Unlocking the Power of Monetization: A Guide to Maximizing Revenue with New Use Cases
As your product evolves, adding new use cases can unlock new revenue streams and increase customer satisfaction. However, this requires a thoughtful approach to monetization. In this article, we’ll explore the importance of aligning your monetization strategy with your product’s growth, and provide guidance on when to expand your model vertically or horizontally.
The Dynamic Nature of Monetization
Your monetization model is not set in stone. It should adapt to changes in your product, target audience, and competitive landscape. Failing to reassess your monetization approach can lead to lost revenue and dissatisfied customers. As you add new features and use cases, consider how they fit into your existing model and make conscious decisions about how to capture value.
Use Cases vs. Features: What’s the Difference?
Not every new feature requires a change to your monetization model. A new use case, on the other hand, solves a significant problem for your customers and creates new value. For example, a restaurant reservation tool that adds takeout ordering capabilities is creating a new use case, whereas adding the ability to preselect seats is simply expanding an existing feature.
When to Add a New Use Case
There are three key reasons to introduce a new use case:
- Expanding target audiences: Solving adjacent problems can help you reach new customers.
- Cost-to-serve: If a new feature significantly impacts your costs, it may warrant a separate monetization strategy.
- Segment differences: Catering to specific user segments with unique needs and willingness to pay can justify a new use case.
Vertical vs. Horizontal Monetization Model Expansion
When adding new use cases, you’ll likely expand your monetization model either vertically or horizontally. Let’s explore the differences:
Vertical Expansion
- Adding a new plan or tier to your existing model
- Suitable when the new use case has a similar cost-to-serve and value scales similarly to your main model
- Example: Figma’s enterprise plan, which targets a specific segment with unique needs
Horizontal Expansion
- Offering additional services or features within your existing plans
- Suitable when the new use case has a high cost-to-serve, or value scales differently to your main model
- Example: Peerspace’s add-ons, such as catering and equipment rental, which are available to all users
Choosing the Right Approach
When deciding between vertical and horizontal expansion, consider three factors:
- Consumer value: Does the new use case appeal to different segments of users?
- Cost-to-serve: Is the cost of serving the new use case high?
- Price scaling: Does the value of the new use case scale similarly to your main model?
Real-World Examples
- Uber Pool: A vertical expansion that targets price-sensitive users with a shared ride option
- Peerspace add-ons: A horizontal expansion that offers additional services to all users
Conclusion
As your product grows, it’s essential to reassess your monetization strategy and consider new use cases. By understanding the differences between vertical and horizontal expansion, you can make informed decisions about how to capture value and maximize revenue. Remember, your monetization model should adapt to changes in your product and market, ensuring you stay competitive and customer-centric.