8 ways to monetize your digital product
Digital products are not often created ‘just for fun’ – usually, there is a commercial motive involved, a return on the investment of the product’s research, design, development, and launch. After all, if it’s a product worth using, it brings value to its users – that value means it is reasonable to expect something in return. To achieve that “something”, you need to decide how to monetize your product. This article assumes that you have already – as part of the design and development process – researched your target market and understand your users and their pain points. The question here is, what monetization strategies can you use to realize your product’s value?
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Product monetization strategy #1: Paid apps
The simplest monetization technique is to just put a price on downloading an app. This used to be the main method of monetizing apps – you just charge a fee. The question then is, how do you bring your app to the attention of potential buyers? You can sell it via Apple’s App Store or Google’s Play Store (both of which charge a 30% fee). Or, if you have a website, you can offer it for download here, using PayPal or similar to collect payment.
The challenge, in this case, can be to interest potential buyers if your app has no track record or previous market presence. One option here is to offer a limited free trial period, allowing users to get to know the product before they have to decide whether to purchase it or not.
Product monetization strategy #2: License your product
Putting a price on your app means that once it’s paid and downloaded, the buyer can use it as much and for as long as they want. An alternative is to license your digital product, which permits usage for the period of the license. In essence, a license includes the terms under which your product can be used, setting out the user’s responsibilities and rights (usually in respect of usage), and yours (in respect of security, data, updates, etc.). Whether it is used to monetize your product, the license is important from a compliance perspective (especially about data security).
Product monetization strategy #3: Subscription fees
Instead of a purchase price, you could require users to pay a subscription fee. As long as the subscription is paid, the customer has use of the product. For information-based websites (e.g. newspapers), a common approach is to provide free access to some content with full access requiring payment of a monthly subscription (also known as the content being behind a paywall). The subscription model can be popular because it allows a multi-tier approach to service delivery, and regular payments make revenue forecasting simpler.
Product monetization strategy #4: In-app purchases
Alternatively, instead of charging for the product itself, you can embed opportunities to buy within the product. The advantage is that your app is still free to download and use (encouraging a broader user base) but at intervals, users are invited to purchase either extra features or other products.
Product monetization strategy #5: In-app advertising
Similar in benefits to in-app purchases, this option includes advertisements for other (often related) products during product use. Instead of being able to purchase on the spot, users can click through and purchase on a different site or page, returning to the original product when they’re done.
With both in-app purchases and advertising, caution is required to not reduce the quality of the user experience (UX) – few users will welcome unexpected interruptions or giant banner ads.
Then there is the question of which products to advertise. If you have a range of products (digital or otherwise) you can be sure that there is at least some connection between the app or product in use and those that are interrupting the UX. If you are advertising another business’s products or services, you need to consider what is appropriate for your users, your brand, the messaging and format the length of the advertisement, and how much control the user has (e.g. can they opt to cut the ad short after, say, 30 seconds?)
For more on this topic, check out our articles about UX/UI - learn more about the importance of your product’s user experience.
Product monetization strategy #6: Affiliate marketing
Similar to in-app advertising and purchasing, affiliate marketing involves offering opportunities within your app to buy other products; then, for each purchase, you receive a commission fee.
Again, there is the need to choose products that will not distract or be somehow incompatible with your own digital product that is being used. A similar option is to collect the contact information of interested users instead of them making a purchase there and then – the information is then passed on as marketing leads.
Product monetization strategy #7: Sponsorship
If your app or digital product is sponsored, you are effectively in an advertising or affiliate marketing relationship with a single advertiser – you have sold the exclusive rights to advertising through your product. This is more likely to be an option (i.e. more attractive to potential advertisers) if you have a large user base and can demonstrate high engagement by users with the product.
Product monetization strategy #8: Bundle your product
If you have a selection of digital products or services that are in some way related, you can sell them as a bundle. Yes, you’re asking for a fee or subscription but you are offering multiple products for that single payment. The classic example is Amazon Prime – most people might be tempted by the rapid delivery or the access to TV and movie streaming, but one payment gets you both, plus music, gaming, books, voice shopping, and more.
Never forget the user
With the above list of possible product monetization options, you may be wondering which one is best for your digital product. The answer depends – of course – on your business goals but also, especially, on your users and the product’s UX.
Will your target user audience be prepared to pay for the product? As mentioned at the start, this article assumes you’ve already gotten to know your users. For more on this topic, check out our article about the benefits of user research.
If you’re considering in-app advertising or sponsorship, you need to ensure that the monetization does not impact the user experience when using the product. Does it fit the flow of the UX? Where are the natural breaks that might be appropriate for an ad? Do your advertising partners add value for your users?
If your users are averse to paying a fee or subscription, and won’t tolerate ads or in-app purchasing, maybe a bundle is the way to go, combining with other products to enhance the perceived value to the user.
Whichever option or options you choose, the users are the primary concern because, without them, no digital product can succeed.
How to monetize a product
There is no one-size-fits-all strategy for product monetization. Not only are there multiple options, the best one (or ones) for your product must be well-received by users and fit with your overall business strategy and brand. It’s a question of alignment – with users’ needs and your values. A final recommendation: don’t leave monetization to last. If monetization is part of your product strategy, consider the options early alongside other design and development issues. That way, it won’t be an add-on, it will be a more seamless part of the product and user experience, and more likely to have the impact you’re aiming for.
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