Best Practices for Building Recurring Sales Revenue
Recurring sales revenue is a hot topic among executives in every industry, and creating these opportunities starts with strong sales leadership.
June 15, 2017
Smart business leaders know that today’s best business models are built around recurring revenue. This type of revenue is considered to be highly reliable and more stable than other types of income. Your Netflix subscription is an example of recurring revenue. Those dog treats you auto-order on a monthly basis from Amazon? That’s recurring revenue, too.
Understandably, business leaders are eager to create recurring revenue opportunities wherever possible. But don’t be fooled into thinking this is something your sales team members can build. Successful recurring revenues are driven from the top down, resulting from strategic initiatives launched by sales leaders and executive teams.
Recurring revenue opportunities may already exist within your organization. If you’re a software organization, you could consider swapping out one-time licensing fees for monthly subscriptions to your software-as-a-service. Even if you’re selling products, you could consider a subscription model that automatically delivers items to your customers on a regular basis: Many companies already use this model to generate monthly sales for items ranging from clothing to food.
If such opportunities can’t be created through your existing products or services, you’ll have to come up with a way to generate this revenue opportunity through a future product or service. Depending on your current sales practices, this model could be easier to implement with a new product first—if it works, you can extend this approach to your entire product line, similar to how Microsoft switched its Office suite of software from a one-time licensing model to an annual subscription-based service.
For most companies, recurring revenue strategies will require the adoption of new technologies. Most brands will need to install an integrated solution that manages sales, order processing, and billing all through a single solution. This integration of processes will require collaboration between sales, IT, and the company’s CFO to ensure all sides of the service are effectively managed.
Pricing decisions will be key to the success of your recurring revenue model. You will have to choose between offering a flat-fee subscription and pricing according to usage. While a company like Netflix charges the same amount to consumers regardless of how much they use the video platform, B2B and other companies find it important to base charges on the size of the client and how much the system will be used.
Both flat-fee and tiered pricing are common pricing models, but each company must decide which makes the most sense for their services. Look at your competitors to see how they’ve approached pricing and set a strategy that will work for you and your customers.
A new model for selling to customers and generating revenue requires that sales team members be kept in the loop. Your salespeople need to know how recurring revenue models work, and how they should adjust their selling approach.
A good training program will be necessary, especially as you navigate the transition to a recurring revenue model. This training should emphasize the importance of customer retention: Churn rate is a critical metric when evaluating the stability and success of recurring revenue models. Sales teams will naturally place a greater priority on retaining existing clients fi the reward system encourages it, while still managing their efforts to reach new customers.
With today’s business landscape seeming to embrace subscription selling models, recurring revenue streams are sought out by almost every kind of company. Even when it doesn’t seem like a natural fit, it’s worth considering how the pursuit of such a model might spark innovation that builds a brighter future for your company.
Learn more about the keys to successful selling strategy by downloading our free eBook, Crossing the Chasm: How to Capitalize on the Social Selling Trend.