What Is Recurring Revenue

Recurring revenue is what most businesses rely upon for their income. Most companies that earn substantial profits do so through repeated transactions or experiences. For example, you probably spend more than $1000 per month at your favorite coffee shop, grocery store, restaurant, or shopping mall. These places gain your business because they consistently offer good service and quality products.

By having these recurring experiences, they earn your loyalty and repeat business. Plus, it is easier to remain loyal when something free makes waiting in line worthwhile!

Recurrent revenues are just like this. The product or service being offered creates an experience that is worth its cost. It is built into the price, making it seem very reasonable.

Many successful businesses have adopted the marketing strategy of creating experiences for their customers. They brag about how much money they make every time you visit, making it seem obvious why you should come back.

Businesses depend heavily on the occurrence of these experiences for success. However, not all industries can afford to invest in these opportunities. This article will talk about some types of services and technologies that can help you get out of debt while also earning extra cash.

Topic and bullet point diversity

This article will discuss two different types of services that use micro-experiences to create macro effects. If you’re looking to reduce credit card debt, then you are already ahead of the game (but still need to choose which cards to close!).

Examples of recurring revenue

Running a business doesn’t always make money, but that isn’t to say you can’t reap the benefits of having it. A lot of successful businesses have long periods of time where they don’t see much profit, if any at all. This is because they only need enough income for their services to keep running themselves.

Services like Netflix or Amazon are good examples of this. Neither company makes a huge amount of money per se, but they earn enough to pay their bills and retain loyal customers.

For entrepreneurs who want to achieve success, knowing how to run a business with recurring revenues is important. It’s not necessarily easy to come by, but there are ways to create them in your own business model!

In this article, we will discuss what constitutes as recurrent revenue, look at some example companies that use this concept, and take a look at two different strategies to help you get started.

Relationship between customer loyalty and recurring revenue

what is recurring revenue

As we have seen, one of the key differences between internal and external forces for business growth is whether your company relies heavily on customers that come and go or if you rely more on repeat buyers.

With internal forces, such as marketing to loyal clients or offering rewards to frequent shoppers, this does not change. It is also important to note that although it is great to have occasional large spenders, true long term success comes from the steady stream of small purchases over time.

For example, Amazon has always been known for its low price points and vast selection, but what most people don’t know is that the all-important second factor behind their success in building an online shopping destination site is their repeated purchase behavior.

By creating incentives for repeat buying, they were able to draw out and keep the regular buyer who needed something from time to time. This type of person will continue to buy things because they need them, not because of cost.

External forces, like having offices in several cities where staff can easily get work done and reward programs for those that shop at a specific retailer, are also examples of drawing in repeat buyers.

These types of individuals will make the effort to return and be reacquainted with your brand because they want what you offer and feel some level of appreciation from being given special perks.

Monthly subscriptions

what is recurring revenue

Another way to have recurring revenue is with a monthly subscription. This is when you pay for an extended service or product on a regular basis. Technology companies use this model very frequently, with users paying per month to use their software or services.

Software companies use this method of charging more often than not! That is why it is important to have a steady flow of income, since there is no one week’s break before people are charged again.

This type of business model is perfect if you make your goods or services accessible to many people. Technology companies that have incredible success using this model are Netflix, Amazon, and YouTube.

These three companies all offer products that most people want to try at least once. They also keep offering them to us because they know we will come back for more every month!

Another perk of having a monthly subscription is that you get extra value each time you log in. You do not need to purchase the expensive “enterprise” version of the software to access some features, which can be limiting at times.

Many technology companies will only release limited feature versions of their software as a premium package. These packages cost much more, making the normal software cheaper by comparison.

Subscriptions with a trial period

what is recurring revenue

Another form of recurring revenue is subscriptions or monthly or yearly memberships. With this type of business model, your company provides its customers a service or product for a set amount each month or year. This can be anything from an online magazine site to go through their various levels or features, music streaming services that have free trials, or an annual membership to a fitness studio.

This is very common in the technology industry due to the cost of products. Technology companies use it as they are trying to build their brand, so they offer people who want to try out their software a one time price or subscription fee.

This also helps them retain more users since people will spend money to keep using the app or program. The users feel like they got their money’s worth because you get access to the app for a certain length of time.

For example, if someone wants to test out the new Instagram feature, they pay $10 a month instead of buying the full version which costs $30 per person. This is similar to what many sites do now where you can watch a movie free during its first week before having to buy a paid account.

Subscriptions with a trial period and refund

what is recurring revenue

One of the most common types of recurring revenue is subscriptions. A subscription model can be monthly, yearly, or even lifetime (no end date). This article will discuss what it means to be a subscription business, how to determine if your business qualifies as a subscription business, and some examples of different types of subscriptions.

Subscription businesses offer users a product or service for a set price each time you visit their site or use their tool. This could be access to an online magazine, movie tickets, software, fitness classes, and more! It does not have to be completely digital products and services either – many people purchase annual memberships to go out every year or get refreshments at the local coffee shop once a month.

The term “subscriber” isn't used very often these days, but it's still relevant. Just because someone is paying you for a membership doesn't make them a subscriber. Only when they stop paying do you gain exposure to that word.

Subscriptions with a credit card

what is recurring revenue

A recurring revenue model is one that keeps bringing in income consistently, without you having to work hard to get it. This is an excellent way to run your business because you are not dependent upon there being an audience or people visiting the site to make money.

In fact, you can go several weeks or months without anyone buying anything and it will not affect how much money you make.

The other major benefit of this type of business model is lower start-up costs. Because you do not have to invest large sums of money in advertising, marketing materials, or facilities, you can spend less money getting the word out about your service or product.

Furthermore, instead of investing in equipment such as printers, laminators, and mimeograph machines, you do not have to worry about running out of ink, electricity, or paper!

These things all cost money, which makes the concept of keeping up morale very expensive at times. However, when they don’t need to be paid for, it becomes more affordable.

Subscriptions through advertising

what is recurring revenue

Another way to have recurring revenue is via subscriptions. A subscription business model can be categorized as an ongoing service or product that customers pay for repeatedly over time.

A good example of this is Netflix, where you pay monthly access to streaming movies and TV shows. This is more common than it was years ago, when people would purchase DVDs at brick-and-mortar stores who then shipped them off to be installed.

Now anyone with internet access has almost constant access to entertainment content. There are many other examples of this type of business model: Amazon Prime, Spotify Premium, Apple Music, etc.

The important thing to remember about the term “subscription” is that there is no one defined end. You will not get your money back if you stop paying your subscription fee! That being said, most companies offer some sort of early termination privilege, which is usually within a specified amount of time.

However, these privileges are very limited and difficult to find, so make sure to do your research before signing up.

Product subscription

what is recurring revenue

With a recurring revenue model, your business does not need to depend on one product or source of income for survival. This is an important distinction as we have seen before with something like free web hosting that can be terminated at any time.

With a subscriptions model, your company gets paid over and over again for using their products or services. This happens in two ways: through monthly bills and re-engagement discounts.

Monthly billing usually occurs when you use a service for a certain amount each month. For example, someone who uses your site’s software on a daily basis will pay a monthly fee every month no matter how much they use the tool. This way, they do not run out of access easily!

A re-engagement discount refers to having members get special offers or rewards for returning to the service. This is similar to what companies do with frequent fliers — extra perks for being loyal.

The difference is that these incentives are always available, even if you are not actually using the service at the moment.

About The Author

Tiara Ogabang
Tiara Joan Ogabang is a talented content writer and marketing expert, currently working for the innovative company juice.ai. With a passion for writing and a keen eye for detail, Tiara has quickly become an integral part of the team, helping to drive engagement and build brand awareness through her creative and engaging content.
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