3 Ways to Diversify Product Revenue without Technical Debt

3 Ways to Diversify Product Revenue without Technical Debt

Diversifying product revenue is a valuable yet potentially overwhelming task. The process can be challenging when you’re managing the complexities of modern tech and market conditions. But what if you successfully diversified your product revenue without accruing additional technical debt – even during an unpredictable or shifting market? 

Just look at Amazon’s decision to diversify its portfolio into food and entertainment – it was a strategic move that paid off, boosting net sales by 38% YOY in Q1 of 2021. And it’s not the first time Amazon has used product diversification to achieve this level of growth. 

Since starting as a small online book retailer in 1995, revenue diversification (including the creation of Amazon Web Services – AWS) – has contributed to Amazon’s success in becoming the world’s top tech giant, with net sales of $469.8 billion in FY21 and a market cap of $1.1 trillion in FY22. 

Diversification has long been a significant factor in Amazon’s strategy, and its tactics can be applied to virtually any business model. Here, we’re sharing how you can implement similar techniques to boost revenue and cement your leadership position. 

Why Businesses Should Consider Diversifying Their Product Revenue 

The business landscape constantly changes, and companies must be agile to survive. Product revenue diversification promotes financial stability and drives growth, and the outcome is well worth the effort.

Minimize Dependency for Financial Stability

Think of diversification as insurance against vulnerability to market fluctuations. Minimizing reliance on a single source of income protects you from economic downturns or sudden, unexpected changes in customer behavior. 

Pivot with Market Trends for a Competitive Advantage

Beyond providing a safety net, revenue diversification helps you stay agile and competitive. Quickly pivoting in response to current trends, market dynamics, and changing customer needs or preferences helps one gain an edge over competitors struggling with adaptation.

Foster Growth with Expansion Opportunities

Diversifying product revenue leads to growth and expansion opportunities. Innovative pricing models and catering to new customer segments can create multiple revenue streams that provide avenues to expand into new markets and segments.

3 Ways to Diversity Your Product Revenue

Many strategies can diversify product revenue without increasing technical debt – here are the top three:

1. Turn Free High-Value Features into Paid Offerings

Transitioning high-value product features from free to paid is an excellent strategy.  For example, this may involve feature restrictions, allowing customers to test out specific features while locking the more important ones. Choose features that significantly impact UX and align with your customer’s core needs. When implementing a conversion strategy, it is important to give your customers plenty of notice and allow them time to give a response. It is also key to ensure them it will help provide an even better customer experience. 

However, you should view this change as more than just a means of generating income. Leverage your new offerings as opportunities to upsell, cross-sell, and introduce users to other products or services you offer.  

Integrating domains into your platform as a paid feature is just one example of how to do this. Offering your customers the ability to register a domain name is considered a high-value feature because it allows them to seamlessly and intuitively secure a domain name all within your platform. By doing, you can enhance the overall customer experience while driving revenue – it’s a win-win.

Ways to Turn Free Features into Paid Offerings

Research shows an intrinsic link between price sensitivity and profitability. When it comes to pricing, you can’t afford not to get it right. Anticipating how people might respond to a change in the cost of your products or services is essential. Fortunately, several strategies can help you turn free offerings into paid ones.

• Use feedback and analytics: Careful review of customer feedback and product usage analytics will offer data and insight into the features your customers most value – these are worth monetizing. 
• Develop value props and tiered pricing: Developing an attractive tiered pricing structure is key. Pricing should be based on access levels – think basic, premium, and enterprise tiers.
• Communicate with customers: Ensure existing customers understand why they should now pay for something previously free. Establishing this understanding will require tactical and strategic messaging – clearly and succinctly highlighting added benefits can ease resistance.
• Offer trial periods and incentives: Offering trial periods can incentivize adoption while reassuring customers about product quality. Some research suggests free trials contribute to up to 66% of B2B conversions.
• Don’t fully eliminate the freemium: Don’t deter potential new users altogether, keep some valuable features in a freemium model too. A combination of free and paid tools provides balance by ensuring you have attractive entry-level access and more advanced paid options.
• Foster long-term relationships: Implementing retention strategies will encourage ongoing subscriptions to foster long-term relationships critical to sustainable growth. For example, SaaS platforms might integrate domain resale into their offering. Bundling domains with other high-value features can convert freemium customers into paying ones and capture more revenue.

2. Diversify Product Positioning  

Diversifying product positioning creates opportunities to reach new customer segments who find value in different aspects of your offerings. Data and user feedback might reveal hidden or emerging secondary audiences who’ll benefit from your product.

How to Diversify Product Positioning

Diversifying product positioning can establish new revenue streams and broaden your customer base. It can showcase how product versatility can address user needs. The following tips offer ways to revamp and diversify product positioning.

• Leverage customer testimonials and case studies: Customer testimonials and case studies offer real-world examples of success and demonstrate product benefits that can entice prospects. It goes beyond just marketing – by sharing narratives, you’ll encourage an environment that inspires customers to explore alternative uses for your offerings – potentially discovering even more value than initially expected.
  • For example, Beacons.ai was able to uplevel its positioning through a domain resale offer: “Integrating custom domains helped us enhance our product and evolve our business from a simple web tool to a comprehensive business platform for creators.”
• Encourage customers to explore new use cases: Community forums or social media groups can allow customers to share experiences with your products. Forums can uncover hidden potentials within existing product features. It can also offer insight into areas that might benefit from improvement or expansion, guiding future potential diversification efforts.
• Gather feedback from core audiences: Focus on sourcing feedback via surveys or direct interactions to ensure you understand needs and pain points. Assess data and implement necessary changes so your product offerings can stay relevant.

3: Offer Subscriptions

In a constantly transforming digital landscape, subscription models have emerged as another revenue diversification strategy. 

To enter the subscription market, you must first identify which high-value features can be transformed and packaged into compelling subscription offerings.

How to Create a Subscription Service

A successful subscription service relies on more than just packaging existing products or services. You’ll need to deliver continuous value, which can take shape in various forms, like exclusive content, premium feature access, or personalized experiences tailored toward individual needs. For example:

• An online educational platform might make advanced courses available exclusively through subscriptions. 
• An innovative project management tool may reserve certain game-changing functionalities for subscribed users. 
• Domain resale can add recurring revenue via subscription – it’s a low-risk way to create a new, regular revenue stream that auto-renews year after year. 

Create a lucrative subscription service by:

• Developing diverse subscription tiers: Different tiers within a subscription service should cater to various customer segments, offering a range of access levels and benefits that align with a pricing structure. Reviewing data from existing customers will help you identify the biggest needs at each price point. Then you can create incentives – like exclusive tutorials or guides highlighting high-value features within higher-priced tiers – to entice customers to upgrade.
• Promoting long-term value over single purchases: Emphasize the long-term value of a subscription vs. a single purchase. Create marketing campaigns featuring case studies demonstrating how subscribers benefit more than one-time buyers.
• Leveraging domain resale for recurring revenue: Create a  low-risk, recurring revenue stream by integrating domain resale into your platform. By consistently providing valuable resources to customers, you encourage auto-renewals from subscriptions. 

Name.com’s Flexible Reseller Solution  

Domain reselling is a robust opportunity that can diversify product revenue. Name.com, an Identity Digital company, offers an innovative Reseller Solution which allows SaaS platforms to integrate domain reselling services on a website, app, or platform for a seamless user experience. 

By using Reseller Solutions, platforms can remove the middleman, keep users in the purchase flow, and reduce customer product setup issues. 

Domain reselling improves UX while helping you attract new customers and establish additional recurring revenue streams

Get Started 

Revenue diversification lets you tap into emerging trends and capitalize on new revenue opportunities to stay ahead of the competition. And it doesn’t require a willingness to take on additional debt, especially when you utilize domain reselling as a strategy. 

Visit Name.com to explore how domain reselling can help you diversify product revenue without incurring additional technical debt. 

Sources:

Amazon, Amazon.com Announces First Quarter Results, https://ir.aboutamazon.com/news-release/news-release-details/2021/Amazon.com-Announces-First-Quarter-Results/default.aspx

Cascade Strategy Factory Case Study. How Amazon Conquered the E-Commerce and Tech Industries Worldwide. https://www.cascade.app/studies/amazon-strategy-study

Journal of International Business and Economics, A Critical Review of Consumers’ Sensitivity to Price: Managerial and Theoretical Issues https://jibe-net.com/journals/jibe/Vol_2_No_2_June_2014/1.pdf 

Klipfolio research, Free Trial Conversion Rate https://www.klipfolio.com/resources/kpi-examples/saas/trial-conversion-rate 

Beacons Case Study. How Beacons Seamlessly Integrated Domains with Identity Digital and Name.com to Drive Value. https://www.identity.digital/resources/reseller-beacons-integrated-domains-to-drive-value