Gotransverse
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Feb 04, 2020“During my career, I’ve had the opportunity to work at large companies, small companies, high-tech companies and companies around the world. And one of the common things that they all share is they want to figure out how they can both maximize revenue and drive adoption.” - Michael Beamer, President, Gotransverse.
Maximizing revenue and driving adoption, or growing the customer base, are two key goals of just about any business, and in the video below, Gotransverse president Michael Beamer introduces one key strategy to achieve both: Look at your offering as more than just one product.
He’s talking, here, about combining subscription and consumption-based billing, which is a powerful way to create predictable cash flow and add new and diverse revenue streams to lower the barrier of entry to new customers — maximizing revenue and driving adoption.
We’ve written about consumption-based billing before, but Beamer explains in a really useful way, here: he recommends breaking down every feature and capability of your product and then rearranging them. First, he suggests, create a minimum combination of functionalities that you can sell as your base product subscription, and then use the rest as additional revenue streams.
Let’s unpack those two steps — what they mean and how they help businesses achieve both their revenue and adoption goals.
1. Create Your Base Offering
To borrow a term from the software development world, this base offering is your “minimum viable product”—the simplest version of your offering, including just the most basic features and capabilities. You can sell this offering—a service or access to a product—as a simple subscription, and because it’s so streamlined, you can sell it at a fairly minimal cost. That way, customers who might shy away from a larger investment can start using your product with relatively little financial risk.
Just like that, you’ve increased adoption, and you’re well on your way to building lasting customer relationships. (After all, research shows that recurring customers spend 67 percent more on average than new customers.) And as an added benefit, your simple subscription provides reliable, recurring revenue for the business.
2. Turn Additional Capabilities into New Revenue Streams
This second part of the equation is where the real revenue opportunities come in. When you identified that “minimum viable product,” you left a whole range of capabilities on the table. So now that you’ve got customers buying into that simple subscription as a baseline, you can offer them the other capabilities as add-ons, which they can buy in whatever quantity or frequency they need.
The concept itself is fairly simple, but consumption-based billing models can take on a variety of forms. Perhaps users pay an extra fee to give additional users access to a SaaS platform. Perhaps they purchase a block of consulting hours that they can use as needed. Or they might add on additional items to a basic subscription box — or features to that same SaaS platform. These are just a few examples of how consumption-based offerings might look. To see them in action, take a look at your recent cell phone bill: you’ve got your basic data, talk, and text, and you may have additional charges for insurance, extra data, or service plans. If you add a user, you may get some kind of “family discount,” and there may be other perks, too, based on the hardware you’ve purchased or a seasonal promotion you took advantage of. There may be options for prepaid as well.
Whatever your models look like, the benefits of consumption-based billing are two-fold: First, it gives the company far greater opportunities to increase revenue by cross-selling and upselling additional features and products. Second, it helps customers feel like they’re getting the most “bang for their buck,” as they’re only paying for what they’re using, when they’re using it. If they don’t need a feature, they simply don’t purchase it, and they don’t have to worry about wasting money on unused bells and whistles. This personalization is a great way to turn new users into long-term customers.
You can learn more about consumption-based billing — and what it takes to support this innovative model — in our recent whitepaper. And when you’re ready to take your business’ billing to the next level in order to maximize revenue and drive adoption, we’d love to talk about how we can help. We invite you to take a tour of the Gotransverse platform or call us to schedule your complimentary, personalized demo.