monetization-analysis

Monetization Analysis

Produce a structured analysis of revenue model options, pricing strategy, and unit economics projections for a product.

Revenue Model Evaluation

Evaluate which model fits the product. Score each on a 1-5 scale for fit:

Model Options

Model	Best For	Consideration
SaaS subscription	Recurring value, software tools	Predictable revenue, requires retention
Usage-based	Variable consumption, APIs	Scales with customer, harder to predict
Freemium	Large market, viral potential	Conversion rate is critical metric
Marketplace/platform fee	Two-sided markets	Need both supply and demand
One-time purchase	Standalone tools, templates	Simple but no recurring revenue
Licensing	Enterprise, white-label	Higher deal size, longer sales cycle
Hybrid	Complex value chains	Combines models (e.g., subscription + usage)

Model Scoring Criteria

Factor	Question
Value alignment	Does pricing scale with the value customers receive?
Simplicity	Can a customer understand what they'll pay in 10 seconds?
Predictability	Can you forecast revenue reliably?
Competitive fit	How do competitors charge? Would deviating confuse the market?
MVP feasibility	Can you implement this model in a 2-4 week MVP?

Pricing Research

Competitor Benchmarking

Use WebSearch to research competitor pricing:

• "{competitor}" pricing — direct pricing pages
• "{competitor}" pricing plans OR tiers — tier structure
• "{product category}" pricing comparison — aggregated comparisons
• "{competitor}" vs "{competitor}" pricing — head-to-head
• site:g2.com "{product category}" pricing — review site data

Build a competitor pricing table:

Competitor	Model	Lowest Tier	Mid Tier	Top Tier	Notes
[Name]	[Type]	$[X]/mo	$[X]/mo	$[X]/mo	[Key differentiator]

Value Metric Identification

The value metric is what you charge for. It should:

• Scale with value — customers who get more value pay more
• Be easy to measure — both you and the customer can track it
• Be predictable — customers can estimate their cost before buying
• Grow naturally — usage increases as customer succeeds

Common value metrics:

• Per user / per seat
• Per project / per workspace
• Per API call / per transaction
• Per GB / per unit of consumption
• Per feature tier (feature gating)
• Flat rate (simplest, least scalable)

Willingness to Pay Estimation

Methods to estimate WTP:

1. Competitor proxy: If competitors charge $X, market accepts ~$X
2. Value-based: Calculate customer ROI, price at 10-20% of value created
3. Cost-plus: Your cost + target margin (weak but useful as floor)
4. Van Westendorp: Survey asking "too cheap / cheap / expensive / too expensive" price points

Tier Design

Three-Tier Framework

Design 3 tiers with clear differentiation:

Aspect	Starter	Pro	Team/Enterprise
Target	Individual / tryout	Power user / SMB	Teams / larger orgs
Price anchor	Low barrier	"Most popular"	Premium
Feature gating	Core only	Full features	Full + collaboration + support
Value metric limit	Low cap	Higher cap	Unlimited or custom
Support	Self-serve	Email	Priority / dedicated

Pricing Psychology

• Anchor high: Show the expensive plan first (left-to-right or top-to-bottom)
• Highlight "popular": Visual emphasis on the middle tier drives selection
• Annual discount: Offer 15-20% off for annual billing to improve cash flow and retention
• Round numbers: $49 is better than $47.99 for B2B
• Free trial over freemium: When possible, time-limited trial converts better than permanent free tier

Unit Economics Projection

Key Metrics to Estimate

Metric	Formula	Target
ARPU	Monthly revenue / paying customers	Based on tier distribution
CAC	Marketing + sales cost / new customers	< 1/3 of LTV
LTV	ARPU x avg customer lifespan (months)	> 3x CAC
Payback period	CAC / ARPU	< 12 months
Gross margin	(Revenue - COGS) / Revenue	> 70% for software

Estimation Approach

1. ARPU estimate: Assume tier distribution (e.g., 60% Starter, 30% Pro, 10% Team) and calculate weighted average
2. CAC estimate: Based on planned acquisition channels and their typical costs
3. LTV estimate: ARPU x (1 / monthly churn rate). Use industry benchmarks for churn (5% monthly for SMB SaaS is typical)
4. Break-even: Total fixed costs / (ARPU - variable cost per customer) = customers needed

Revenue Scenarios

Model three scenarios:

Scenario	Monthly customers	ARPU	MRR	ARR
Conservative	[X]	$[X]	$[X]	$[X]
Base	[X]	$[X]	$[X]	$[X]
Optimistic	[X]	$[X]	$[X]	$[X]

Monetization Risks

Identify and assess:

Risk	Likelihood	Impact	Mitigation
Price too high (low conversion)			A/B test, validate in Stage 3b
Price too low (unsustainable)			Monitor unit economics, plan price increase
Wrong value metric			Watch usage patterns, be ready to pivot
Free alternatives emerge			Differentiate on quality/support/integration
Churn exceeds projections			Retention focus, onboarding investment

Output

Write the analysis to the product's PDE spec directory using the template at ../pde/assets/templates/monetization-analysis.md. The analysis feeds into Stage 2 (Filter criterion 5: clear monetization) and Stage 3b (pricing tier validation).