How constraints impact revenue

Learn how value that is tied to constraints and triggers can help you increase conversion rates & revenue.

Constraints.

In life and in products, they can be great.

Have kids?

Then you know how important it is to build in some level of constraints so that your kids don't become monsters. If I let my kids do anything they want, there could be trouble. Constraints in life can be good.

Have a startup?

Constraints can quite literally be the difference between figuring out how to monetize, and wondering why you have no revenue. When used correctly, constraints will drive up your conversion rates and lead to more revenue.

I like to define constraints as the things that you’d like to do in a product but can’t do because they are not available to you when you need them. To use the product fully, you need to remove the constraint - almost always by getting out your credit card.

Examples of constraints include:

• Trying to add a new admin user to Quickbooks, but limited because you’re on the free plan

• Looking to add a new board to Miro, but can't’ because you are already at 3 boards on the free plan, and you have to upgrade to add more

• There are endless examples

Miro constraint leading to upsell pathway.

The challenge is that constraints on their own are useless. I’ve seen way too many companies try and fail at building in constraints. Often times product teams are told to increase revenue via product usage, and the path that looks easiest is to just throw up a paywall on features that people like to use.

But it’s not that simple. If you constrain too early or too deeply, you will drive people away. If you have too loose constraints, you’ll leave money on the table. I’ve found that in order for constraints to really work, you need a few things to work in parallel:

1. Enough product value had to have been created already for the user to feel the pain by not getting more of what they want or need. You can’t just let someone plod along and then hit them with a constraint. It’s likely they’ll just leave.

2. The constraint needs to be tied to an action (i.e. you can unlock something by upgrading). This cannot be vague or arbitrary - the action has to be real, the unlock needs to be a value add.

3. The constraint needs to be triggered by something - the tactical thing that produces the desire for the constraint to be lifted (i.e. I really NEED to add a new user or a 4th board…)

4. Then, you have the ability to push an upsell, upgrade, etc..

Most products have constraints that can be built in, but many operators just don’t know how to leverage the combination of enough value with a trigger that works to drive unlocking the constraint.

This requires deep work to pull off.

If you need help thinking through how to do this for your company, send me a quick note on my LinkedIn post about this topic and I’ll see if I can come up with a couple ideas for you.

Also, in case you missed my last post on building a startup growth model, here it is: