Recurring Revenue: The Holy Grail of Modern Business

In the old days repeat customers, and new customers, kept the business alive. Especially retail and  business to business (B2B) sales. Their were limited means to attract new customers: advertising, advertised store sales, and, if lucky, word of mouth. Which, before the Internet, meant "fad." there wasn't much thought given to capturing customer personal information, since scattershot newspaper, magazine and TV, and radio advertising, was about it. Everyone knows that direct mail campaigns, if successful, will generate a one percent (1%) response rate - but not even one guaranteed sale. Coupons were and still are found in the weekend papers.

It costs much more money to capture a new customer than to keep an existing customer. And you can see that from all the large budgets companies have for advertising. A good share of their profits is mostly wasted on blanket advertising vs targeted advertising. Direct mail and hand-holding by the sales rep with a few annual phone calls, was all that was necessary in the past to maintain the same customer year over year. 

Today, it seems to me, all advertising is of only two kinds: special sale price ads or discounts, and branding ads with no specific pricing given, or they're combined. That is loyalty advertising. Promoting the brand name and the qualities the company wants people to remember: the product works, and the company is stable and solid. Every company will and does say "Customer Satisfaction is Our Number One Priority." And unfortunately, until we need something else from them, like a refund, we don't find out they're lying, or, as in most cases, haven't told us the full truth. "The small print" in other words. Yet sometimes customer's outrageous demands should be ignored. But when the company is always a poor responder, or doesn't provide multiple feedback and contact mechanisms, then the best thing to do is go to small claims court and get your money back (but no damages). In Mercer County where I live, that means claims under $3,000. I had to appear their once for a $75 doctor's bill I disputed in the early '80s - I paid it off for $50.

And today sales are all about establishing personal relationships. Companies want three things from you on the Internet: Name, email and mobile phone number. And there's tens of thousands of "free" sites, free trials, free gifts, "no obligation" company websites, and blogsites to prove it.  They want you to subscribe to their regular newsletter or "sales updates," or "third party offers." And all these free outlets, even free community newspapers, generate most of their income from ads they show you, whether fixed price or by the click. This is called, in part, 'The Subscription Model,' and increasingly companies and websites are cherging for their subscriptions, either monthly or annually. 
  Recurring Revenue.

In the 'late 70's workin' for the State of NJ, we paid big bucks for mainframe software from companies like ADR, IBM, Computer Associates, SAS and others. We paid a one-time fee for a "perpetual license' - we owned it, yet also paid annual maintenance for updates and their tech services. "Perpetual" became "99-year," but new versions had to purchased again, so ultimately, they became annual licenses to use the software, with an annual fee subscription (like Microsoft) for updates and tech support seperately. Recurring revenue coming from both angles, the best of all possible scenarios. 

This is the new mantra for all sales. Rent, lease etc. What's in a name? What can I do to generate recurring revenue from the same customer?

After all, its much, much cheaper for any kind of company to retain customers than it is to obtain new buyers.

Caveat Emptor

by Rodney Richards 2014.
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Surviving Bipolar Disorder in the modern age . . . a journey of Hope for the afflicted.
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