I admit we’ve been talking about money quite a bit in our last few blogs. And for a good reason! Funding is one of the five key elements to consider when you’re taking a business beyond the idea. In our previous posts, we talked about crowdfunding as a superb way to fund your project or even attract investors with the help of a public audience. But what about revenue streams for invention makers?
Revenue Streams are one of the nine components of the Business Model Canvas that helps inventors manage and structure a streamlined business plan. If you’ve been following our other blogs about the BMC, you probably pieced together that each component is related to one another. Revenue Streams for invention makers are no different.
We’ve learned that individual customers can be grouped together into Customer Segments that represent your general target audience. Customer segments tend to value different things because of their differing demographics, behaviors, and other characteristics. As a result, your marketing and communications to these different segments must be based on what each of your segments values the most. These communications are called Value Propositions. Each proposition is designed to convince a segment to purchase your product. In order to communicate these propositions effectively, you need to ensure that you’re using the appropriate Channels such as your social media accounts. As you communicate with your segments, you’ll need to establish trust with them by building short-term or long-term Customer Relationships.
Revenue Streams are the ways your business makes money. It’s the fruit of all the labor from all the steps we talked about above. Indeed, if you’ve successfully completed the steps above and convinced your Customer Segment that your product provides value to them, then your next question is how much is that value worth.
Monetarily that is.
Additionally, you’ll also want to think about how your customer will pay for your product. Not just talking about Apple Pay or Paypal here. Specifically, is there a specific purchasing model you want to approach? For example, you could utilize a subscription plan to help retain existing customers like Dollar Shave Club. You’ll also want to consider the percentage that the specific Revenue Stream contributes to your overall revenue.
Types of Revenue Streams
Below are several types of revenue streams to consider:
- Product Sale: This is straightforward. You’re selling the product to consumer from a mortar and brick store, online, or other channels.
- Subscriptions: We mentioned the Dollar Shave Club above. It’s a great way to generate continuous revenue and keep your customers locked in and safe from competitors… as long as you’re providing a superior customer experience of course.
- Usage Fee: Think of your phone plan. The more data you want per month, the more you have to pay.
- Lease/Rental: Speaking of phone plans, Rogers, a telecommunications company in Canada, has a program called Upfront Edge. It’s really just a fancy way of saying that they’ll let customers rent a phone to help lower the cost of their phone bill month-to-month.
- Licensing: One of the most popular revenue streams for invention makers is for them to license their product. Easier said than done though. Before you can license your product or push for a brand partnership, you need to prove that your product has traction to lower the risk to potential investors and buyers. A great example is our client Moonlite, pictured above. In 2017, Spin Master announced a global licensing partnership with Moonlite and you can find their products on the shelves of big-box stores such as Walmart, Mastermind Toys, Indigo, and Best Buy.
About: MAKO Design + Invent is the original firm providing world-class consumer product development services tailored to startups, small manufacturers, and inventors. Simply put, we are the leading one-stop-shop for developing your physical product from idea to store shelves, all in a high-quality, cost-effective, and timely manner. We operate as one powerhouse 30-person product design team spread across 4 offices to serve you (Austin, Miami, San Francisco, & Toronto). We have full-stack in-house industrial design, mechanical engineering, electrical engineering, patent referral, prototyping, and manufacturing services. To assist our startup and inventor clients, in addition to above, we help with business strategy, product strategy, marketing, and sales/distribution for all consumer product categories. Also, our founder Kevin Mako hosts The Product Startup Podcast, the industry's leading hardware podcast. Check it out for tips, interviews, and best practices for hardware startups, inventors, and product developers. Click HERE to learn more about MAKO Design + Invent!