Monetization Law Number #17

Monetization is primarily a profit and revenue maximisation concept not a growth concept

The role of monetization is to maximize revenue and profits.

Growth, revenue or profit; that is the question

This chapter explains that growth, revenue and profit require different monetization approaches

The Rule provides a quick monetization heuristic i.e. a rule of thumb in operation, a kind of —do this— and you’ll be 80% of the way there.

Rationale explains why the rule works with deeper insights and its use in practice.

Rabbit hole provides more in-depth resources and recommendations for anyone wanting to spend more hours researching each topic.

⓵ Rule 📖

⓶ Rationale 🧠

⓷ Rabbit Hole 🐇

⓵ Rule: Monetization Law #17 📖

Monetization is primarily a revenue and profit lever as opposed to a growth tool.

⓶ Rationale: Monetization Law #17 🧠

What are you optimizing for??

Monetization works within the confines of the overarching economic concept of supply and demand.

The outcomes of growth, revenue, or profit maximization are correlated, but not always harmonious.

Thus it is essential to set a clear direction on which is to be the number one goal.

At some point in most markets, an increase in price will result in demand trending to zero.

⓷ Rabbit Hole: Monetization Law #17 🐇

Optimizing For — Example

In rational agent terms, the marketing team may be motivated for maximum unit sales, and the sales team may be aiming for the highest revenue. The gap therefore arises; who in the organization is driven solely by profit maximization? - The monetization function!

The table below demonstrates the importance of goal clarity.

–Price scenario #1, with sales of 2,000 units, would please Marketing.

–Price scenario #3 with revenue maxed at $80k would delight Sales.

–However, it is price scenario #4, which is optimal from a monetization profit perspective.

Monetization thinking or an advocate is, therefore, a key seat at the goal-setting table.

But, even more importantly, it is vital that the #1 goal objective be communicated across the business!

🐇 Additional Research 🐇

Some background research on the price elasticity of demand is always useful for constructing demand estimate tables as shown above.

This article by the legends at ProfitWell should suffice, but for anybody wanting to go deep-deep-deeper, this is an excellent paper by Byungtae Lee & Eunkyoung Lee on the elasticity of e-books and how the availability of a paper version affects the elasticity of a digital version.