There are many exciting things in digital product development, such as defining the problem to be solved or innovating technical solutions and appealing user interfaces. However, the way you plan to make money with your product has an impact on every other phase, and therefore, you should also know something about monetization. Monetization is the method that you choose for your digital product to make money. That is something that you should consider from the day one of your digital product development process. Of course, as the previous blog post highlighted, you have to fell in love with the problem not the solution. However, few entrepreneurs have the luxury to only solve problems – they also need to make money.
Who are the clients of your digital product?
In short, your product should be worth of using and create value for the clients. These clients are supposed to return something for the value they get – for instance money. But who are your clients? Or on the other words: who is getting value from your product and is willing give something in return? Just like with non- digital products you can choose if you want to go broad or to go deep with your target clients. Digital distribution of your product makes the broadening of the target group much easier. For example, think about a yoga studio. They are likely to attract people from a quite limited geographical area. When thinking about an online yoga studio, the clients can be almost everywhere. However, digitalization has allowed the broadening of target clients for your competitors as well. Narrowing the scope and focusing on a small niche can also be reasonable. You should also think about the paying client. Is it an institution, a business, a consumer? And not forget to evaluate how much your target client have money and are they willing to pay for a product like yours? Defining your clients and knowing them extensively is he first step to successful monetization.
How are your clients paying?
Traditionally pricing was divided into value-based, competitive-based or cost-based methods. Digitalization has brought several new approaches to this. Pricing methods for digital products can be for instance a pay-per-use, subscriptions, freemium pricing, adverting based, dynamic method, licensing or creating digital products for clients. Choosing your pricing method is dependent on both your product and your target clients.
How much are your clients willing to pay?
Putting a price tag on your digital product can be tricky. The way consumers are willing to pay for digital goods might vary from the way they are used to pay for non-digital ones. You could still start by thinking the value your product creates for the client. Is it saving time or effort for them? Is it enhancing for instance clients’ feel of security or health? Is it just for fun? Without making any grand surveys, you could start by asking ten of your friends, how much they would be willing to pay for your product. If the results are not promising, you can always re-think your pricing method or even the target clients.
Finally, be prepared to change the monetization strategy
Just like the other product development phases of a digital product, also monetization is something that you should be willing adjust or change during your process. Be prepared to collect data, analyze it and make agile adjustment accordingly. The monetization strategy is also likely to evolve as the product evolves. Pricing is one of the main tools of marketing and product success, so don’t consider it just a minor detail. It is essential.
Reetta Raitoharju
Lecturer
Turku University of Applied Sciences