How To Turn Repeat Customers Into Subscribers
Many people mix up re-occurring and recurring revenue, but one is much more valuable than the other.
Re-occurring revenue comes from customers that have a re-occurring need for whatever you sell and buy from you on an unpredictable yet regular basis.
Imagine a health food store. Customers come in to replenish their supply of vitamins when they run out. The owner is never quite sure when a customer will be back, but she’s pretty sure they will return when they run low on a critical supplement.
Recurring revenue comes from sales to customers that buy from you on a predictable, automatic cadence, for example, a subscription or service contract.
Let’s take the same health food store owner. She recognizes her customer comes in every month or so to buy Vitamin C. She decides to offer a subscription for Vitamin C capsules, where she ships a new bottle to her subscribers each month automatically. The customer doesn’t need to make a dedicated trip to her store, and the owner automatically gets repeat sales.
Compared to one-off transaction revenue, both re-occurring and recurring revenue contribute positively to your company’s value, but one is much more valuable than the other.
To convert re-occurring revenue into recurring revenue:
- Find the Segment of your customers that buy on a re-occurring basis.
- Design an offer for these customers that makes it more convenient for them to buy on a subscription or service contract rather than on a transactional business model.
- Give these customers three compelling reasons and incentives to subscribe.
The vitamin store owner, should make the case that subscribing to a regular shipment of vitamins is
- more convenient for the customer because there is no need to drive to the store,
- more reliable because subscribers would not run out of supply
- more valuable because vitamin subscribers would get additional perks for subscribing
Re-occurring and recurring revenue may sound similar, but when it comes to your company’s value, recurring revenue is far better. Consider converting your re-occurring customers into subscribers, and you’ll build a more predictable—and valuable—business.