Product Revenue
What is Product Revenue?
Product revenue is the total amount of income an individual product generates. It is one indicator of product performance; however, it is not a metric of profitability by itself. Product net profitability is calculated by subtracting total product costs from total product revenue.
Understanding Product Revenue
Monitoring product revenue and sales helps you understand whether demand for a product is increasing or stagnating over time. This data helps you adjust goals accordingly during the product’s lifecycle. Keep in mind that lower demand may not imply a bad product, especially for a new product, but may be due to other factors such as low awareness or even poor product strategy.
Not all products generate revenue directly. However, they do have users they provide value for directly. For example, this could be an internal system that a delivery driver uses to help them in their job of delivering orders. This product does not generate sales, yet should help the driver in navigating their day-to-day work better while they provide delivery service to end customers. Another example might be a service that a non-profit provides for a community like a food bank or soup kitchen where food is offered to the hungry for free. They are providing value by providing a beneficial service for society.
While all products may not generate revenue directly, they need to produce valuable outcomes, and they always generate costs.
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