Why the Recurrence Economy Came to Stay

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If you lived on planet Earth in the last 10 years, surely he has come across and even got used to the service subscription model – or even products – where you pay a recurring basis for access.

In a flash, we can easily enumerate various services or you consume or have heard. Want to see one? Netflix, Spotify, RD Station, Cable TV, marketing, beverages (wine, beer, coffee) … The list is long.

In this new economy of recurring payments , or economy of recurrence, the most successful brands focus on building value relationships with their customers to keep them for a long period of time.

Software companies were the pioneers in this new wave of the recurring pattern. It is noteworthy that this model is much older – newspapers and magazines have been around for decades operating with signatures; cable TV as well. If you have more than 30 years, should remember the Circle of the Book, which was very successful with signature books in Brazil.

With the emergence of cloud computing, today virtually all software is sold as a subscription (Software as a Service or SaaS) and not as it was then, when programs were sold in boxes and needed to be installed on the computer.

Salesforce, one of the pioneers of this movement, never sold a license from your CRM – from the foundation, has always worked in the signature format. Another giant of the market, Adobe does not sell more licenses of its famous graphic editing software like Photoshop. Now it’s all signature. Even the Shutterstock image bank no longer sells single images. Want access? You have to sign. A few weeks ago, the Uber launched in the United States, a subscription for unlimited races – the Uber Plus .

Ever stopped to think of the tremendous transformation that was / is being stop having things to have access to them?

Why signatures business different?

Numerous markets work with recurrence, such as Software as a Service (SaaS), digital platforms, club subscriptions, service companies, managers of buildings and condominiums, gyms, courses, among others.

In this model, there are two sales, so to speak, that need to be implemented: 1) To win – good old sale; and 2) Retain – focus on maximizing the lifetime, thus increasing the profit.

One of the main differences between transactional and recurring business is the model of financial management and the monitoring indicators and metrics. Instead of selling a product once, what happens is the sale of a signature, thus changing virtually all key metrics and analysis.

Loyalty is key to growth

In this economy, companies need to understand that customer satisfaction comes first. The challenge is to prove useful and interesting for long enough so that there is profit to the company in the relationship. In other words, the financial value left by the client needs to be greater than the cost done to earn it. More than that, never the phrase “win-win” has been as important as now.

For the company, the benefits of a business based on signatures are clear: predictable revenues, reduce customer acquisition cost, stable cash flow. Besides, of course, the proximity to the customer and ability to sell other items or increase the ticket over time.

Acquiring customers is such a costly process that usually takes months up to that amount back, and in some cases, years for this client pass to profitability.

So if your company can not keep the customer fidelizado for a minimum time, no use fighting this problem by bringing in new customers. Have you ever heard the “leaky bucket” expression? The more you fill, will continue leaking.

Given this importance, companies working with subscriptions usually invest enough in your Customer Success departments (Customer Success). Moreover, they are responsible for bringing customer demands and ideas for business improvement.

On the other hand, if a customer is unhappy, you will cancel, carrying costs invested to earn it. This creates a dynamic management different from a traditional business in its essence.

Besides not being “only” the sale of a recurring service, the customer sees the contracted solution (whatever it is, software for the delivery of weekly clean clothes in your home) really as a service – that is, it must be constantly pleased to continue paying.

If you are attending the Summit RD 2016, be sure to stop at the stand of Superlógica and pick up a special magazine about the recurrence economy that we produce for the event.

 

This post was written by Carlos Eduardo Moura, chief growth officer of Superlógica .