We recently introduced our thoughts on the need to create a Chief Monetization Officer (CMzO) executive role, particularly for software companies. Two factors are at the root of our position:
- The “SaaS-ification” of software has exponentially increased the complexity involved in many essential aspects of monetization:
- Analyzing how software is sold and delivered and how customers use and derive value from it.
- Strategizing how to structure pricing, licensing and packaging for optimal performance.
- Synchronizing the people, processes and technology necessary to implement and adhere to the model.
- Shifts in investment capital practices and competitive environments have made monetization one of the most scrutinized contributors to software company performance and valuation. Both the upside of an effective monetization platform and the risk of an ineffective one have escalated.
While software executives will largely agree that those dynamics exist, most software companies continue to place responsibility for monetization under the purview of an existing department, making it the responsibility of leaders in charge of Marketing, Revenue or Finance, for example.
From our work with hundreds of B2B software companies, we believe this commingling approach to monetization makes it difficult for the company to reach its full potential. Let’s explore why.
The New Realities of Software Monetization
Monetization is a highly detailed and nuanced outgrowth of Pricing. It requires gathering insight and data from every department in the company to examine how customers use the company’s products over time. It requires breaking down all the tiny parts of the company’s offering–e.g., product features, customer training and support, technology platforms–to find the ones that drive value, then reassembling them into their most compelling forms. It requires getting corporate tools, training and incentives to align with monetization objectives and metrics. It requires educating across functions and gaining consensus and compliance around core underpinnings like consistency and market fairness.
The Importance Of A Chief Monetization Officer
There are several reasons why these requirements are best met with a dedicated Monetization team, led by a Chief Monetization Officer:
- Monetization is simply too deep and multifaceted to be adequately managed alongside other important functions. The focus necessary to investigate, design, test, train, launch, monitor, refine and expand the company’s pricing, licensing and packaging models could easily be diverted when up against other department priorities.
- Monetization is still a new discipline, with few masters. It’s hard enough to find an executive with the experience and skills necessary to manage monetization’s research, analysis and modeling demands, let alone finding one who also has the expertise needed to run the company’s Marketing, Revenue or Finance functions.
- Perhaps most importantly, Monetization is the thread that ties all functional areas of the software business together. While every area–from Marketing, Sales and Customer Support to Product Development and Finance–provides input for monetization, overall performance and company valuation depend on the company’s ability to implement monetization strategies across all functions. As conflicts develop between sound monetization strategy and more narrowly focused functional interests (e.g., around discounting, competitive responses, short-term revenue or profit objectives, product development plans, etc.), giving Monetization its own dedicated voice ensures that corporate actions are aligned.
Monetization will Continue to Evolve
These monetization challenges will only get more complicated and meaningful in the future, as SaaS customers can easily churn if they perceive the value they derive from the software no longer justifies their ongoing commitment. So, future product development must involve monetization planning: Which features will be included to existing customers? Which will be made available only at premium-levels or for additional fees? Should certain features be packaged into a separate product? Will current customers be treated the same or differently than new customers?
Which means the importance of a Chief Monetization Officer will become even more critical.
This campaign to create a Chief Monetization Officer (CMzO) is not a knock on the value of other executive positions. CROs (Chief Revenue Officers), CMOs (Chief Marketing Officers), CFOs (Chief Financial Officers) and other CXOs are obviously critical to company success. Rather, this is a recognition of the evolving nature of the software business and the inherent gaps that keep software companies from realizing their full potential.
The topic deserves a robust dialogue, so we explore it further in part 3 of this series. We’d love to hear your thoughts and experiences, so please weigh in or reach out to us directly at CMzO@softwarepricing.com.