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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

  1. ​Sell product directly on website (B2B, B2C)

  2. Sell product thru distributors.

  3. Sell product thru wholesalers.

  4. Consignment

Monetization strategies that could work for services:

  1. Monthly subscription to service

  2. Free subscription with micro-transactions for upgrades

  3. Free subscription with sponsored content

Pricing Strategies

1. Reoccurring Revenue generates monthly and annual revenue

  • Razor/blade model - sell handle at - cost, sell propriety cartridges

  • Printer/cartridge model

  • Microsoft office 365

  • Product plus support software

2. One-time sale generates a single purchase price

  • Customer buys entire product, no reoccurring revenue

  • Leather Couch

  • Baby stroller

3. Lease-to-own

  • Monthly contract, eventually covers cost of product; buyout

  • Minimizes financial risk. Seller owns

4. Power-by-the-Hour

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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