For Monetize 2015, we created this video, which provides our take on why monetization is one of the essential capabilities for driving growth for businesses in the new normal. That’s why we chose it as the name for our conference.
Two weeks later and I’m still reflecting on the key learnings for me.
Recurring Revenue and The New Normal
One thing we heard loud and clear: the recurring revenue business model has become synonymous with the new normal. Customers demand it, prospects expect it, competitors are doing it, and Wall Street is rewarding it. Success requires thinking about recurring revenue models for what they really are: the way business is getting done.
It began with Uber, Netflix, Roku, and Airbnb and many others disrupting their markets with never seen before business models. Now major brands like Adobe, Verizon, Pitney Bowes, and Audi are getting in on the action. For example, with Adobe’s launch of Creative Cloud and Audi’s recent Audi On-Demand car sharing service, both are capitalizing on their strengths in surprising new ways.
When products and services move from one-time sales transactions to customer-centric relationships, the whole world changes. Businesses need to recalculate and reorient.
Recurring revenue models only work when there is a high degree of customer retention. All of the myriad interactions – from the welcome email to the service inquiry – that make up the “customer experience” suddenly become very important.
This was the essential message from SungardAS CTO Josh Crowe. They are using Uber as their template for what they see as the fundamental touch point with their customer – the invoice.
Taking Advantage of the New Normal
Businesses that understand this are coming out on top. But there is more to it than simply plugging a functional gap.
Hearing customers stand up and say “Aria made my number this year” because it gave them the power to compete and grow their businesses in new ways, really got me thinking about monetization as a competitive advantage. So much innovation is being held back because the business simply cannot change they way they charge and collect money.
But the real question is “What does a business need to do to maximize the benefits of this market disruption?” Here are the three focus areas we proposed:
- Embrace the continuous launch. In the new normal fortunes can rise and fall in an instant. Businesses large and small are using recurring revenue to grab new markets or new market share. They are using rapid iterations of feature delivery and pricing and packaging adjustments to change the game. Will you be one of them or will be run over by one of them?
- Monetize everything. It’s not about reinventing the wheel, it’s about reinventing how you package and sell the wheel. Those in need of a single spoke may not want the entire hub, but would be willing to pay for what they intend to use. Examine every aspect of your business and what you know about your customers. Repackage or re-bundle your offerings for more options.
- Maximize lifetime value. At the end of the day, recurring revenue is rooted in your customers. To be successful, think maximizing their lifetime value versus maximizing your revenue. How can you best serve your customer to ensure they keep coming back after the initial sale? Recurring revenue businesses with a 95% retention rate is a cash and growth machine. Remember, 80% of future profit comes from 20% of your existing customers.
In five years all revenue will be recurring revenue. Understanding and taking advantage of the New Normal lays the foundation for long-term growth and paves the way for sustainable business. To get there, move beyond billing. Monetize.