Really touched by my boy today. I have much to learn from him.
Me: "Your Mom is a good woman. I haven't given her much in life. I haven't given her any big things."
#2 Son: "It's okay. Mom hasn't given you anything. Except for her love..."
Me: "Then your Mom has given us everything."
A few minutes later:
#2 Son: "Dad, it's okay not to have big things. Big things are not the most important things. You can't buy the most important things...like love, family, and health."
We have all heard about the razor company giving away the razor so that they can make real money from the replacement razor blades. This is a basic primer on understanding where the revenue stream is.
You need to think beyond the initial sale and look at the revenue you get from a customer during his/her entire product usage life cycle (from initial purchase to replacement). Look a the maintenance, training, and ancillary (e.g., accessories) purchases. Also consider whether this customer is a high profile account that influences other purchasers.
One of the most brilliant examples of this "customer alignment" is Amazon. Amazon does not try to make an obscene profit from its Kindle e-readers and tablets (the profit margin is most likely very small). However, that initial purchase has drawn the user into its ecosystem where the user continues to buy e-books, games, and streaming media. To top it all off, Amazon recognized that the Kindle has an additional continuous revenue stream – the advertisers whose ads appear on their discounted versions of their tablets! Simply brilliant.
So think beyond the initial purchase. Focus on how the user will use your product and his/her needs during that time. Grow and build your ecosystem to accommodate that use and your revenue will grow correspondingly.
Frank Lio is a Product Manager, Strategist, and Change Agent in the Hi-Tech industry. His growing track record of successes include creating 3 winning software products, leading nationwide seminars, and turning around a failing business unit. He is currently serving a dual role as Product Manager and Business Team Support Manager at Instron ITW.
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