Monetisation delivers economic value, whereas, Business Development focuses on customer acquisition.

Is the role of the Business Development Manager living up to its title? Does the required deliverable of product and/or service monetisation fit within the sales mandate? Is the responsibility to originate, negotiate and execute complex and financially driven commercial deliverables a pure sales function?

There is little doubt that the business development function in an early-stage, entrepreneurial business has grown in status. This is consistent with the increase in funding available to founder teams to focus on growth and development.

The Challenge – there is an immediate need after successfully raising funding to substantiate the investment by gaining measurable market traction.

Management teams are driven to implement strategies to increase revenue to validate  “product-market fit”. On the surface this is a function of customer acquisition, a sales team initiative driven by the business development team. Think about the negotiation of partnerships focused on acquiring new customers. Being a sales team deliverable the KPI’s to measure success are sales-orientated. However, for these partnerships to be effective, they must be commercially driven and therefore structured and measurable based on specific financial and qualitative metrics.

Business Monetisation is about delivering on financial performance with measurable metrics.

Todays digitally-driven consumer marketplaces involve dealing with diverse user groups. Namely; customers, suppliers and service providers. Consequently, in order to service and monetise each of these user groups effectively management need to be innovative and flexible. It is no longer sufficient to structure a one size fits all sale price point, consideration needs to be given to each user’s specific needs and value expectations. Specifically, focusing on the interdependence of various users within the marketplace and broader supply chain.

In a vertical market, the sales focus is skewed toward targeting specific buyers. Conversely, when dealing with platform economies, network effects turn all users into potential suppliers and customers, www.medium.com/networkeffects-explained.  Users transact based on  immediate needs and the interdependencies that they share with each other.

To convert users into loyal customers the sales strategy needs to be commercially driven.

Is ownership of this deliverable a finance or a sales team function?

To succeed and to create a meaningful proposition for all platform users requires understanding the value proposition relative to each user. Thereupon, structuring and negotiating a pricing arrangement tailored to deliver value. Introducing the important role of the  Business Monetisation leader.

In conclusion, as a result of my experience working with growth companies, the deliverable is to execute a commercially driven as opposed to a sales orientated customer acquisition strategy.  Consequently,  the ownership, including strategising and negotiating of of Business Development partnerships should fall under the Commercial leadership of the business.

Monetisation Growth Strategies.

Chief Executive Officers need to focus on originating and implementing customer and product monetisation strategies. Above all, the focus needs to be on generating high margin, sustainable cash flows from diverse user groups.

Blitzscaling by Reid Hoffman of Linkedin fame highlights the need for management teams to focus on economic value and financial metrics when pursuing a growth strategy. The book is loaded with valuable insights and learnings relevant to all founder teams. Blitzscaling

How IoT is transforming Retail. Chiefly, customers should be able to identify and request stock items from tablets inside the changeroom at the press of a button. Markedly, 3D sensors installed behind mirrors should allow customers to select, model, style and fit items of clothing and accessories.

To Accept and process payments from customers anywhere in the store. This increases sell-through for the retailer while providing customers with immediate service.

To arrange for customer deliveries with mobile tracking facilities at the point of sale – this would allow customers to continue shopping or with other activities without the hassle of carrying their bags around. The benefit for retailers. Customers who don’t have to worry about carrying their bags will likely purchase more goods per shop.

To provide instant in-store feedback on a customer’s loyalty status and any discounts and/or awards available for use.  Consequently, this would influence purchasing decisions and drive sales while providing customers with benefits. Benefits would be based on personal history and loyalty points earned and could include free delivery, price discounts, giveaway items.

The IoT creates a seamless and effective communication channel for retailers. In order to, target customers with contextualised messages wherever they are and whatever they’re doing. This especially becomes relevant when a customer can be identified by location-based services within a certain distance of the retail outlet. Thereby, creating an incentive for them to engage. Additionally, time-specific and personnel offers can be pushed to customers. Ultimately, driving traffic in-store when retailers are less busy or during specific promotions.

The result increased turnover for retailers and personalised and relevant services delivered directly to the customer.

What is a Platform Strategy

It is highly ironic that in this materialistic and asset rich society that we live, that the subscription economy is taking off. People are choosing to subscribe for services and the use of assets as opposed to owning the asset outright. Ditching richly and often personal possessions in favour of having real time access, instant updates and the ability to pay based on a specific needs and measured usage. Welcome to the world of the subscription economy.

The Subscription Economy.

Markedly, prioritising usage and flexibility over ownership.

Furthermore, creating annuity based income streams as opposed to once-off payments.

Subscription services explained

The Subscription Economy explained. A subscription is a service where a consumer pays a recurring fee. Specifically, for the ongoing use of an asset. Alternatively, to gain access to a service offering.

The benefits of a subscription business are through the resulting transformational changes. As a result, of management teams successfully implementing a subscription model.

Firstly, the executive decision-makers of a subscription business need to shift strategic focus. Namely, from product production and development initiatives to becoming customer-centric and service orientated.

The growth strategy for a subscription business is centred around the customer. As opposed to, driven by the product. Subscription models are about providing instant, relevant and seamless services. Notably, to a loyal and engaged customer base.

It is the customers’ current and ongoing needs that are central to the management’s execution strategy.

Marketing will always be core to growing any successful business. However, subscription businesses are principally premised on securing and maintaining customer relationships. Including, the promotion and sale of physical assets and providing service driven customer experiences. Consequently, strategic thinking will be needed to plan new marketing initiatives.

The impact of artificial intelligence.

Artificial intelligence and machine learning will be used to analyse and interpret data. In effect, the increased use of data analysis will directly impact marketing strategies. Henceforth, moving from a sales-based approach to a data-driven methodology.

Customer interactions will need to become central to overall product development. As opposed, to being dependent on the outcome of marketing campaigns. Instead, executives will place reliance on user-generated curatorship. For this reason, marketing will evolve from reactively pushing product through traditional media channels. Henceforth, to proactively engaging instant customer feedback, based on user experience. Therefore, positively impacting customer services.

The Financial Impact.

Financially, businesses will become more cash neutral. Especially, as income is earned over the products lifecycle or the extent of the service. Financial models will be transformed. Uniquely, from the receipt of unpredictable and lumpy, one-off upfront purchases to reliable and predictable annuity income streams.

Impact on Customer Behaviour.

Customer behaviour will shift from the need to own physical assets outright. Above all, to the desire to pay based on access and usage. In particular, the levels of customer service and engagement will have to increase substantially.

In order to, ensure continuity of subscriptions. Indeed, management will have to develop deep customer relationships premised on analysing data, behaviour and feedback.

Subscription as opposed to Ownership.

Customers will benefit in numerous ways. As a result of subscriptions instead of ownership. In summary, some of the fundamental benefits for customers will include;

1. All-inclusive services contract as opposed to naked exposure to unplanned for costs. Namely, for insurance & maintenance.
2.  Instant updates as opposed to waiting to take delivery of an upgraded asset.
3. A flexible and tailored service instead of purchasing an asset off the shelf fit for a specific purpose.
4. Cash payments aligned with benefits received as opposed to upfront payments. With, benefits only follow from usage over time.
5. Tailored services, based on personal feedback as opposed to purchasing an item designed for the general market.

In Conclusion.

The marketplace is transforming. Consequently, customer values will shift from ownership to relevant and personalised services. These will be delivered instantly, and at the price, they choose to pay for them.

As a result, both businesses and their customers stand to benefit from the emergence and growth of the subscription economy.

 

Understanding the Subscription Economy

Zuora.com

Subscribed-the-subscription-economy-explained

How the retail environment as we know it is transforming:

The Internet of Things. Creating a personalised service offering for all. 

The Internet of Things has the power to transform behaviour and lifestyles. Consequently creating value throughout the economy.

In retail, it drives loyalty by providing customers with one-on-one services focused on personalisation.

 Retail environment

The Internet of Things will enable sales personnel with digital mobile devices will have immediate access to a shopper’s prior history. Including, their shopping preferences, loyalty points and demographics. Therefore, allowing them to deliver a meaningful and engaging shopping experience. Moreover, customers will instantly be shown relevant products based on their purchase history and profile choices.

Communications

The Internet of things facilitates an efficient marketplace by promoting real-time, instant and relevant communications. Thereupon, resulting in cost-effective and real-time services for all users.

The Internet of Things creates a seamless and effective communication channel for retailers to target customers. Instantly, with contextualised messages wherever they are and whatever they’re doing. Especially, when a customer can be identified by location-based services within a certain distance of the retail outlet. Significantly,  creating an incentive for them to engage.

Time-specific and personalised offers can be pushed to customers driving leads in-store. For example, when retailers are less busy or during specific promotional periods. Resulting, in increased turnover for retailers and personalised and services for shoppers.

Data Analysis

The Internet of Things enhances customer loyalty by providing access to and analysis of meaningful customer and sales data. In particular, using artificial intelligence-driven by machine learning.

The richness and reliability of a customer’s sales history and personal data, combined with analytical tools provide accurate insights into consumer preferences and behaviour.

By collecting all of a customer’s personal data and demographics at the outset and after each sale. Accordingly, retailers will be better placed to analyse and understand buying habits, optimal pricing and shopper preferences resulting in;

1. The shift to a customer-centric organisation. Therefore, providing customers with instant and bespoke services. Successfully creating an improved, seamless, cost-efficient and more meaningful shopping experience.
2. Enhanced retailer engagement. Ultimately, transforming the role of a sales assistant from a cost centre into a profit centre. Accordingly, driving sales from the shop floor whilst providing personalised and value-driven customer services.
3. Creation of switching costs. The Internet of Things, when leveraged appropriately, will play a significant role in generating increased profitability at the store level. While enhancing customer relationships and customer loyalty creating switching costs.

For further insights on the Internet of Things

IoT explained

Digitization of the traditional business landscape provides NEW opportunities for businesses to leverage and at the same time benefit:

Understanding the impact of digitisation

Digitisation will have many meaningful impacts on business and consumer behaviour.

Machine Learning

For example, to utilise machine learning to create unbiased and non-emotional data points. Used, to determine appropriate customer strategy. Resulting in, increased revenue as a consequence of an upward shift in the demand curve.

Customer-centric replacing Product-centric

Chiefly, it will transform a business from being product-centric into becoming customer-centric. Therefore converting product based supply chains into services driven platforms. Accordingly, increasing operational margins as focus shifts from costly production to the provision of high margin, instant services. Specifically, tailored to user needs.

Building a Customer-Centric Culture “Harvard Bus Review 2018”

Power of the Crowd

Henceforth, through digital platforms retailers will access the diverse and free expertise of the crowd. As opposed to, having to rely on the costly and specialized expertise of employees. Significantly, making information available immediately, at little cost from a diverse pool of opt-in experts. Rather, then having to rely on technicians with niche knowledge demanding high salaries.

The Power of the Crowd (Forbes.com)

 

Network Effects

Leveraging of network effects. In order to, convert suppliers into customers and customers into suppliers thereby broadening the marketplace for all participants. Furthermore, making for the seamless exchange of feedback and information. In essence, the beginning of a vibrant self-servicing marketplace.

The Power of Network Effects Explained (Forbes.com)

 

For more insights on the subject

machine-platform-crowd-harnessing-our-digital-future

Digitization shifts management’s focus from the product to the customer: Customer centric platforms will replace product focused pipelines. The benefits of a platform strategy are shared by all users of the platform and include the following:

Impact of Digitisation as a result of Digital Platforms

Key areas where the Impact of Digitisation can be demonstrated include,

1. Marketplace effects – whereby platform economies aggregate supply and demand.
2. Dynamic pricing – platform economies generate data points resulting in dynamic pricing.
3. Network effects – platform economies deliver increased liquidity, product innovation, impact pricing strategies.
4. Self-regulation – customers and suppliers curate behaviour, service quality, reliability and trustworthiness. Consequently,  providing reassurance for all users. Uniquely, in a digital marketplace, curation is essential to optimize value for all parties.
5. Increased customer loyalty – platform economies create personalized and tailored experiences while increasing switching costs for customers.

Digitisation creates an “opensource” focus resulting in externally sourced diverse skills and expertise replacing internally focused specialized management teams resulting in the following business transformations:

Understanding the Impact of Digitisation on Management teams 

1. Decentralized user-driven marketplaces will replace complex management structures.
2. People willing to share their knowledge and expertise, the crowd. For the most part, will replace costly in-house core competencies.
3. Automated data sets analysing information via machine learning will dominate decision-making. Resulting in, an informed and analytical basis for decisions making.
4. Instantaneous real-time demand, as a result of customer engagement and feedback, will positively impact the cost of stockholding.

Digitisation impacts the product vs customer relationship in a business strategy:

Impact of Digitisation on business strategy

Product centric businesses are built around the organization of production and assembly lines. In short, critical thinking and order are key drivers of business decisions.

– whereas –

Customer-centric organizations are built around customer service and developing sustainable relationships. Accordingly, converting them into revenue.

Subscription services with add-ons and upsells are key drivers of a customer-centric business model.

Digitisation impacts management strategy, the business and its users:

In Summary the Impact of Digitisation

1. Executive management becomes customer service champions. Moreover, the customer becomes the centre of business strategy.
2. Management strategy shifts from focusing on product pipelines to becoming a user-centric platform marketplace. A platform economy is driven by network effects. Hence, all users of the platform benefit from each other’s input and feedback.
3. Buyers have the potential to become sellers, sellers are converted to customers. Equally, all users have the opportunity to participate in curating platform behaviour and services.  Significantly, user-generated feedback further improves the quality and relevance of the customer service offering via the platform.
4. Platform economics positively impact both customers and suppliers. Namely, previous once-off customers are transformed into loyal platform members benefiting from increased platform interaction.
5. Platform owners shift from earning once-off, lumpy revenues into earning reliable annuity income streams.

What is a digital platform business?

Digital Platforms Economics explained

A platform business, as opposed to a product pipeline business, is a digital environment with little or no marginal cost of access, duplication and distribution.

Platforms provide cost-effective real-time services to all users. In effect, the platform owner creates a marketplace for service providers and customers to engage in. The result, the aggregation of supply and demand.

The resulting outcome, product innovation and personalized customer services. Additionally, this generates network effects which further drive innovation and customer acquisition.

New revenue opportunities are created for both the platform owner and suppliers. Whilst, offering customers instant, customized and reasonably priced services.

Digital Platform Strategy Explained

Mckinsey-the-right-digital-platform-strategy

Key features of a digital platform economy:

Digital platforms economics, result from open-source marketplaces. As a result, contributions from a variety of outside users. Resulting,  in innovation and increased choice for all users of the platform.

Platform economics create a consumer surplus and push the demand curve outwards increasing the market opportunity.

Markedly, digital platforms equally create an environment of complementary offerings for all users. Consequently, this stimulates and drives demand. Thereupon, increased demand positively impacts supply as well as the services available to users. As a result, increasing demand for these services.

In a digital platform economy, services are free, fair and instant. Accordingly, this increases user engagement and interactions creating new revenue opportunities for all.

Digital platform economies are based on user-generated content and real-time curation thereof. Therefore, curation by users creates quality control and maintains the integrity of the marketplace for all users.

User interactions on digital platforms result in two-way reputational systems. In a word,  users rate each other creating trust and reliability amongst all platform members.

The relationship between different users in turn creates network effects which give rise to liquidity and switching costs. Ultimately, leading to enhanced customer loyalty.

Digital platform economics are driven by user personalization. On balance, this customer-centric focus creates user engagement which in turn enhances platform liquidity.

Benefits to the digital platform owner:

Digital Platforms – Opportunities for Platform Owners

Digital platform owners have both control and influence over the user experience. Thereby, positively impacting the owner’s ability to generate new revenue streams from all platform participants.

Digital platform owners, benefit from the economics of bits by offering cost-effective, high quality and instant services. Accordingly,  pushing out the demand curve and increasing the opportunity to be a price maker and therefore profitability.

Digital platform owners have access to significant Data Mining opportunities. Consequently, they use data generated by machine learning to track and analyse customer preferences. Leaving them,  well-positioned to drive effective recommendations and pricing.

The economics of digital platforms. Furthermore,  provide an environment whereby owners can foster innovation this, in turn, creates choice for users. Therefore driving new customer acquisition.

In summary, digital platform owners have the benefit of being able to leverage the diverse interests of platform users to generate new revenue opportunities.

Benefits to digital platform customers:

Digital Platform Customer Benefits

Customers accessing a digital platform experience “economics of choice” as a result of a highly customer-centric environment. As well as, experiencing “economics of price” as a result of having access to free or near-free functionality. In addition, members of a digital platform enjoy instant service delivery as a result of the digital and viral nature of the platform economy.

All users on a digital platform benefit from revenue opportunities as a result of platform engagement. Specifically, all customers benefit from self-regulation by way of managing user-generated ratings and curation.

Digital platform customers have control over the service offering owing to their ability to generate instant feedback. In order to, dictate the nature of the ultimate customer service offering.

Platform Economics explained:

In summary digital platforms provide all users with the “Economics of Choice” meaning all participants in a platform have the power to operate as buyers, sellers, customers and / or service providers. Platforms also create a centralised market environment conducive to generating “Economics of Price” whereby the middle man in a transaction is dis-intermediated allowing buyers and sellers, service providers and users to negotiate directly with one another. This significantly reduces transaction costs and results in pricing efficiencies for all participants.

All users of digital platforms benefit from the “Economics of instant” by engaging in a real-time environment for the immediate and instant transmission, sharing and usage of products and services.

Digital platforms provide diverse revenue opportunities as a result of direct and indirect transactional user engagement. Network effects between different users drive platform membership and usage, stimulate liquidity and give effect to platform diversity.

Digital platforms provide a self-regulating form of curatorship whereby users can comment on and engage with other users in a transparent and real time environment.

The Subscription Economy Explained

It’s not a secret that many businesses are gradually gravitating towards the subscription business model. Accordingly, lured by changing consumer buying habits. Whereby, users prefer the benefits of a simple, cost-effective and hassle-free experience.

Significant numbers of companies are exploring launching subscription-based services. Ultimately, the shift from a product-based to a services centric economy will transform purchasers from once-off into annuity-based services.

Subscription Services provide a range of customer benefits

Subscription economy provides customers with access to an all-inclusive, reliable and transparent service offering. Moreover, in return for a fixed monthly payment, customer’s are guaranteed ongoing use of the product or service.

For the customer who chooses “paid for usage” as opposed to outright ownership. In addition, it presents a markedly different risk profile and funding proposition. Given that, ownership comes with the hidden costs of usage. Including; maintenance, insurance and general upkeep.

An asset procured on a subscription provides instant access to the latest technology and product updates. Comparatively, when the owner of an asset needs to upgrade it involves having to sell the original, in order to, purchase an updated version. Resulting, in an increased cost of ownership, as well as, waiting times for the upgraded version.

Subscription Services are customisable as opposed to off the shelf

Tailored subscription services allow users to select products customised to their specific needs. Different from, purchasing a product fit for a specific purpose. Therefore, allowing personalisation and providing customers with the opportunity to ”get exactly what they paying for.”

An additional benefit of subscription services is structured payment plans.  Chiefly, to align customer costs with the benefits derived from usage. Henceforth, providing customers with a greater value proposition then if they paid upfront and only enjoyed benefits over the life of the asset.

In effect, the opportunity to align cash outflows with the benefits obtained from usage creates a “win-win” proposition for both the user and provider services.

How to build a Subscription Business Model

Zuora.com-building-a-subscription-business

 

 

The Subscription Economy puts the customer in control

Finally, the ongoing nature of subscription services puts the customer in control. As a result, they are in a position to provide meaningful input and feedback. Consequently, this feedback will have a positive impact on improving the offering. Accordingly, creating increased value for new users.

In comparison, when purchasing an asset, after payment and ownership is transferred the impact of customer feedback is less relevant.

For further insights on the subject, I recommend the following audiobook

Subscribed