Monetization Law Number #6
Increase your monetization by creating increased customer value
Increased value creation for your customer will present more value capture opportunities for your business.
It’s easier to capture more revenue when the overall pie is growing.
This chapter is about how creating more value for your customer can be utilised to increase your monetization.
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 #6 📖
Increasing customer value always creates increased monetization potential.
⓶ Rationale: Monetization Law #6 🧠
An increase in monetization, first requires, an increase in customer value
Increased value creation for your customer will present more value capture opportunities for your business as this will generally allow you more price leverage.
Increasing customer value
Businesses live or die by creating customer value. That much is known. The question is, what do our customers value?
This question has many a vexed entrepreneur stumped. The startup era has spawned several different views of how to create value.
While we are primarily concerned with explaining the techniques and methodology of capturing value, we acknowledge the importance of first creating value before attempting to capture any.
Some methods that have emerged are noted below, and we follow up in more detail in our frameworks section later in this manifesto.
We highlight some of the best frameworks for creating customer value below:
Jobs To Be Done [Anthony Ulwick, Clayton Christensen]
The jobs to be done theory has two strands. Jobs as Activities and Jobs as Progress while they differ in specifics, the overall goal of both infers that people don’t buy products or services just through want, they hire or partner with them to get a job done. A desired outcome or solution to a problem.
Value Proposition [Alexander Osterwalder & Yves Pigneur]
This model introduced the value proposition as the cornerstone of business model evolution within the Business Model Canvas. The value proposition frames customer gains and the resolution of pains. The Business Model Canvas in which it resides details the value proposition interaction with all the elements required to sustain the delivery of the value proposition to your customers.
Eating Customer Complexity [Sam Ovens]
This model asserts that customers want to achieve the desired state outcome and that your product develops around alleviating complexity along the customer’s journey to reach this outcome. Eating complexity partners the customer en-route to their solutions.
Problem-Lens Framework [Ken Hudson]
By changing the problem, or the lens with which that problem is viewed, a new range of solutions presents themselves. This alternative approach offers new contrarian solutions by altering the problem and zooming in and out on the current way the problem is viewed.
⓷ Rabbit Hole: Monetization Law #6 🐇
Iterate To Success
More than 90% of new offerings fail.
Over the last 30 years, many commentators have put this failure down to an understanding of what the customer values.
The startup movement sought to address this. Since the beginning of the web 2.0 era, a new iterative [build-measure - learn] approach has been adopted by many successful product launching companies irrespective of the base framework used to establish an initial value proposition.
Eating Complexity Theory
This process represents a simple way to assess value creation.
It positions that wherever you can reduce a customer’s complexity in achieving their end goal, you have the basis of an increased monetization strategy.
Eating Complexity: The Method
The process involves distilling the customer’s goal into a succinct meaningful tagline and resolving to have them achieve that.
The critical determinants of success being the least number of steps with the least friction.
The best market example of eating complexity is Uber, which eats the customer’s complexity in reaching a destination.
Tagline Ideal State Goal - Simplify your customer’s ideal goal state into a tagline. This will be three or four words that capture the essence of the goal.
Change Shoes - Immerse yourself in your customer’s shoes and list every source of complexity and friction that they encounter on the way to their ideal state goal
Score Complexity - Score your list of complexity and friction. Identify the top 3 obstacles experienced in reaching the ideal state goal.
Eat Complexity - Resolve to eat the top 3 complexity and friction issues. This should be resolved as a whole, from customer interaction to friction in monetization, psychological or physical.
Plot New Value Curve - Plot your new offering curve v’s the industry curve. This will help you understand where you differ from current and seed your differentiation marketing material.
Deliver New Offer - Present your new offer to your complexity reduced and frictionless experiencing customers!
Customer Value Innovation
Increased customer value is a great way to start the monetization question.
Since monetization, in essence, represents the capture of some of the value you create, the goal is, therefore, to increase the size of the value pie from which you slice.
Here are a few examples of value innovation that now seem obvious, but we’re anything but….
🐇 Additional Research 🐇
There’s a whole bunch of stuff in this space that will have you wiling away hours on end, so I’ll only recommend my personal favourites.
The pick of the bunch is The Blue Ocean Strategy which comprehensively covers strategy with great storytelling and inversion thinking.
Competing Against Luck and Jobs To Be Done help you simplify strategy thinking into actionable steps.
