Revenue Stream and Purchasing Hammers

Revenue streams are often not as simple as we would like. The problem can usually be tied to a misunderstanding about the underlying customer need.

Start by completing the sentence: “Customers are willing to pay for…”

Why isn't this as simple as it seems? Consider the example of hanging a picture frame on the wall of your home. Your plan is to use a nail to hang the picture frame. You discover you cannot push the nail into the wall with your fingers. So you go out and buy… a £10 hammer. Apparently you needed a hammer. After all, you bought one!

Except that, in fact, you did not need a hammer. A hammer is an oddly shaped lump of steel (and usually some wood or plastic). And, as it turns out, it can be used to bang a nail into a wall. But you did not need to buy an oddly shaped lump of steel.

What you wanted was an outcome or a service: the nail pushed into the wall.

If I had a magic wand that could push nails into walls, and I offered to help you for a few pence, you might have taken me up on it rather than bought the hammer for £10. Or I might have charged you £1 to borrow the hammer for an afternoon. You could have cheerfully hammered as many nails as you wanted into your walls, returned the hammer at the end, and come away £9 less poor.

Obviously, the benefit of buying the hammer is that you can use it again. On the other hand, if you’ve ever used any other hard blunt object to get a nail into a wall, you know the hammer is often optional.

It is important to be as clear as possible about what your customers actually want.