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Building your Revenue model

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Presentation prepared for the Founder Institute session on revenue model in Santiago, Chile.

Talking about revenue model framework, how to capture revenues and the profit zone.

Building your Revenue model

  1. 1. REVENUE MODEL BUILDING YOUR BUSINESS Guillaume Balas - guillaume@tingslabs.com
  2. 2. REMEMBER?
  3. 3. -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
  4. 4. FOCUS ON YOUR REVENUE MODEL!
  5. 5. WAIT !!!
  6. 6. REVENUE SOURCE A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
  7. 7. REVENUE SOURCE A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES VALUE
  8. 8. REVENUE SOURCE VALUE PRICE A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
  9. 9. REVENUE SOURCE PRICEPAYER VALUE A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
  10. 10. REVENUE SOURCE PRICEPAYER VALUE A REVENUE MODEL IS A FRAMEWORK FOR GENERATING REVENUES
  11. 11. REVENUE SOURCE
  12. 12. REVENUE MODEL Product Service Production Commerce
  13. 13. VALUE
  14. 14. 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)
  15. 15. 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
  16. 16. PRICING
  17. 17. REVENUE MODEL PRICING IS HARD TO DO AND EASY TO IGNORE. Jay Goltz, “The price of Bad Pricing”, July 6th 2011, NY Times
  18. 18. 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
  19. 19. 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
  20. 20. REVENUE MODEL example
  21. 21. 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.
  22. 22. PAYER
  23. 23. REVENUE MODEL Source: http://fakecrow.com/free-persona-template/
  24. 24. 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 ADMIN PRODUCT MANAGER BUSINESS DEVELOPMENT ▸ 2 personas may have conflictual stated needs Source: http://www.spikelab.org/blog/persona-development.html
  25. 25. REVENUE MODEL
  26. 26. ALWAYS PUT YOUR CUSTOMERS FIRST
  27. 27. 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
  28. 28. HOW TO CAPTURE REVENUE? BUT ONE THING IS MISSING…
  29. 29. REVENUE MODEL CAPTURING REVENUE COMMERCE AND RETAIL SUBSCRIPTION AND USAGE FEES LICENSING AUCTIONS AND BIDS ADVERTISING DATA TRANSACTIONS / INTERMEDIATION FREEMIUM AND MORE…
  30. 30. REVENUE MODEL REVENUE MODELS BASED ON "FREE" Source: Chris Anderson, "FREE"
  31. 31. PROFITS IDEALLY, TO MAKE
  32. 32. 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/
  33. 33. RECOMMENDED RESOURCES SOME HELP
  34. 34. 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/
  35. 35. THANK YOU !GUILLAUME BALAS - GUILLAUME@TINGSLABS.COM

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