The evolution of revenue: from intermittent to streaming

Revenue interruptus

When selling products or solutions a salesman has one shot at getting big revenue from a customer. One shot at getting a commission.
Then the salesman has to wait until the expected life-time comes to an end before having a second chance to make any revenue. The risk of not getting the second sale is real.
The exceptions to this case are customers that have a fast expanding or growing business making them buy more appliances, devices or software. Only then there is more commission for the salesman.
Still it is revenue interruptus.

Bridging: maintenance and upgrades

In order to bridge the intermittent sales over the life-time span of the product the maintenance concept was introduced.
By selling the fear of not getting the service required in time, maintenance contracts were presented as the solution for business or production continuity. Reducing the perceived risk for the customer, while generating more revenue for the vendor and commissions for the salesman.

Clever businessmen went even further by introducing upgrades: especially in the software business. As a company you shouldn’t run behind, but keep up-to-date with the ever evolving technology. The more upgrades the more revenue.
In some cases upgrade contracts were sold in combination with maintenance contracts.

Avoiding the risk at the decision point: streaming revenue

Still the big lump sum in revenue is when a new appliance, device or software gets bought. However there is a risk involved at the decision point: the risk of the customer deciding to buy from a competitor. The more the market matures, the more the customers can switch between competitors.
As with any business the goal is to make profit at the least risk for both vendor and customer.

Newspapers have understood this a long time ago: instead of selling one newspaper at a time, subscriptions were introduced in order to smooth the printing numbers and avoid risks.
Other businesses have adopted subscriptions too.

As software and hardware as services are moving into the cloud space: the number of appliances, devices and software are no longer the unit of measurement for the revenue.
Time and the number of users have become the units of measurement for these investment goods too.

As time is a continuum, the revenue becomes also a continuous stream: subscription.

Benefits of subscription

Due to the ongoing service process there is no decision point at the end of the life-span of an appliance, device or software as the invoices have a steady flow (every month).
The advantage an benefit is that there is no catalyst in the process that induces a review or a decision as the service just continuous.
Additionally the resistance to change will keep the invoice flow streaming over a long time – if the supplier doesn’t screw up.

Additionally subscriptions are paid in advance of the supply of the service, whereas devices, appliances and software will bring revenue after delivery. Prepayment is always beneficial as the main risk of the vendor gets eliminated: getting paid.

The income has changed from an intermittent process to a steady stream of income for both the company and the salesman. Decreasing the risk for both.

Can your business become subscription based?
What are the technology hurdles?
What are the business hurdles?

More from LEADS Explorer

• How to catch the lost leads of your leaking funnel
• What’s the purpose of your website ?
• Social is the new SEO thanks to the democracy of the Internet

LEADS Explorer Recommends

• Making The Most Of Your Twitter Profile
• Top 10 Ways To Market On The Web
• The Direct Connection to Stability

Ask LEADS Explorer To Recommend Your Posts