Dear Strategy:
“How do you make a business case for a non-revenue generating product?”
First, it’s important to understand that a business case is, at its core, a financial justification to spend some amount of money in return for some financial benefit. Therefore, we can make the assumption that, even though a product may not produce any direct revenue by itself, it will almost always produce some financial benefit – or at least some tangible return on investment – if it is attached to a business case.
There are some common situations that may be connected with non-revenue generating products. For example, a product manager may be responsible for developing controls that are associated with industrial equipment. If the controls are not sold separately, they may be considered to be non-revenue generating by themselves. However, they would clearly be sold as an integral part of the revenue-generating equipment and, therefore, would need to be justified accordingly. You might also have a product or service that you are providing free of charge so that you can get pull-through sales of an associated product or service. An example of this might be providing a free device with the purchase of a subscription of some type. In this case, the device by itself would be non-revenue generating, although it would certainly be connected to a service that would provide some payback on investment.
So, the answer to the question is to justify any investment in non-revenue generating products based on the revenue-generating products or services with which they are associated. This may seem challenging if you are a product manager that is responsible only for the non-revenue generating part of the investment (which is where I suspect this question originates). However, in this situation, it is imperative that product managers work together on their collective business cases, particularly if the products that they manage are expected to work together in the marketplace. Simply put, if product managers of related products aren’t working together at the business case stage, chances are there are going to be much bigger problems to deal with when you are trying to bring a common user experience to your valued customers.
Listen to the podcast episode
Dear Strategy: Episode 002
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Bob Caporale is the author of Creative Strategy Generation and the host of the Dear Strategy podcast. You can learn more about his work by visiting bobcaporale.com.
