Image provided by Shutterstock

I have often discussed the impact of revenue models on the customer experience. Some revenue models make the customer experience better; some make it worse. Revenue models have one of three impacts on the customer experience (and subsequently customer loyalty): they can hinder the experience, not impact it, or enhance it. In a tribute to our agrarian roots, I will refer to these impacts at Slash & Burn, Harvest and Fertilize, respectively.

Slash & Burn refers to monetization strategies that cause customers to defect. Customers are essentially cut-down and sold off. They are monetized, but lost in the process.

Harvest refers to monetization strategies that don’t impact the customer experience and ultimately do not affect usage levels. These strategies monetize customers but like agriculture they leave the customer’s roots in fertile ground to be monetized again in the future.

Fertilize refers to monetization strategies that enhance the customer experience, increasing the rate at which customers grow in value or in number.

A given revenue model may have a different impact on the customer experience in different contexts. Take advertising for example. Pop-ups drive consumers away from websites, banner ads have little impact as they are ignored and Google’s paid search results enhance the experience – they are the preferred search result roughly 10% of the time.

Furthermore, the impact a revenue model has on the customer experience may sit on a spectrum. For example, eBay’s listing fees may fall in the harvest category at their current levels, but if raised significantly may become characterized as slash & burn.

Since a company may have multiple revenue models, they may have some strategies that fertilize and others that harvest or slash & burn. You may be wondering why a company would ever want to employ a slash & burn strategy, but in some cases this makes a lot of sense. As my friend Kartik Kumaramangalam pointed out, as a customer segment becomes unprofitable, a company may want to drive them away (and make some money in the process).

The impact of your revenue model on the customer experience is of critical importance not only to investors, but also to the viability of your business, as it impacts your company’s ability to both build and monetize its customer base.