How Businesses Are Generating Recurring Revenue Streams
While in its simplest form, the concept of manufacturing may convey the thought of creating and selling a product, today's connectivity has led to further opportunities. For manufacturers, that includes windows opening to new revenue streams.
This story originally appeared on The Epoch Times
While in its simplest form, the concept of manufacturing may convey the thought of creating and selling a product, today's connectivity has led to further opportunities. For manufacturers, that includes windows opening to new revenue streams. The trend encompasses changing preferences among consumers as well, including benefits that come from services such as subscriptions and warranties.
For companies like Illuminate Labs, a supplement company which uses a third party to test its products, that has meant a shift into the advertising world.
"We make the bulk of our revenue from our products," notes Calloway Cook, president of Illuminate Labs. During mid-year 2021, the company started testing paid advertising as a way to generate leads and bring more customers to its site. Unsatisfied with the return on investment from that strategy, the company reduced its marketing budget to zero.
"Now we publish great content," Cook told The Epoch Times.
Delivering quality material related to supplements has served the company well: visitors come to the company site to learn about supplements, nutrients, health, and wellness topics. The traffic to the site and blog has increased so substantially that Cook and his team looked for a way to create another revenue stream.
"Starting in 2022, we plan to partner with a top display ad network to monetize the growing traffic to our site," he explained.
The plan includes running display ads on the pages of the site that are not branded; in other words, consumers won't see ads running on the company's product pages. Ads will show up on pages like the blog, where the company features health information and doesn't endorse its products.
"We get a lot of visitors through organic search and we have no affiliate deals," Cook added, noting that the arrangement helps ensure the content is unbiased and that ads don't compete with the products the company sells.
Adding display ads to a site can produce recurring revenue, but before doing so, it can be worthwhile to analyze costs and benefits. Generally speaking, the benefits of income may outperform the costs of running the business for manufacturers that have more than 10,000 page views to their website, Cook noted. Revenue can increase as page views climb as well. It's also important to establish terms with any ad networks, to layout conditions such as where ads should be displayed and the type of ads to include.
Subscriptions are another way for businesses to provide access to a product or service and create recurring revenue.
"We use the subscription model," Adam Korbl, founder and CEO of iFax, an online fax service, told The Epoch Times. Customers can pay a monthly subscription and use the service, rather than purchasing a fax machine or paying every time they need to send a fax.
From a business standpoint, the subscription arrangement can help with forecasting sales.
"You can easily predict next month's revenue," Korbl notes. To retain customers, however, value must be delivered at a price point that fits their needs. "You need to invest resources to avoid high cancellation fees," Korbl added.
Perhaps the greatest potential of recurring revenue steps from the opportunity to transform and grow a business model.
PostcardMania, a marketing company and print manufacturer in Clearwater, Florida, began in 1998 in a small 600 square foot cottage.
"I knew I wanted to become a one-stop-shop for direct mail for small business owners from the start, because back then everything was splintered—you had to get a mailing list from one place, get it designed by somewhere else, then someone else would print everything and someone else would address the cards," Joy Gendusa, the founder, and CEO of PostcardMania, explained.
Under Gendusa's direction, the company became that one-stop-shop, outsourcing as needed until sales increased and it became possible to purchase offset commercial print presses.
Over the years, competitors caught on to Gendusa's one-stop-shop model and started copying the strategy.
"This is when I realized that we were being commoditized and needed to figure out a way to set ourselves apart and become more valuable to small business owners," Gendusa explained.
Taking on the challenge, PostcardMania studied their clients' pain points and found that for many of them, it was the uncertainty surrounding a postcard campaign: how could they be sure they would get a result and weren't wasting money?
The company hired a person to catalog the results of every campaign and then share that data with potential clients.
"Once PostcardMania was positioned away from being the provider of a commodity and instead an expert at providing a much-needed service, we began creating a number of subscription-based services to grow revenue," Gendusa said.
One of these, Everywhere Small Business, is a marketing bundle that combines direct mail with call tracking and coordinating online ads, and aggregates ad performance across each platform into a single online dashboard.
The company now has more than 320 employees, operates out of a 69,000 square foot custom-built facility, and has earnings that are up 23 percent in 2021 over 2020. Gendusa credits the transformation to becoming a marketing company specializing in lead generation as a turning point for the company's success.
"If I had never broken out of the commoditization pigeonhole years before, I never could have done this," she said.
Rachel Hartman is a freelance writer with a background in business and finance. Her work has appeared in national and international publications for more than 10 years. She resides in Miami and travels frequently.