If you run an online store, it can be stressful not knowing how much revenue you’ll have at the end of each month. This can leave you scrambling for new customers, who aren’t guaranteed to make a future purchase. Fortunately, the recurring revenue model can help increase customer retention and create a steady income stream for your business.
In this post, we’ll look at the recurring revenue model and discuss its benefits. Then, we’ll explore several ways you can implement it into your online store. Let’s jump in!
An Introduction to the Recurring Revenue Model
The recurring revenue business model is one in which customers pay a monthly or yearly fee for a product or service. This usually takes the form of a subscription or membership. Any e-commerce store can implement recurring revenue, including those that sell content, services, or products.
Popular examples of businesses that use this strategy include Netflix and Birchbox:
People who take out a subscription or membership will have to pay a residual fee, usually on a monthly basis. In exchange, they get full access to the product or service that the business is offering. This can be a physical product that’s shipped to the client, or access to software or a library of content.
Of course, customers are able to cancel their subscriptions at any time. Even so, companies are better able to predict their income when they use this type of model.
There are other advantages to using recurring revenue on your online store. For example:
- It improves customer experience. Buyers get flexibility and a lower price barrier upfront when they subscribe or become a member of your e-commerce store.
- You’ll find it easier to scale your business. You can incorporate different options such as tiered billing and add-ons.
- It can boost customer retention. Clients who purchase a subscription are likely planning to keep using your products and service for the foreseeable future.
If you’re looking to build a more sustainable business, you might want to consider implementing recurring revenue to sell your product or service. This method can help you create a loyal customer base and grow your sales.
How to Implement the Recurring Revenue Model in Your Online Store (3 Ways)
Now that you know what recurring revenue is and how you can benefit from it, let’s take a look at how you can use this strategy on your online store. We’ll show you three different ways to do so depending on what you sell.
1. Create Members-Only Content
A membership site is a website that requires users to sign up and pay a recurring fee to gain access to premium content. This content can be anything from online courses to podcasts:
This business model enables you to build a community of like-minded individuals who are interested in your content. Plus, you can easily promote or upsell content to people who have already used your service or products, and may therefore be more willing to upgrade.
For example, you could create a higher-tier membership that comes with more features or enable users to purchase add-ons.
To create a membership website, consider using a tool such as MemberPress:
This plugin lets you create paywalled content and set rules for who can access this material. It also enables you to set up weekly, monthly or yearly fees.
With MemberPress, you can create different subscription options for your customers, such as basic and premium accounts. This allows users to choose the best plan for their needs. Plus, they can always scale up in the future.
2. Sell Software and Other Digital Downloads
Digital products are files or software that users can access and download from your e-commerce website. There are many different kinds of digital goods you can sell online, including mobile applications, games, e-books, and stock photos:
Selling your products as digital downloads has many benefits. For starters, you won’t have to deal with packaging, inventory, and shipping management. Furthermore, once you create your downloadable product, it can live on your e-commerce store forever.
To sell digital downloads on your e-commerce site, you can use a plugin such as Easy Digital Downloads:
This tool enables you to sell any type of virtual product, including software, digital artwork, and audio. To charge a residual fee, consider releasing new material every month.
Easy Digital Downloads lets you set up recurring payments. This makes it possible for users to sign up for subscriptions on your online store.
3. Offer Subscription Boxes
If you sell physical products, consider creating a subscription box. Users can pay a fee to receive new items every month.
This model has become popular over recent years. It gives businesses the opportunity to promote new products, which could encourage customers to buy them again in the future.
You can create subscription boxes with any kind of physical goods, from toys and books to beauty supplies and artisan food products. For example, Platterful sells monthly subscriptions for charcuterie plates:
Customers who sign up get new meats, cheeses, and accompaniments delivered to their doorsteps every month. They also get access to videos on how to arrange the board.
You can use WooCommerce to sell subscriptions boxes on your WordPress site:
The WooCommerce Subscriptions add-on enables you to create and manage your subscription boxes with recurring payments. You can provide buyers with samples of new products while earning residual revenue.
Conclusion
While one-time purchases are good for business, they don’t provide a consistent income for your e-commerce site. Implementing a recurring revenue model can help you create a steady stream of income. For example, you can offer members-only content and sell subscription boxes to encourage more sales.
Do you have any questions about using the recurring revenue model on your e-commerce website? Let us know in the comments section below!
Image credit: Unsplash.