Using a Recurring Revenue Model for Customer Retention

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Recurring Revenue Management

From software to personally styled clothing to streaming video, companies of all kinds are trying their hand at selling goods and services using consumption economics or as some in the tech space call it - a recurring revenue model.

The trend is a fast-growing one. According to a recent report from McKinsey & Company, the subscription e-commerce market that is based on this revenue model has grown by more than 100 percent a year over the past five years.

The advantages for companies that succeed using this model are clear: predictable revenue streams, the potential for faster growth, and a large pool of customer preference and habit data to mine, just to name a few.

But perhaps the most strategic benefit of the recurring revenue model is the regular opportunity it offers to improve customer retention. As explored in a recent blog post, the monthly check-ins that this model offers allow companies to interact with their customers in ways that go far beyond just delivering their bills. Companies get the chance to improve customer service and the overall customer experience by offering periodic service updates and renewals, upselling to newer technology, and cross-selling complementary offerings.

This is important, because in the age of the consumption economy, the customer is in the driver’s seat. Unlike in the past, when customers bought big-ticket technology assets by paying for them upfront and sticking with the purchase for a few years, subscription customers can easily change their minds about which offering they want to use. The consumption model makes it simple for them to take their business elsewhere if something better comes along.

“Today’s customers are less focused on product features and more on how the technology will lead them to improved business outcomes,” explains Thomas Lah, executive director of Technology Services Industry Association (TSIA), in a blog post last year. “However, this means that if at any point along the customer journey the customer decides your product or service isn’t meeting their needs, the revenue will stop flowing.”

Viewing the development of the customer experience as an ongoing process, instead of a periodic but finite event, is essential to optimizing the recurring revenue model. It’s important to have a strategy for implementing a customer success program that stretches from ensuring the successful deployment or adoption of a new offering all the way through to creating opportunities for upgrades or additional purchases.

Your ability to retain customers using a recurring revenue model speaks to the value you offer them with your products or services, which keeps them coming back every month for more. You would need to consider how well your organization is set up to focus on extending the lifetime of each and every customer. Let’s take a SaaS business as an example. Your technology is fantastic, but if your users are not actively adopting or using your software, then you are at risk. By closely monitoring usage, delivering valuable support and training, and leveraging your monthly contact to create an ongoing dialogue with your customers, you will be able to influence customer retention and loyalty. But in order to achieve this, you need the right processes, resources and tools in place to ensure it is a seamless experience for everyone involved.

Read this ebook to learn more about how you can develop a customer success strategy to extend your customers’ lifetime and optimize recurring revenue for your organization.


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