R&D Q’s: How will I monetize my idea?
Monetizing an invention should be primary decision when deciding whether an invention idea has merit.
Ideas are a dime-a-dozen If the idea can’t be monetized, then it’s not worth the napkin that it’s sketched on.
Try to find a way to test/quantify how much someone would pay for your product or service. Build a quick mockup and try to sell directly to consumers. Figure out if consumers want what you’re about to deliver.
Sometimes, you’ll figure out that your customer is not who you initially thought it would be.
Several monetization strategies that could work for physical products
Sell product directly on website (B2B, B2C)
Sell product thru distributors.
Sell product thru wholesalers.
Monetization strategies that could work for services:
Monthly subscription to service
Free subscription with sponsored content
1. Reoccurring Revenue generates monthly and annual revenue
Razor/blade model - sell handle at - cost, sell propriety cartridges
Microsoft office 365
Product plus support software
2. One-time sale generates a single purchase price
Customer buys entire product, no reoccurring revenue
Monthly contract, eventually covers cost of product; buyout
Minimizes financial risk. Seller owns
OEM owns product, sells ‘time’ on the device.
Rolls-royce owns all the motors in over 500 airlines’ fleets.
RR services on their terms.
Airlines pays for uptime, no ownership risk.
Let’s think about this: Imagine if you could find a way to provide expensive leather furniture at a profit, without selling a single couch? What do people want? They want nice furniture that’s in-style, comfortable and provides places to sit. What if someone created a business that revolved around monthly subscription to furniture plan? Would it make sense? How would you monetize that? How much profit is in it? How much financial risk is invoiced?
Volvo and other car companies are trying car subscription plans, but it hasn’t really taken off yet.
All of these monetization strategies have different investments up front. Choosing one early helps define how the brand will interact with the customer.
Choosing a monetization strategy can be a fluid decision. But it helps define how much to spend on capital investment (design, prototyping, tooling, inventory, etc)
Make a decision, and pivot later if the market changes.
Have a great day! Tomorrow, I’ll discuss how we decide the investment into Design or Tooling.
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