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Predictable Revenue 2017-09-24T02:24:58+00:00

Predictable Revenue Models

Viral Components | Design for Self Expression | Network Effects | Bundling Recurring Payment

A digital revolution is sweeping the globe and changing the business landscape. What was possible before billions of people were networked together was completely different. The rate of growth became exponentially faster if applied correctly. We will explore how to systematize this business model so that you’ve baked in predictable revenue that avoids common fail points.  Monetizing this model correctly is tricky.  It’s using pull techniques rather than push. It’s strategically avoiding monetizing where it could cause negative network effects and carefully adding it where it consistently creates positive network effects. It’s aligning with exponential growth curves that use customers to attract new customers that work while you don’t. It’s creating platforms instead of pipes.

The following is a cheat sheet of practice flash cards that I use to remind myself where the proven repeatable monetization moments are in platforms that succeed, rather than cause friction and negative network effects. To be clear, some of the most successful platforms fail with one one of these methods and pivot to another or choose more than one. We’ll dive into when to use one over another with case studies that show what must be present when it works.

They include: Pay Per Transaction | Pay For Access | Pay For Attention | Pay For Tools

Hover or tap on each flash card to flip over

Pay Per Transaction

Matchmaking - Reduce Barriers

Curate 2-Sided Marketplace

Seed the platform with producers that create value to attract consumers by reducing the barrier to finding vetted, high quality producers and charge only after value is exchanged.

Pay For Access

Producers Pay For Access To The Consumers

Dating & Lead Generation

Create a vibrant community of consumers and optimize for the 3 F’s: Fun | Fame | Fortune. Once they are there, tactfully, without turning them off, charge producers for access to them.

Pay For Attention

Producers Pay For Consumers

Provide Traffic For Views

This is an open and public platform that has obvious traffic from consumers, viewers or social interaction. Charge for the attention of those users.
Example: ads on Youtube/Facebook • recruiters on Linkedin/Indeed

Pay For Tools

Make It Easier To Do

Automate a Task

Automate a time consuming task that people don’t like to do. Charge for use of the tool.

More Than
“Viral” Elements

A platform needs more than viral elements. Salesforce.com is now the largest sales platform but it required outbound sales teams to grow. This will include a fully rounded case study of outbound sales methods by Aaron Ross’. Aaron is the creator of the outbound/inbound sales process, people and teams that grew Salesforce.com to $100 million in revenue in just a few years. To be fair, his methods would not have worked if the foundation of salesforce didn’t include the monetization methods above. Both are critical to your success.

Includes: bundling services for recurring payment packages that create compounding growth. How to avoid cold approaches using what Aaron calls:

Seeds | Nets | Spears

Hover or tap on each flash card to flip over

Seeds

Many-To-Many

Key Metrics

When tracking your Seeds, you should make sure to look closely at Account Management activities: Opportunities from referrals, revenue from upsells, and the percentage of your customers you’re losing to churn.

Nets

One-To-Many

Key Metrics

The important metrics to track when evaluating your Nets are: Lead velocity, number of opportunities from each campaign, and the rate at which marketing leads convert into opportunities.

Spears

One-To-One

Key Metrics

One-to-one outbound prospectors or Business Development Reps who actively find and reel in prospects. When analyzing Spear production, pay attention to: Number of activities by sales rep, efficiency ratios for those activities, and achievement of sales goals.

1. Offer a tool
2. Create spartan tandems
3. Seek mutual fits
4. Build in a viral coefficient
5. Demos vs sales meetings
6. Identify an NGP (New Growth Platform)

 

Harvard Business Review: What Is a New Growth Platform?
Opportunities for building NGPs lie at the intersection of a company’s actual or potential capability set, unmet customer needs, and forces of change in the broader environment

 

 

Spartan Tactical Strategy: a small core elite group of Tandem teams, each person protects the other from knee to chest… One only sets layups for the other.

 

Your “pitch” is rooted in

“How can I help them as quickly as possible from the moment our conversation starts?”

 

Answer: Offer Them A Tool. This is your Viral Coefficient: a user makes a credible referral without the intention of making you a sale.

The “tool” you offer is your viral coefficient. Do not overlook the power of the tool approach.

http://ebusiness.mit.edu/platform/agenda/slides/8%20Sangeet-MIT%20FINAL.pdf

Does your startup have a wallet-acquisition strategy?

1. Subscription SaaS models

2. Credit card on file allowing for a one-click checkout, e.g. App Store, Amazon.com

1) Structuring a very clear and tangible incentive for the user to part with payment details

2) Creating the right levels of control for the user over her wallet information

3) Allaying security fears

1) Recurring billing: In the SMB/Consumer SAAS space, billing is self-serve and recurring. In such cases, payers are more comfortable surrendering their payment details when they feel they have adequate control over changing or terminating payment schedules.

2) The actual price is unknown: In automated bidding mechanisms (AdWords, auction sites), the payer needs to have the right level of control to ensure a cap on price (e.g. maximum keyword CPC that an advertiser is willing to pay) as well as outflow (e.g. daily budget).

The Intersection Of Freemium, Networks and Marketplaces

ENTER: THE FREEMIUM MARKETPLACE

Exponential Opportunities

the ingredients required to create exponential growth: a bulletproof strategy, choosing a ripe industry (ripe for disruption), how to build a new era platform business model, how to bake in a predictable revenue model with explicit instructions, how-to guides and checklists.

“Companies should be selling ideas more than benefits. Sell Ideas.  Not Stuff.”

Aaron Ross

Exponential Insights

“Most entrepreneurs and managers looking to build the next Airbnb for X or Facebook for Y, dive into the problem headlong by building technology. Instead, technology should be built only after understanding the interaction that needs to be enabled. Without this in mind, one often ends up with a platform that nobody wants to use. Build platforms with an interaction-first, not a technology-first mindset!”
― Sangeet Paul Choudary, Platform Scale: How an emerging business model helps startups build large empires with minimum investment

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