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6 Steps to Recurring Revenue Success

Why buy when we can rent? That’s what customers are asking. Do you have a good answer?

Channel Partners

July 29, 2015

2 Min Read
6 Steps to Recurring Revenue Success

By Jon Gettinger

Businesses across all industries are moving their offerings from one-time purchases to ongoing recurring revenue services in an effort to generate greater growth and long-term income streams. According to Ventana Research, the top drivers are increasing the top line (selected by 51 percent), enhancing the customer experience (also 51 percent) and increasing customer loyalty (46 percent). But only companies that do cloud right will reap these benefits. Successful recurring revenue businesses focus not just on acquiring customers, but also on growing their lifetime value with upsells and cross sells. They look at every interaction as an opportunity to retain customers and build loyalty. Recurring revenue also impacts the way the business bills and accounts for revenue.

Here are six steps to ensure a successful, long-term recurring revenue model.

1. Cultivate the long-term relationship. The biggest difference between recurring revenue and traditional transactional business models is the emphasis on customer retention. Customer lifetime value (CLV) is a critical KPI that measures the value of this retention. Keeping customers is not just about the quality of your service, but includes factors like customer support, training, brand loyalty and upselling.

2. Evaluate different monetization models. Recurring revenue is not just about yearly subscriptions. In fact, there are a wide range of monetization models, from long-term subscriptions to irregular purchases to pay per use, or some combination of the three. Determine which best fits your specific business strategy.

3. Implement rapid iteration. Your product catalog is powerful — if one offering doesn’t fare well, repackage or re-bundle new services and plans. Pricing and positioning are competitive, and offering granular, and continually updated, options to meet customers’ evolving needs spells advantage.

4. Focus on retention and upsell. Don’t disappear once the initial transaction is made and then show up a few weeks before renewal time. You may not make money until a customer’s been a customer for a year or upgrades to a new plan, but that doesn’t mean you can’t show ongoing value and appreciation for the business.

5. Offer usage-based models. Building multiple tiers and packages based on usage allows for a variety of ways to sell and generate revenue streams from one central product or service. The flexibility to quickly deliver new offerings on a pay as you go basis will boost the bottom line over time.

6. Customize the dunning experience. Most failed payments are unintentional, and these accounts can be saved. Ensure the user experience for your dunning process is smooth and encourages retention.

Jon Gettinger is the senior vice president of marketing for Aria Systems. He has more than 20 years of experience in the software industry and is a leader in software-as-a- service (SaaS), having founded one of the first SaaS businesses in the industry, a solution for testing responsiveness of Web businesses.

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