirrors their value. The Guardian delivers hard-hitting, investigative journalism and takes a position on important issues. In effect, the Guardian has woven its message into the very fabric of its product. If the Guardian instead had a backbone of click-bait, the message would not resonate, and the proposition would be a hard sell.
#3 the offer, nailing your terms of sale.
The offer is the crucial next component to define, building upon the foundation of the message. The offer is the terms of trade between the product and its customers. For example, a barber shop’s message might centre on a creating a more stylish you, while the offer is $100 for a haircut. As the digital world has become increasingly freemium, the nature of the offer has shifted from bouncer to concierge. Customers are no longer barred from the product until they cough up, usually in the form of a one-off fee. Instead, they are increasingly encouraged to try before they buy, and hefty one-time fees supplanted by more approachable subscriptions.
Slack provides a useful example of how to structure the offer for success. A freemium product, there are no barriers to teams using Slack. With no limits on how many people can join or features hidden behind paywalls, organisations can extract maximum value in improved communication, collaboration and productivity. This approach also feeds Slacks network effects helping to drive adoption, which in turn reinforces Slack’s value further. But, there is the catch: if you want a history of more than 10,000 messages, you have to pay. Many Slack Groups can survive without their history. But for companies, having the message history is often essential. When they hit their limit, it creates a desperate need to upgrade. In this way, Slack introduces the offer at the point in use when it will have the highest chance of being accepted.
Aligning the offer with the message and the value creates a powerful incentive for customers to buy, but doesn’t guarantee it. Customers might remain unconvinced of the benefits of the paid product, or might not realise there is an option to upgrade. To overcome these hurdles, it helps to perfect the pitch.
#4 the pitch, the vehicle for intent.
The purpose of the pitch not just to project the message and the offer into your customers’ brains, but to also make it compelling. The pitch often takes the form of some intervention — ads, pop-ups or other calls to action — paired with a landing page. The pitch must articulate your message in a way that resonates with your customers and sticks with them. Many variables can make or break your pitch: from pushing pixels around the creative to the placement of the message, from the imagery used to wordsmithing that perfect, pithy copy. Equally important is the context in which the message appears. The Guardian will likely have more success showing a request for contributions on an article exposing corruption than on a 404 error page.
Fortunately for Product Managers, perfecting your pitch is inherently testable and optimisable — the 2012 Obama re-election campaign demonstrated this. The team extensively used A/B tests — running over 500 on their campaign website — to help drive a 49% increase in conversions over 20 months. The campaign tested everything in pursuit of the perfect pitch, from button design to the images used.
The perfect pitch, layered on a compelling message and astute offer should be enough to create purchase intent. However, to give that intent the best chance of becoming a sale requires the conversion to be as seamless as possible.
#5 the conversion, and the eternal war on friction.
Transforming the intent created in the pitch into revenue is the job of the conversion. However, when potential customers abandon their purchase at the last step, the likely culprit is friction. Friction is a general term for anything that gets in the way of the conversion. Anyone who has done any online shopping in the past decade will have experience the transformation wrought by the war on friction. E-commerce checkout processes have become shorter, simpler and more accessible — all in pursuit of frictionless sales. However, friction is often more subtle than the number of pages or check-boxes. Uncertainty about shipping, trust in a merchant, or sticker shock at checkout all introduce friction and can be enough to push a customer to look elsewhere. Driving frictionless conversion is about understanding what is making users say “this is too hard” and solving for that.
Go forth and monetise.
As product managers, it is our responsibility to ensure that the products we build are successful. Often, success relies as much on our products being able to generate revenue as it does on creating more value for our users. Through careful consideration and focus across the value, the message, the offer, the pitch and the conversion, our products can deliver not only great user experiences but revenue as well.