Monetize Before Making Your Product

By Poornima Vijayashanker

This post is based on my latest book: How to Transform Your Ideas into Software Products

When I was 6 I took my first stab at being an entrepreneur. I recruited my neighbor, another 6-year-old, and convinced her that we could become millionaires before we were 18. I could tell she was one of those sensible girls who thought I was full of hot air. So to bring it down to a level that would appeal to her sensible nature, I told her not to think about the millions, but instead to think about paying for her college education.

Call me precocious, but I knew about inflation and the rising cost of higher education.

Maya agreed to join my venture, and we got started.

Like any entrepreneur, we knew that we had to come up with an idea, and a big enough one to appeal to customers.

We ruled out services like car washing and babysitting, because, well, we were only 6! People would be incredulous if we asked them to leave their precious baby or car with 6-year-olds.

Instead we decided to focus on making a product. Since we were both makers we thought about what we enjoyed making, and it turns out that we both loved eating and making popcorn balls.

The next day we started prototyping our popcorn balls. We got our families to test them out and their responses were positive. Based on their feedback we felt confident and decided that it was time to start selling these popcorn balls.

Deliberating on distribution

We brainstormed ways to sell them. We had both known that Katie down the street didn’t make much money selling her lame lemonade at a stand—there just weren’t enough people walking by who wanted to buy it. Based on Katie’s results, we knew we needed to come up with a better distribution scheme.

Unlike Katie, who expected customers to come to her, we’d take our popcorn balls directly to the buyers by going door-to-door. We knew that we had to go local before we could go global!

The next day we got started walking through our neighborhood, knocking on people’s doors, and asking them to buy our popcorn balls.

After a few hours, we were starting to get disheartened. We sold exactly ZERO popcorn balls.

I could tell Maya was getting ready to throw in the towel when she said, “I don’t want to be late for taco night at home.”

I let Maya go.

Then I looked at all the popcorn balls we had made. I decided that I didn’t want them to go to waste. So I just walked around the neighborhood giving them away for free.

I was disheartened. My dreams of becoming a millionaire by 18 and being able to pay for college didn’t seem like they’d pan out. Of course, the reality was that as a 6-year-old I lacked some much-needed entrepreneurial traits like discipline and determination.

I also had made the classic first-time entrepreneur mistake: making a product before selling it!

There is a market precendent for pre-sales

Whenever I recommend that people should monetize their product before making it, they look perplexed and bewildered, much like Maya had when I told her to join my business venture.

So then I proceed to explain to them that there are precedents for pre-paying for products. Take, for example, a book. You don’t go to the store, read it, and then say, “Oh yes I’d like to buy this.”

No.

You read the book jacket, which is just a marketing message. If you believe the message, you buy the book. And many authors do pre-orders, selling their books even before they’re released!

The same can be done for any and all other products.

But when I tell most first-time founders this, they have trouble wrapping their heads around the concept.

The reason they struggle is that they don’t feel comfortable selling vaporware (software or hardware that’s not yet available for purchase because it’s still conceptual or being built). They feel like it’s easier to show their prospective customers something tangible.

It’s not.

I showed customers my popcorn balls, but still got ZERO sales.

You don’t need to show people anything. Instead, much like a book jacket, you’ve got to get comfortable telling customers what the benefits of your imaginary product are.

How can an imaginary product have benefits?

Let’s take a simple example.

Back in 2010, I started to work on my second startup, BizeeBee, and I was pretty adamant about having customers before launch day.

I had spent several months talking to a number of prospective customers who were yoga studio owners. I listened to their problems to understand what was important to them. There were some nuances  to each studio owner’s situation, but based on their feedback, I concluded that the 2 most common issues they all faced were:

• Getting students to come back

• Getting paid on time

And while a number of products to help yoga studio owners already existed in the market, what they really wanted was something simple. They didn’t have time to waste learning a new system or training employees. They wanted a push-button experience.

Retain students and get paid on time with a tool that’s simple. These become the 3 benefits that I wanted to capture in my product.

A month before we launched I contacted a number of the prospects I had interviewed and told them we were getting ready to launch. I explained that the software product we built was going to make managing their studio a cinch. They could use it to get paid on time and get students to come back, and I told them that if they were interested they’d need to pay $27/month.

3 people took me up on my offer!

Here’s why getting people to pre-pay worked for me:

1. I had taken the time to understand what was most important to them: getting students to come back, getting paid on time, and having a simple product.

2. I only spoke about the product’s benefits in terms of what was important to them: retention, revenue, and simplicity.

3. No one received a free trial or demo, I just walked them through the experience. I sent them an email with what they would need to do to get started on launch day.

When you take the time to understand a customer’s needs and what they’d be willing to pay for, you don’t need to put a finished product in front of them. Instead you can focus on selling your product based on the benefits they are seeking.

Yes, I’ll admit there are some folks who need to play with a product before purchasing it, but those folks are NOT your early adopters! They are mainstream customers who expect to hear more than just benefits before they’ll buy your product.

Don’t fixate on the mainstream. They’ll come around once your early adopters go out and evangelize your product.

Even after I mention this, first-time founders struggle with focusing on early adopters. They worry about appealing to everyone and create broad messages thinking that if they cast a wide net someone is bound to pay them.

Wrong.

People have nuanced needs, and when you’re just getting started you cannot appeal to every one of those. Hence you focus on a target market segment, appealing just to their needs, and making sure the product meets them.

With BizeeBee, I made it clear that this product was only for independent yoga studio owners. People who owned multiple studios or franchises wouldn’t benefit from the product, because those folks wanted more, a lot more! They wanted to be able to do payroll for their staff and track the profitability of each location. It would be hard for my team of 4 to build all those features into our initial prototype.

Hence we decided to focus on just independent yoga studio owners and provided them a way to take attendance, track student memberships, and remind students to pay them back if their memberships had expired.

By making it clear who the product was for and putting the benefits in terms of what mattered to them, I attracted early adopters and monetized my product before launch day!

Now it’s your turn. If you haven’t monetized your product yet, ask yourself the following questions:

1. Am I trying to appeal to too many customer segments?

2. Am I trying to sell features instead of benefits?

3. Do I know what the common needs of a particular customer segment are?

4. Can I focus on just building for that particular customer segment first?

5. Can I craft a marketing message that conveys the benefits of my product to that particular customer segment?

6. Has that particular customer segment expressed a willingness and ability to pay for my product?

Let me know in the comments below if you think you should monetize product before launch!

Learn more about the process for designing, building, shipping, and selling software products in How to Transform Ideas into Software Products. It will give you a step-by-step process for validating your ideas and bringing them to life, plus save you the agony of having to learn it all on your own! Sign up here to receive more information and samples from the book.

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