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6 Great Models To Attract Recurring Revenues

By Business Management Sales Strategy No Comments

Too many entrepreneurs think long and hard about finding the simplest ways to generate money through their product or service. But what they often fail to realise is that the way in which they package their solution will ultimately determine how sticky, profitable and attractive their product/service is to the customer.

And one of the smartest ways to package your product more effectively is through the pricing and revenue model that you choose to offer.

That being said, here are a few of the top revenue models that could transform your business into a gold mine.

Why Your Choice of Revenue Models Is So Important 

A revenue model is the approach your business takes to earn revenues. After establishing your value proposition and the set price(s) of your product or service, the next step is to figure out how your client or customer is going to pay for it.

That’s why having a good revenue model ensures that your business is able to make long-term projections based on current and future profit potential. This will aid you in extracting the best possible returns for your company, while retaining clients through the use of subscriptions, contracts and the sunk cost fallacy.

Sunk cost what?

The sunk cost fallacy (or sunk cost bias) refers to the justification we give ourselves when buying an expensive dinner, finishing a movie that we don’t necessarily enjoy, or remaining a loyal customer to a brand that we’ve already been with for years (even if there are better options out there).

Putting money, energy or time into something means that we inherently develop a bias towards it and are willing to ignore any pitfalls or failures that could motivate us to change our minds.

While it might sometimes be unfortunate for us as consumers, clients or customers, it certainly works in the favour of any business owner. Conversion rates can be increased, contractual obligation can maintain profits, upselling can be amplified, and client retention can be improved by simply being aware of this cognitive bias.

So choosing the ideal revenue model for your company will enable more consistent profits and a far more loyal customer base.

And the great part is that there are a number of promising options to choose from.

As a business coach that cares so much about your success, I’ve taken the time to sift through some of the best models out there and rank them from the least beneficial to the most.

Let’s check them out:

The Top 6 Revenue Models

1. Consumables:

These are your typical consumables (whether a product or service) that generally get purchased once, twice or three times a month or even every few months.

Think of products like coffee, milk and bread, or services like electricity, gardening or cleaning; these ‘consumables’ work well once you’ve established customer loyalty, which will ensure that you’re bringing in a recurring revenue.

2. Sunk-Money Consumables:

By making use of the sunk cost fallacy, this model is based on offering a product or service that requires an additional item or clause in order for that product or service to  operate or function effectively.

Basically, you offer a base product/service that’s quite affordable (a Gillette razor handle, gaming console, or a dating site) and then provide additional items or functions that the base product needs for it to be of any use (Gillette razor blades, games, or in-app currency for extra purchases).

With this type of model, you ensure recurring revenue based on customers’ reluctance to give up on something that they’ve already invested in. You wouldn’t buy that gaming console without feeling the need to buy games for it; or sign-up for a dating service and be limited to one message per day, when you can pay to receive more messages.

3. Renewable Subscriptions:

One of the most common and effective recurring revenue models would be through the use of renewable subscriptions. By incurring a monthly fee (a subscription), you ensure that the client or customer is bringing in revenue on a monthly basis and has the opportunity to renew their subscription at the end of a certain period.

This model is usually a win-win, as the customer perceivably pays less to own a product or use a service, while the business owner has a more stable and predictable source of revenues (especially when compared to consumables).

A great example could be a cell phone contract or streaming platform like Netflix.

4. Sunk-Money Renewable Subscriptions:

This model has the customer invest in a base product or service that has additional premium features that are offered on a subscription basis.

By taking renewable subscriptions and adding an element of sunk-costing to it, you guarantee more recurring revenue options. When you purchase a device (e.g. an Apple TV) or a service platform (e.g. a Bloomberg terminal), you’ve already sunk money into it, so you’re more likely to purchase exclusive additions for it, such as an Apple One subscription for the TV or a business publication subscription for the Bloomberg terminal.

It takes advantage of the sunk-cost bias and blends it with renewable subscriptions.

5. Automatic-Renewal Subscriptions:

By taking renewals into your own hands and making the process automatic, you allow for a much better recurring revenue.

Instead of letting the customer renew their subscription after a period of time (say, a year), you automatically renew it until they choose to end it. This way, customers are more likely to stay, as they don’t bother looking at competitive prices and you make the renewal process easier for them.

Think about gym memberships or insurance firms that keep renewing your subscription until you’ve made the decision to terminate the agreement.

6. Contracts:

Long-term contracts are highly beneficial for maintaining a recurring revenue that can’t be challenged or disputed. It ensures an ethical agreement between both parties that a certain amount will be paid within a particular period of time in exchange for goods or services.

This model is a great choice, especially if you’re able to get customers to come on board for a long period of time. If you’re planning to sell your business, then ensuring that a survival clause is present will help keep customers from leaving after a change of ownership takes place.

*Bonus Model: “Rundles” 

This new approach coined by NYU professor, Scott Galloway, takes a recurring revenue model like renewable subscriptions and blends it together with bundling.

Bundling basically entails putting multiple services or products together and selling them at a ‘better price’. This extends to products/services that might not be very popular and putting them together with more favourable ones, then selling them as a package.

With “rundling”, you take those two concepts and form an approach that has seen huge returns. I’m talking billions of dollars in revenues and millions of customers migrating to platforms that offer recurring revenue bundles or “rundles”.

A great example of this is the way in which Apple has offered services like iCloud and Apple Care, then bundled them with entertainment services (Apple Entertainment and Music) under one affordable subscription model.

Companies like Adobe and Walmart are also jumping on this lucrative bandwagon to bring in the big bucks. It’s most certainly one of the best recurring revenue models taking over many industries and I’d highly recommend looking into it.

If you’re looking at your product or service and thinking, “how do I apply one of these models to best suit my business?”, then I’ll let you in on a little secret:

Taking me on as a business coach means that I can help you identify exactly what will work best for you and your company.

It takes DICE (determination, interest, compassion and experience) to move a company forward, both on a micro- and macro-level.

And I’ve got all the DICE you need!

So do yourself a huge favour and start communicating with me as soon as you’re ready for a better future:

+2783 253 3339

brent@spillly.com

small business consultant cape town

It’s Time To T.E.C.H. (Teach Each Customer How)

By Business Coaching Entrepreneur Sales No Comments

So your business provides a great product or service, you have clients that appreciate what you do for them and business is going great, but there’s a certain issue that keeps coming up: a lack of understanding as to what you actually do.

Different industries require different processes and the more technical the service is, the harder it becomes for the client or customer to understand.

So in order for you to get better results, it’s essential that you teach or explain to your customers how and why you do certain things for the service to work effectively.small business consultant cape town

That’s why I’ve come up with the acronym TECH, to help remind you that teaching them how your service operates can be helpful in more ways than one.

Teach Them How

A lot of the conversations with business owners have revealed to me a recurring frustration that they deal with. I often hear, “most clients don’t understand the technical side of the work or service that we provide for them,” and it often becomes an issue when doing the job.

Some spaces that require technical knowledge, such as software development, engineering, etc. come to find that the client doesn’t always understand the work that needs to be done or the processes that go into providing the service.

Most clients end up seeing the output, the end result or the reason for doing the job in the first place.

Many of these clients often don’t understand why certain things can’t be tweaked or changed to suit their needs in an immediate manner, simply because they don’t understand what happens in the background.

That’s why it comes down to you, as the business owner, to TECH.

You need to have the ability to clarify and simplify your service into an easily digestible explanation that helps to paint a picture of your processes, procedures and ultimately, the work that you do for the client.

I’m not saying that you should jump the gun and give away your IP, but by making it clear that you have to go through certain steps in order to achieve your end result, you’re allowing for the customer to understand why you do the things you do and that it takes time and an iterative process to give them what they want.

By doing this, you deal with less confusion from the client and they won’t be as demanding, which allows you to do your job more effectively and without any added pressure or frustration.

You need to show or explain to them that your job or service doesn’t just happen overnight, as you have to first lay a foundation, build the walls, place the roof and still test everything to ensure there are no issues, bugs or kinks that need work.

If your client can comprehend what you do in an untechnical manner, then you’re provided with more time, freedom and flexibility. This will also allow for less complicated expectations, as they know that your process takes time, because of x, y and z.

Teaching Each Customer How is also quite easy, as there are a few different options to pick from: you can explain it to them face-to-face, through documentation, a video that you create, or even via email, text or a phone call.

Your goal should be to give them as much clarity and transparency as possible, so that trust and understanding is formed.

Also, don’t forget just how important word-of-mouth can be. By painting them a clear picture of how your business and service operates, you allow for them to explain to other potential clients how you do the work and how open you are to include them in the process.

Try not to be esoteric in your approach, as giving people clarity will result in them giving you their trust.

My role as a business coach will see that you understand exactly how your business should operate for it to be effective, remarkable and in a constant state of growth.

I’ll teach you how to TECH and show you exactly how I approach business owners and leaders; what routes to take when the road is foggy, when to lay down your anchor and realign your crew, and how to implement the right strategies when the wrong competition comes along.

Let me teach you how:

+2783 253 3339

brent@spillly.com

 

What Is Strategic Account Management and Why You Should Use It

By Business Coaching Marketing Sales Strategy No Comments

As a business coach, I’ve come to find that business owners will often overlook the advantages of client retention and tend to be rather shy in giving the right amount of focus, love and attention to both their new and existing clients.

And although it might seem like a heinous crime and a blatantly obvious area to focus on, you’ll be surprised at how many businesses don’t put the customer at the center of their attention.

That’s why making use of a strategic account management (SAM) plan allows for the development of an in-depth strategy that puts the customer in first place and draws out their needs so that you’re able to provide more solutions and retain them for the long haul.

Let’s look at how it works, why it’s necessary and how to differentiate it from the traditional sales approach.

What Is SAM?

Simply put, strategic account management focuses on building healthy and fruitful relationships with all of your clients or customers – especially the important and high-value ones.

It makes use of in-depth research and strategic planning to identify new problems for you to solve with the goal and purpose of enhancing the customer experience, strengthening loyalty and paving the way for better returns.

It’s almost like finding ways to invest in your clients to get better profits and secure recurring revenues.

Using a SAM plan comes with some pretty big benefits, too: it builds and strengthens customer loyalty, it stimulates and motivates new growth, and improves profitability.

Setting up this sort of plan usually involves every department within your business, as it should be a strategy that everybody is aware of and actively participating in. This way, everybody contributes to a system that seeks to improve the interactions, experience and relationships with existing clients.

How Does It Differ From Sales?

There are a few key differentiators that separate SAM from sales.

The easiest way to look at it is that sales primarily focuses on seeking and capturing opportunities, while SAM focuses on providing consistent value and satisfaction to clients that result in more returns – usually being implemented after the sales cycle.

Sales makes use of small and dedicated teams that use short-term strategies and planning to achieve results. This is quite different to SAM, which functions across the entire organisation and acts in an intimate manner that has far more involvement with the client.

In other words, sales is for drawing in and getting more clients; strategic account management is for retaining and getting more out of clients post-sales.

SAM is seated in between both sales and operations in that it uses more complex, long-term strategies to both add and extract value from clients. Clients are also generally more open and receptive to strategic account managers as they’re viewed as partners, where sales teams have a relationship with clients exclusively based on the exchange of goods/services.

The adage, “It’s cheaper to keep your clients than find new ones”, basically sums up and differentiates the two from one another; retaining clients through enhanced satisfaction, better service, improved relations and attention to detail is far more beneficial than the costs, maintenance and unpredictable nature of sales.

What Is The Purpose of A SAM Plan? 

If a SAM plan is implemented correctly, then there are certain key benefits and results that can be used to measure its success.

By using a SAM plan in the correct way, you’re able to identify new opportunities in your existing client base, allowing for you to upsell far more efficiently as you cater to new problems that they might be facing.

It also gives you far more intimate access to your clients in terms of influence, as you understand their needs and desires on a much deeper level – this also allows for more innovation with your clients to improve on new and existing services.

With this influence and access to your clients, you’re able to keep your competition at a distance, as a sense of loyalty is fostered between your company and the client.

How To Get That SAM Plan Started? 

Firstly, you need to identify your key clients and create an offer that they can’t refuse – one that is unique to them and that other clients don’t get unless they’ve been ‘upgraded’.

You then sit those clients down individually and determine what the perfect system looks like from their perspective. This will give you more insight into what they desire most and will help you figure out the best way to deliver on their expectations without annoying them.

Bear in mind that you ideally want to focus on anywhere between 5 to 25 key client accounts when you engage in this strategy, so you’re not overwhelmed by too many.

Strategic account management usually follows a 10-stage plan when it’s implemented correctly:

1) Develop The Customer Profile

At this stage you determine what the client/customer looks like, what they want, what they do, their goals and the products/services that they use.

2) Analyse Relationships

Determining how the relationship came to be and what influences your relationship with the client is the next crucial step. You look at their attitude towards you, their concerns and expectations, the frequency and methods of contact, and a SWOT analysis of them.

3) Identify Strategic Requirements

The third stage has you looking at specific requirements for the strategy to be implemented effectively. Looking at the history of sales, any issues that have been expressed, what it would take to impress the client, as well as the current and future needs of each department should all be measured and evaluated.

4) Analyze New Opportunities

With the mounting information that you’re gathering on your client(s) and the business as a whole, you can begin to target and determine any new opportunities that might benefit you.

Figuring out ways to leverage your resources to find new opportunities, identifying what obstacles need to be overcome, discovering whether there are unique offerings that your business can offer, and correcting mistakes that haven’t been attended to is your goal.

5) Map the Decision Process

At this point, you need to plan out and explain to the client your decision-making process. Here, you determine and explain which factors and people will influence the decisions, who the key decision makers are, explain the external pressures that exist, and the level of influence each decision-maker has.

6) Analyze Competitors

Gauging how good or bad the competition is with the client can provide very helpful insight. During this stage, you have the client rank you against other competition in terms of speed, innovation, cost, quality, service, etc.

Together with the client, determine the benefits of buying from you over the competition, who their preferred choice is and why, and use a SWOT analysis of the competition from the client’s perspective.

7) Establish Objectives

Looking at goals and objectives that can be measured will help in setting out deadlines and key changes that need to occur for the plan to take effect. Look at your expected sales and profits from each client, map out the objectives that need to be completed in the next 3 months, and determine what relationships you want with your clients.

8) Develop Account Strategy

Working on a strategy that focuses on each client account will be your next step. Here, you figure out how to successfully present your USP, determine the success factors for each account and how you aim to implement these factors, look at how you’re going to provide better value than your competition, and how to motivate the client to purchase more.

9) Coordinate Action Plans

In the penultimate stage, you look at the best ways to implement the necessary actions that need to be taken. Figure out who will be responsible for taking action, how you will accomplish these goals, the order and process that needs to be taken, which methods to use for measuring success, and what resources/people you need for the strategy.

10) Manage Account Relationships

Your final stage would be focused on the management, maintenance and measurement of those relationships that you develop with your key clients. You need to look at more initiatives that you can take to improve relationships, identify which clients give you the greatest return on your efforts, look at how you’re going to extract feedback and improve performance, and how often you measure client satisfaction.

Get A SAM Plan Going 

Remember that a SAM plan must be both measurable and iterative in its implementation. Look at it more of a long-term process as opposed to a short-term solution.

Try not to make the mistake of putting your best sales staff in the position of a strategic account manager, as not all people are comfortable with the change in roles and responsibilities. It might also result in losing some of your best sales staff.

It might seem like an intricate and long-winded process, but I assure you, it’s worth it.

And instead of looking at changing your business to embrace these new roles and this entire process, think about outsourcing the job to someone that has experience and practical knowledge in this field.

That someone could be me.

I’ll help you set up and manage a SAM plan with ease and comfort; other than all of the advice, skills and insight that I bring to the table as a business coach, I’m more than capable of providing you with a plan that will have your best clients fall in love with you.

I’m so good at it, you’ll probably fall in love with me.

So get that SAM plan going and bring me on board.

+2783 253 3339

brent@spillly.com

 

 

Bullwhipping The Sales Machine Out Of You!

By Business Coaching Entrepreneur Sales No Comments

Thinking back to some old-school (and brilliant) pop culture, Indiana Jones definitely comes to mind. Such a legendary character that brought true action and adventure into our hearts that satiated our imaginations with all the right choices. Ah, the nostalgia.

One of my favourite trilogies of all time (of course, they had to butcher it and turn it into a pentalogy, with a fifth being introduced in 2022), I was hooked like a salmon to a treble hook and was in total awe of his ability to use the bullwhip like a proper Spanish Vaquero.

Using that bullwhip effectively is no easy task and understanding how it works will add a bit of bulk to the analogy I’ll be providing for you today.

My Whip Is Longer Than Your Whip 

In those years, when cowboys mattered, the size of the bullwhip determined the strength and ability of those capable of wielding such a responsibility. The bigger the whip, the stronger you were; not to be mistaken with small-dick syndrome and the overcompensation that comes with having the most expensive, phallic-shaped car possible.

By using it as an analogy for sales and referrals, you need to be aware of what it does and how it works.

Being quite a difficult process to get started, there needs to be a lot of work and strength put into initiating the circular motion that will gradually expand in circumference to eventually send out the tip as far as possible. This is done in order to create a loud crack through a small sonic boom made by breaking the sound barrier.

So, how does this translate to sales and referrals?

Obviously, in order to get new clients, you need to get out there and do some heavy lifting of your own, pushing down on your sales team and using the right marketing tools, while setting aside your pride and asking for business.

Like the bullwhip, getting it going can be difficult to do, but once there’s momentum built-up – it becomes a lot easier to manifest your intended outcome. It takes a lot of strength and effort to go out and land your initial clients and deliver value and a quality solution to them; but once those clients are involved in the process of buying on a regular basis, they will start referring you to others with comfort and confidence.

Similar to the cone that a bullwhip forms, which gets wider and wider as you spin it; so do your clients continue to expand until they reach a tipping-point, where referrals start happening.

At that point, you don’t have to put as much effort into sales and marketing, but you just have to maintain the quality of work that you’ve been producing.

You need to be aware that in order to become a referral-based business, you must look at it as a long-term goal, because in the short-term phase of your growth – you need to be far more aggressive and proactive and go out there to do your marketing.

Pace Yourself And Crack The Speed Of Sound

 In sales, the pace in which your sales leads grow is directly related to the effort that you put in at the beginning of the process.

As soon as you start selling and landing new work, the sooner referrals will pour in from those clients and you’ll build a portfolio of work that will fetch positive PR that can be used as content for your marketing strategy.

In your business, you act as the wrist that will provide motion to the bullwhip; speaking to as many relevant people as possible, advocating your business and driving awareness to your service and USP.

The faster you whip those sales, the larger the sales will be and the easier it becomes to maintain those clients and the referrals that will come with them.

Now, before I whip you, get going and drive those numbers up.

Get those referrals flowing to you like a well-irrigated rice farm.

And be sure to include me in your ass-whipping journey; I’ll provide you with a bigger, stronger bullwhip, one that won’t just break the sound-barrier, but shatter it.

Get in touch for a lunch, a chat or to see who might even have the bigger whip:

+2783 253 3339

brent@spillly.com