Reasons why your products fail to monetize profitably

Avoid these mistakes and increase your revenue · 4.08 min

As a product builder, I build things full-time, whether it’s a venture newsletter, micro-products or coaching founders to build tech products. For fun, I build AI article tool, event app, Food app, SaaS tracker, sneaker app, using my rapid MVP technique.

This post is one of my Multi-Part Product Guide series. You may also like my top-rated guides such as—Product Monetization, Minimum Viable Market & When To Kill An App Idea.

Internet products often fail to monetize for various reasons. As a full-time product builder for almost 3 years, I've learned valuable lessons from my own failures and successes. Here are some tips I've used to monetize my products profitably:

Factor #1: Target market

You can't successfully monetize a product unless you know WHO you're solving the problem for and WHO you’re creating the solution for.

The consequences of not understanding your target market can seriously impact your revenue. For example:

• If you don't understand the unique pain points and needs of your target audience, you may not provide the right solution (or feature), or your solution may not resonate with them.

• Failing to identify the most profitable customer segments can lead to missed opportunities for revenue and a suboptimal monetization strategy.

• Misaligned go-to-market channels can hurt your chances of monetizing your product. Make sure your marketing channels align with your target customer's behavior, such as their preferred social media platforms, search keywords, brands and influencers they follow, and shopping behaviors.

Common mistakes:

🚫 Skipping market research, ignoring market trends and competitor landscape.

😬 Neglecting customer research and failing to understand their needs, pain points, and preferences. [📗 Guide: Find Out Willingness To Pay]

🙊 Avoid talking to potential customers…because “building the product is more important” or “I can always fix a bad product with brilliant marketing”.

Ask yourself:

1. How much revenue do you need to make your business profitable? Do you want to build a $100 million ARR (Annual Recurring Revenue) business or a $1 million ARR lifestyle business?

2. Is your target market large enough to generate the revenue you need?

3. Is it possible to generate enough sales from your target market to reach the estimated revenue?

4. Are people price-sensitive or willing to pay a premium for quality?

Factor #2: Value proposition

If you are building Internet products, the first thing customers see is NOT the product itself, but the words you use to describe it.

A weak value proposition can lead to confusion, lack of interest, lack of conversion or, lack of sales.

Because customers simply don’t understand the benefits of your product or why it's worth their money.

This is why you need to craft a clear value proposition: A statement that clearly communicates what your product or service offers, how it solves customer problems, and why it's better than other alternatives in the market.

Formula for value proposition:

• Product name: FitAI (I made it up LOL)

• Helps [target audience]: strength training enthusiasts

• Who are [narrow down the target audience]: who want to stay fit but struggle to find time to go to the gym

• To [help them achieve a goal]: get the benefits of a 40-minute workout in the comfort of their own home

• With [core differentiator]: our at-home smart AI gym device that offers personalized workout sessions

Common mistakes:

😱 Focusing on selling what customers want (“nice to have”) rather than what they need (“must-have”) can often lead to creating offerings that fail to generate revenue.

😹 Focusing on features instead of benefits. Here’s the truth: Customers don't buy a piece of technology or a product feature; they care if it makes their life easier.

🌎 Trying to appeal to everyone instead of narrowing down your target audience.

📝 Not iterating your value proposition over time based on customer feedback.

Ask yourself:

1. What makes my product unique and valuable? [📕Guide: Create Valuable Products That Monetize]

2. How does my product solve problems more effectively than competitors?

3. What are the core differentiators of my products?

4. How can I create a compelling value proposition?

Factor #3: Revenue model

When you're building a new product, it's crucial to choose a viable revenue model that fits your target audience.

For example, the subscription-based model has been gaining popularity in the e-commerce and Direct-to-Consumer (DTC) industry.

It allows companies to generate a recurring revenue stream by offering customers access to their products or services through a “subscription box” plan.

But it's important to note that this model isn't suitable for every product category:

• For instance, durable appliances with long lifespans may not be a good fit for subscriptions since customers prefer to buy them one time instead of receiving them every month.

• However, products that are disposable or consumable, like food and beverages, personal care items, or products that require frequent replenishment, work great with subscription models. You can even offer bundled discounts to keep customers coming back for more and staying loyal to your brand.

Common mistakes:

☀️ Monetizing too early: attempting to charge customers before the product has been properly validated, which can lead to low adoption rates and negative feedback.

🌅 Monetizing too late: waiting too long to implement a revenue model, which can lead to missed opportunities for generating revenue and difficulties in transitioning from a free model to a paid one.

🧫 Not experimenting with multiple revenue models to find the most suitable one for the product and target audience.

Ask yourself:

1. What is the cost structure of your business? What are the costs associated with running the business?

2. What revenue models are successful in your industry? (But don’t blindly copy your competitors!)

3. How much do you need to charge to cover your expenses and generate a profit?

4. Is the revenue model scalable as the company grows?

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