Maximizing Growth and Monetization: The Relationship between Core Actions and Business Models

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Glasp

Sep 07, 20234 min read

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Maximizing Growth and Monetization: The Relationship between Core Actions and Business Models

Introduction:

In the dynamic world of technology and startups, achieving sustainable growth and monetization is a constant challenge. Two key factors that play a crucial role in this pursuit are the core actions of a product and the business models adopted by companies. This article aims to explore the relationship between these two elements and how they contribute to the success of a product or platform.

Understanding Core Actions:

At the heart of every successful product lies a core action, which defines its essence and functionality. For example, pinning is the core action of Pinterest, while tweeting is the core action of Twitter. These actions are the building blocks that shape the user experience and drive engagement. However, simply focusing on increasing the total number of users without ensuring their completion of the core action is akin to empty calories in terms of growth. To sustain momentum, it is essential to prioritize the growth of users who actively engage with the core action.

The Importance of Engagement Hierarchy:

Engagement hierarchy refers to the various actions and interactions that stem from the core action. For instance, on Twitter, users engage by following others, liking tweets, and replying to them. This hierarchy is crucial because it fosters a sense of community and encourages users to continue completing the core action. Without a growing number of users actively participating in the engagement hierarchy, a product's momentum will eventually dwindle.

Sequencing Business Models:

When it comes to business models, there is no one-size-fits-all approach. As companies grow, they often find the need to sequence to new or additional models over time. In the context of marketplaces, the primary value proposition is selling incremental demand to customers. However, the sophistication of value propositions offered to suppliers increases as we move from left to right on the business model spectrum.

Starting with a SaaS-like model, where the focus is on solving important customer problems, businesses typically begin by addressing payment-related issues. As they progress towards becoming marketplaces, the value proposition shifts towards offering leads or connections to suppliers. Eventually, the emphasis on leads is replaced by liquidity, which requires a stronger focus on matching and ensuring the marketplace effectively attracts demand.

The Role of Payments:

Payments play a crucial role in the evolution of business models. They not only facilitate transactions but also enable companies to enforce policies that build trust within the marketplace. For companies aspiring to be SaaS or light marketplaces, investing in their own payment infrastructure may not be necessary. However, if they plan to transition towards a managed marketplace model, retaining payment infrastructure becomes vital.

Brand Perception and Consumer Trust:

Businesses that provide software to other businesses have no direct relationship with the end consumer. This lack of branding to consumers can create confusion and impact trust. On the other hand, SaaS-like networks have a relationship with consumers, but they do not consider them as their customers. This discrepancy can lead to consumer confusion, as they may not understand why the level of support varies based on the supplier they choose.

Actionable Advice:

  • 1. Prioritize the growth of users actively completing the core action: Instead of solely focusing on increasing the total number of users, invest in strategies that encourage active engagement with the core action. This will ensure sustainable growth and user retention.
  • 2. Continuously evaluate and adapt your business model: As your company grows, regularly assess the effectiveness of your business model and be open to sequencing to new or additional models that align with your goals. This flexibility will allow you to evolve and stay competitive in a rapidly changing market.
  • 3. Invest in building trust and enhancing the user experience: Payments and policies play a crucial role in building trust within a marketplace. Consider the impact on user experience and brand perception when making decisions about payments and support for consumers. Strive to create a seamless and trustworthy environment for both suppliers and consumers.

Conclusion:

Maximizing growth and monetization requires a holistic approach that considers both the core actions of a product and the business models adopted. By prioritizing active engagement with the core action and carefully sequencing business models, companies can create sustainable growth and build a trusted marketplace. Additionally, investing in payments and enhancing the user experience can further solidify the success of a product or platform.

Resource:

  1. "Engagement Hierarchy: Core Actions | by Sarah Tavel | Medium", https://sarahtavel.medium.com/engagement-hierarchy-core-actions-dd4f72042100 (Glasp)
  2. "Sequencing Business Models: The Types of Marketplaces", https://www.giladhorev.com/posts/sequencing-business-models-the-types-of-marketplaces (Glasp)

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