On this week's episode of Lifestyle Business Weekly, we answer a great question from listener Paul Minors:
I'd love some help with growing product revenue. I'd love to hear your advice around the steps you would take after launching a digital product to get more revenue from it.
Note: if you haven't heard Lifestyle Business Weekly before, it's a weekly podcast and curated email that I (Corbett) created last year. It's a quick show (10-15 minute episodes) made for people who want to build businesses around their lives, not the other way around. Check out the episode below and subscribe if you like the format.
This is something we spend a lot of time thinking about ourselves at Fizzle, because we have just one product for sale. Growing our business means growing revenue from this one product.
To answer Paul, I'm going to break this down into five specific ways to increase revenue from an existing product. These are roughly in order of least to most effort on your part as the business owner.
Listen to the episode via iTunes, SoundCloud or RSS.
Or, hit play right here:
1) Raise prices
Raising prices is probably the simplest way to increase total revenue. In many cases, you can literally just increase your price point and watch your revenue increase as well.
This is because pricing is what economists call "elastic." That basically means that doubling your price won't necessarily result in losing half your customers. You will probably lose less than half, thereby increasing your total revenue. Likewise, if you cut your prices in half, you may not double your total customers.
The way demand and pricing are related will depend entirely on your specific product and situation. How much pricing power you have is something you'll need to find out for yourself by experimenting.
If you do decide to raise prices, do so based on some customer research or evidence that people might be willing to pay more on average. Don't just wing it.
And finally, if you raise prices, use the increase event itself as a reason to drive more sales leading up to the pricing change. Tell people they have until X date before prices go up. This is a great way to drive a nice bump in revenue.
2) Run a sale / special promo
At Fizzle, we just experienced our biggest revenue month ever, by a large margin.
How did we pull this off?
Simple. We ran a week-long sale on annual memberships, discounting them by around 23%. A few hundred people took advantage of the very rare chance to get a discount on our already incredibly inexpensive membership offer.
A sale can be a great way to get customers to take action now and finally get around to trying your product. Customers who are on the fence sometimes need a gentle push, and a discount can be an easy way to provide that nudge.
In Fizzle's case, we don't run sales, almost ever. This was the first time we had offered a discount to the general public since our original beta launch back in 2012. Because the event was so rare, customers took notice.
If you haven't ever offered a sale, there's a good chance a simple time-limited discount could lead to your biggest revenue month too.
Just beware that discounts and promotions can become a trap. We all know certain retailers who always seem to have a sale going on. Imagine the hassle of running all those promotions for the businesses who offer them. I know first hand from friends who work in the fast fashion business.
Constant promotions devalues your product and hinders your ability to sell on an ongoing basis. Promotions can be addictive, so be careful.
On the other hand, products many of us know and love, like Apple or Sonos rarely offer discounts, which preserves the brand and makes it unlikely we'll hold off on a purchase in favor of waiting for an elusive discount.
3) Improve conversions of existing traffic
Assuming you have a steady flow of potential customers visiting your website, you can increase revenue by converting more of those people to buyers.
How do you increase conversions?
Sometimes it's as simple as finding a more effective headline for your home page. Neil Patel shares 5 Characteristics Of High Converting Headlines over at ConversionXL that you can learn a lot from. Start there.
Headlines are always a great place to start because they're high-leverage changes. Updating your signup button color? Probably not so much.
4) Improve Customer Average Lifetime Value
Customer average lifetime value (LTV) is the amount an average customer is expected to spend with you in total.
Raising prices would increase your LTV. Offering a discount would not.
If you offer a subscription-based product like we do at Fizzle, you can increase your customer LTV (and thereby your long-term total revenue) by increasing how long a customer sticks around.
The best place to start trying to increase your customer lifetime (reducing "churn") is usually through something known as "activation" (basically getting customers to actually use your product).
Onboarding is the key to the customer activation puzzle. Check out the excellent UserOnboard teardowns from Samuel Hulick to find out how dozens of apps handle onboarding.
By the way, if your product is a one-time purchase as opposed to a subscription offering, activation still matters. By getting customers to use your product and experience the value you promised you can reduce refunds, which will increase total revenue.
Activation isn't the only way to improve customer LTV. You could also offer upgrades or add-ons, or you could split your product into multiple packages. Our friend Nathan Barry found that offering three packages was key to selling over $100k of several ebooks.
5) Attract new potential customers
Finally, we get to what most people probably think of as the primary strategy for increasing revenue: attracting more potential customers.
This strategy can certainly be effective, and it should be your main long-term approach. However, it takes much more effort to grow your audience than it does to take any of the four other steps I already mentioned. That's why I saved this for last.
You probably already know the main strategies for attracting more potential customers. The two most effective really usually come down to partnerships and content marketing.
At Fizzle, we regularly rely on both partners and content marketing. We often work with other sites and businesses in collaboration to offer Fizzle to their people, usually in exchange for paying commissions on sales. We also spend tons of time blogging at The Sparkline and podcasting on The Fizzle Show, both of which are top three sources of new customers. Partnerships as a group is the other top three source.
If you want to rely on attracting new customers to grow revenue in the short-term, focus on tapping into existing audiences. In the long-term, look to content marketing.
--
Now that you know our top five strategies for increasing revenue for an existing product, evaluate your options and think about your goals.
Are you looking for a quick but unsustainable bump in revenue? Do you care more about the long-term?
I've given you plenty to think about. Now get to work :)
As always, thanks for listening to Lifestyle Business Weekly. If you're not already signed up, get the lifestyle business weekly email here >>
Once you sign up, I'll send one email a week full of resources and articles like this one to help you grow your business and have fun along the way.
No comments:
Post a Comment