Upgrade Repeat Customers into Repeat Business Subscribers

Upgrade Repeat Customers into Repeat Business Subscribers

Amazon Prime is arguably one of the most successful examples of a company transforming its repeat customers into repeat business subscribers on the planet.

Not only did the average customer life time value (LTV) more than double, the the success drove tens of thousands of non Amazon customers to subscribe and engage with the company off the bat as repeat subscribers.

As Amazon knew (and clearly illustrated) repeat business drives the value of a company, but not all repeat business is the same.

In fact, you can categorize these sales into one of two buckets

  1. Reoccurring revenue comes from customers who purchase from you sporadically. They’re satisfied with what you offer, and they buy regularly yet not according to a specific timeline. They are also under no obligation to make the repeat purchase.
  2. Recurring revenue is predictable, and you get it from customers who buy on a cadence. Usually in the form of subscription or contract revenue, the main difference is your recurring revenue comes in on a regular rhythm. Often customers here are under some sort of contract and so must either opt out or in other cases are limited in their ability to avoid a scheduled repurchase.

Recurring revenue is more valuable than reoccurring sales because of its predictability. Therefore, it’s worth considering how to turn repeat customers into repeat business subscribers

HP Instant Ink

For an example of an organization that turned reoccurring sales into recurring revenue, let’s look at the “HP Instant Ink” program which has launched in the US, Europe, Australia and elsewhere (not in UAE yet). HP had been in the business of selling printers for decades before launching their toner replacement subscription. 

HP would sell you a printer in the old days and hope you would come back and buy your toner cartridges from HP. As cheaper replacement options became available, HP started to lose reoccurring revenue from people who owned HP printers but chose a more affordable alternative to refill their cartridge. 

In response, they launched the HP Instant Ink program to solve this problem by offering a toner subscription. HP sends subscribers new toner for their printer each month. You can sign up for a plan based on how many pages you print. If you exceed your page allotment one month, you can top up your account. If you fall short, HP offers to carry over your unused pages. Pricing plans start at $0.99 per month. 

How does HP ensure you never run out of toner? They have embedded a reader in their printer’s hardware that sends a message to HP fulfillment when your cartridge dips below a predetermined threshold. Hence, you never run out. 

It’s a brilliant little program and gives HP some recurring revenue while driving loyalty to HP printers.

Inspired by the HP Instant Ink program, here are three secrets for turning repeat customers into subscribers:

At HP, their $0.99/month plan allows you to print just 15 pages per month. At the top end, their $24.99 plan gives you 700 pages, and they have a variety of options in between. This range of options gives customers the ability to pick a plan that will work for them most of the time.

Customers who buy from you on a reoccurring basis will appreciate your various plans. However, they may still hesitate to subscribe if they anticipate their volume will fluctuate. That’s why HP allows you to seamlessly buy overage if your printing volume is higher than expected. Subscribers can also carry over unused pages if they don’t need their entire allotment.

One of the reasons consumers prefer buying on a subscription over a one-time transaction is that they never want to run out of what you sell. That’s why HP’s integrated toner gauge reads when your cartridge dips below a threshold. Find a way to measure your customers’ supply of what you sell in real time to ensure subscribers never run out. 

Why does it matter how I get my repeat business?

Repeat customers are the lifeblood of any business. However, If you want to drive up your company’s value, how you get the repeat business can have a significant effect.

Repeat subscription revenues are seen as much more valuable than a track record of repeat customer one-off purchases. The reason is that subscription revenues are more predictable, more sticky and hence less risky (and more valuable) than relying on the loyal customers to keep showing up.

For example, analysts with the Value Builder SystemTM have found examples where companies which relied upon subscription revenues were being valued at roughly 3x that of similar size competitors who relied more upon repeat customer non-subscription business.

Therefore, consider taking a page from HP’s playbook to turn your reoccurring customers into subscribers.

Recurring Revenues is one of the 8 key drivers of a Company’s value. Book a Sophiall Solution free initial assessment and find out how your company scores on recurring revenues, and the other 8 key business value drivers.

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