Through that relationship and catalyst you create a virtuous cycle of more touchpoints and more data for you to learn about your customer and how they interact with the product, sparking a deeper and deeper relationship.ġ. Put another way, your activation energy to get a customer to give you money is supremely catalyzed by the recurring revenue model. If someone is automatically paying you each month, consistently logging in to your product, and frequently interacting with your brand, then there shouldn't be an excuse for not winning and keeping this customer for a significant amount of time. While you can have a relationship in a one-time purchase scenario, the relationship isn't baked directly in the product. I can't stress the relationship aspect enough. If you're able to get into that particular account and essentially upsell through added value (either through more usage of your product, add-ons, etc.) you can not only recover your customer acquisition cost (CAC) quicker, but you can maximize profits, as well. The secret (and beauty) isn't in the recurring piece necessarily, but in the relationship building, which is accounted for through good ol' expansionary revenue. Now, you may have higher costs upfront (traditionally at least), but the accumulated revenue very quickly covers those costs and then starts to exceed those costs within a reasonable amount of time. In a one-time payment model, you get results like the below, where you make a profit, but in order to make more money on a customer, you have to sell them another item.Ĭontrast this relationship with Monthly Recurring Revenue (MRR). While you may have to pay a larger portion upfront to acquire a customer, the beauty of the recurring revenue world is that these customers are the gifts that keep on giving. It may seem obvious, but let's look at the true power of recurring revenue.
First though - why is the subscription world so important
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