Three Essential Models For Recurring Revenue
Research and development has shown that recurring revenue tends to come in three different, basic flavors. The following article discusses these things and gives tons of great tips for recurring revenue.
Subscription
First we have subscription. This of course means that your company is receiving a set payment for your service for a certain period of time, whether that be per year, month or day.
Usage
Second is usage. This is when a company charges per unit of service or per use. Last is subscription plus usage. This is just like it sounds: it combines a set subscription for the service with overage that is billed as add on charges.
Recurring Revenue
In the process of recurring revenue, you will want to be sure that you make all those models we just discussed as unique as possible. When picking the correct revenue model, businesses need to always align with what works best for their customers.
Advantages
There is a usage model versus a subscription model in this process. The advantages to the usage model are as follows: A foot in the door strategy, reduces barriers to adoption, incremental increase in revenue and scales revenue to the cost of service for the sellers.
Buyers using the usage model gain the following advantages: try before you buy, reduces barrier to buy, pay only for what is used and scales cost.
With the subscription model, the advantages are: generates revenue from automatic withdrawals, collects customer information, promotes customer information and generates predictable, continuous revenue. For the buyers: buy a plan that fits, spreads cost over time and predictable cost over their subscription term.
The subscription plus usage model also has its advantages. They charge a subscription fee for a service plus any overage is billed as extra charges. The advantages for buyers: flexibility to change whenever needed, eliminates having to buy bigger subscriptions and allows extra usage. For the sellers: monetize added services or features, recoup higher expenses and earn extra revenue from heavy users.
When you are enabling recurring revenue in an enterprise, you should keep in mind the following. The buyer should always seek success and a solution that supports. This involves many things. The following are just a few of them.
Speed to market, or rapid deployment for the newer market expansion. Security and state of the art security standers. Deployment options such as traditional SaaS, full appliance and a dedicated cloud. Global currencies and language. Legacy system integration that involves CRM, ERP and service delivery.
Also there is scalability as your transactions grow into multi-millions. Discounts and promotions are important to cross sell and upset anytime. Native channel management is also essential with no workarounds. Experimenting and testing involving new billing methods, bundles, pricing and promotions is essential as well as multiple payment types in a single interface.
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