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QUESTION 5: How will you make money from this user?

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I won’t lie. This is my favorite step, but I’m always a little astounded by how many members of teams don’t know the answer to this in any detail. They might know the basics like “we sell advertising,” but they don’t know things like how to make the number go up or down or which types of advertising pay the best. Or, if they sell products and services, somebody on the team won’t know what things like gross margin are on products or what the balance is between selling hardware and selling customer support for that hardware. This is worse in startups where revenue isn’t a focus yet. Even if you’re not taking people’s money today, you still have to have a plan for how you will eventually make a profit. And no, the answer is not “volume.”

In other words, a lot of people on your team may not understand your actual business model, and that’s a problem if they’re making any decisions, because they’re going to make bad trade-offs. They’re going to make choices that lose you money because they don’t know that they’re losing you money. And that’s not OK.

Remember, when you’re answering this question, you need to be aware that different users might generate revenue differently, and some might not generate it at all. If you run a nonprofit or a government product, all of your revenue might come from donors or taxes, and your users would not have a revenue step. If you run an ad-supported business, the viewers might generate revenue by viewing ads, while advertisers would provide revenue by paying you for showing the ads. Yes, it’s the same money, but you should track it in both places.

Here are some typical answers to this question for specific companies:

• Viewing an ad: Buzzfeed readers

• Making a purchase: Amazon purchasers

• Paying for a seat license: Salesforce managers

• Moving from the free plan to the pro plan: Dropbox new users

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