Monthly recurring revenue is eclipsing traditional business models. If you struggle to find a way to join the traditional subscription economy, there are still a few things you can do to generate reliable monthly recurring revenue.

Recurring revenue is a major asset for companies that leverage subscription business models. These are businesses that offer products or services on a repeat basis (whether weekly, monthly or annually). During the past several years, subscription companies like Netflix and Ipsy have become household names. While Netflix offers its tiered TV and movie streaming and Ipsy sends monthly beauty products, their models are rooted in the fact that their customers are willing to continue to pay for their services month after month.

Is monthly recurring revenue still possible for your business if you don’t fall into the cookie-cutter subscription mold?


This article is for anyone who:

  • Wants to lower CAC (Customer Acquisition Costs) while increasing CLV (Customer Lifetime Value)
  • Wants to reactivate their e-commerce customers effortlessly
  • Owns a business that can’t offer cookie-cutter subscriptions
  • Has customers who don’t want to repurchase the same things every month
  • Doesn’t want to join the saturated subscription box marketplace, but still wants MRR

     

What is Monthly Recurring Revenue?

monthly recurring revenue

Monthly recurring revenue is the amount of predictable income your company can expect each month. Building a strong recurring revenue model allows businesses to make reliable predictions surrounding revenue and growth. Through it, finance teams are able to present an accurate financial forecast and create an efficient plan.

As more companies latch onto monthly recurring revenue, competition is becoming more fierce. Many retailers have been forced to close as they come head to head with more innovative competitors. If you’re not currently leveraging recurring revenue, there has never been a better time than now. Be proactive. Devise a plan to keep up and win the race as early as possible.

Data shows this is a worthwhile endeavor. Earlier this year, NAPCO released a study on the retail industry. It reveals that recurring revenue-based businesses experience favorable results. The study found that:

  • 77% of the surveyed retailers believe the recurring revenue model is a prerequisite for doing business
  • 65% report that regular customers provide higher profitability
  • 49% report an increase in customer retention

In a previous blog post, we gave examples of non-traditional subscription companies that found ways to tap into recurring revenue. However, some businesses are at a loss when it comes to incorporating traditional subscription products and services. What can you do if this describes your company? Here are three ways you can boost your reliable monthly sales.

 

1. Quick-Buy or One-Click Ordering

one-click buying for monthly recurring revenue

It’s sometimes easy to forget that online shopping was hardly the norm 20 years ago. Today, browsing clothes, household goods, and anything else you can imagine without leaving your home is favorable to many. As people become more accustomed to this type of convenience, repeatedly filling in shipping, billing and payment information for every purchase can feel like a daunting task. This is the problem that a quick-buy or one-click ordering feature solves.

One-click buying is an innovation by Amazon, which carried a patent on the model in 1999. However, the patent expired in 2017, allowing other e-commerce merchants to take advantage of one-click technology. The Magento e-commerce platform was one of the first to adopt it.

When a new customer makes a purchase, they are required to enter all of their details. With one-click ordering, the information is saved, and all subsequent purchases can be made with the click of a button. This time-saving feature is highly convenient for customers and enhances their experience with your website and your brand. One-click ordering is one of the most effective ways to optimize your online shopping cart and set yourself up for monthly recurring revenue. By offering a better checkout experience, brands enjoy higher conversion rates and an uptick in customer loyalty.

To reinforce this approach, retailers often blend this technique with an email marketing strategy. They send reorder emails as a reminder to the customer of their frequently purchased products. This is a great way to build your email database, which you can use to send promotional offers and new product information to your customers.


2. Auto-Replenishment

package delivery monthly recurring revenue

An automatic replenishment system is when an online store or brand sends the customer a refill of their products before they run out. A good example of this is Paula’s Choice — a skincare brand that offers a convenient way for customers to receive skincare products on a recurring schedule. The onslaught of the COVID-19 pandemic was a turning point for the automatic replenishment systems as people leaned towards purchasing goods online to minimize their risk of exposure to the virus. Now, shoppers are turning to online replenishment more commonly to avoid running out of household items.

Acosta research said that 38% of shoppers are likely to subscribe to online groceries — more than ever before. Seeing the convenience and practicality of this method, it is predicted that many online shoppers will choose auto-replenishment even after the pandemic dust settles. Retailers who have adapted to customer demand in this way have positioned themselves for receiving predictable and reliable recurring revenue.

When it comes to monthly recurring revenue, it is important for retailers to ensure their technology is up to par. While setting up an automatic replenishment system for your e-commerce website is a lucrative option, it comes with its own set of challenges. That’s why partnering with a third-party company is a good option for building a system that handles subscription orders and recurring billing.

Ensuring that customers receive products before they run out of their last order is a great way for brands to show they care about their customers’ comfort. This is a plus point for customer service. Moreover, for limited supply or high demand items, a subscription assures the customer that their order will always be a priority over non-subscribers. This makes an excellent add-on for your sales and marketing pitch.


3. Membership Programs

Amazon Prime monthly recurring revenue membership program

The third model that can add not just monthly, but annual recurring revenue is the ever-popular membership program.

The retail membership trend started in the 90s from big-box retailers like Costco and Sam’s Club. These stores give customers dramatic discounts when they buy products in bulk. Today, membership models have expanded from physical shopping shelves to the online marketplace.

This type of membership program is also called a green fee model. The customer pays a monthly, quarterly or annual fee to grant exclusive shopping experiences such as discounts and promotions.

How do membership programs encourage customers to purchase from your retail store again and again? Let’s say you sign up for a membership to an online marketplace. Your perks include free shipping and various discounts, depending on the total amount of your purchase. To reach the required amount for discount and free shipping, you will likely buy items in bulk. Sure, you can buy items from other stores, but because you paid for the membership, you are going to maximize it by shopping with that brand.

Amazon Prime is a popular example of a green fee subscription model. Its membership perks include free shipping, video streaming and Amazon Prime reading. The membership benefits give customers a sense of exclusivity, making them think that they benefit more than other customers. Since the launch of Amazon Prime, the company has reached 100 million subscribers globally.


What We’ve Learned

Even if you are managing a retail business, you can still increase your monthly recurring revenue by applying recurring revenue models that fit your business industry. Not quite convinced yet? Here is a list of benefits you will reap by practicing the approaches:

  • Greater revenue
  • Greater profitability
  • Increased customer loyalty
  • Greater revenue predictability
  • Ability to upsell customers
  • Reduced customer acquisition costs (cost of marketing, sales, etc.)
  • Cost savings from accurate inventory forecasting


Today's buyers don't consider cost alone. They are driven by their customer experience with a brand and convenient shopping experiences. Modern retail businesses that find ways to incorporate recurring revenue are able to focus their energy on extending customer lifetime value rather than constantly striving to acquire new customers.  

 

Start Adopting a Recurring Revenue Model

complimentary strategy session for monthly recurring revenue

Subscription models are on the rise. If you don’t start applying the same approach for your retail business, you are vulnerable to being crushed by your competitors.

If you have not yet but intend to incorporate a subscription model for your e-commerce business, then you better talk to the experts. Who are they?

Well, that would be us. PowerSync helps e-commerce businesses by solving complex problems and implement scalable solutions. We offer subscription solutions for Magento and Salesforce. We also offer the world’s best integration between Salesforce and Magento for e-commerce businesses.

Since Magento is one of the most popular e-commerce platforms, we developed mPower to help merchants in subscription management. mPower accommodates various e-commerce needs such as:

  • Managing recurring payments, customer profiles, and subscription products
  • Reporting high-level business outcomes
  • Modifying customer preferences
  • Automating merchant and customer notifications

We designed mPower to optimize any subscription models in any industry. So, these functionalities only scratch the surface of what mPower can do. Whichever of the three recurring revenue models you decide to use, PowerSync can help you integrate them all into your e-commerce website.

If you are ready to increase your monthly recurring revenue, all you need to do is talk to us. We invite you to schedule a complimentary consultation with one of our e-commerce experts today.