Monetizing Innovation – Madhavan Ramanujam and Georg Tacke
Date read: 8/26/21. Recommendation: 7/10.
Reads like a series of case studies on the importance of monetization when you’re launching a new product or startup. However, it lacks some of the punch and the frameworks that a course like Reforge leverages to really drive its concepts home. To be fair, this is still a solid resource. Monetization strategy as it relates to building products is a subject that deserves more focus (and more books). The general principles of the book can be summed up as: assess willingness to pay early, segment customers based on willingness to pay, use that information to inform product configuration and bundling, and choose a pricing model that fits your business.
See my notes below or Amazon for details and reviews.
My Notes:
Willingness to pay:
“New products fail for many reasons. But the root of all innovation evil is the failure to put the customer’s willingness to pay for a new product at the very core of product design.” MR
The willingness to pay talk is critical to have early and will immediately tell you whether you have an opportunity to monetize your product and if it will help you prioritize features and design the product with the right set of features.
Asking about the value of your product:
What do you think could be an acceptable price? Why?
What do you think would be an expensive price? Why?
What do you think would be a prohibitively expensive price? Why?
Would you buy this product at $X? Why?
Other mechanisms for assessing value:
Purchase probability questions (Scale of 1-5 how likely would you be to buy this product, how would you rate this product, etc.)
Most-least questions (List six features and rank from most valuable to least valuable then run a MaxDiff).
Feature shocks:
When the product has too many “nice to haves” and too few “gotta haves.”
Rules for innovation + monetization success:
Have the willingness to pay talk with customers early
Build customer segments based on differences in their willingness to pay
Pay close attention to product configuration and bundling
Choose the right pricing and revenue models, how and how much is a critical decision that must match your product.
Segmentation:
Examples could be, 1) want price only (low cost), 2) want it now (fast delivery), 3) want product only (performance above other factors like service, shipping, price), 4) want the best (least price sensitive)
Monetization models:
Subscription (Netflix), dynamic pricing (airlines, Uber), market-based pricing (AdWords), pay as you go (CAT scan or jet engine).