Reoccurring Billing VS One Off Payments
Reoccurring billing has always been touted as one of the better ways for affiliates and anyone online to make any sort of money.
That is the secret.
But is it?
When you buy something, you expect that it is a one off purchase. No more cash down. But in the ever changing and money orientated online business world where competitors are everywhere, reoccurring billing slips in.
I class reoccurring billing as a whole plethora of different billing ideas that take over once that initial purchase has occurred, without that billing the product functions, but not as well (time, ease, need, updates etc)
There are now some quirky reoccurring billing techniques which have become exceptionally popular to some companies.
- With Diablo 3 you buy the game for $60 and it is a very good game, but oddly flawed and you only realize this when you beat the game. Long story short, Blizzard wanted to stop the third party selling of game items so they created an auction house in game- using real and ingame cash. The game needs the auction house. Without the auction house the game would have been fine, with it? The game needs it and it wreaks the game, but its profitable for Blizzard (15%/ transaction from everyones sales)
- iTunes is reoccurring billing because your iPod etc is cleverly geared towards it. You get gift cards for the store, and you use it on the store. For 99c (or there about) you get tunes to make your music better, programs to watch or Podcasts to hear. Everyone uses it, so you have to. It costs millions to run daily but they get millions back in revenue. In the second quarter of the financial year, it raked in $1.4 billion in revenue.
- ProActive from Gunthy-Renker is a phenomenal product that gets real praise in the media. It is a reoccurring product because if you don’t use it, those darn spots are going to come back. Just a little dab…and you are good to go. It also makes up 40% of Gunthy-Renkers total revenue.
- TheFourHourWorkWeek’s author Tim Ferriss created an “energy drink” that brought in $80k/ month. People didn’t use just one small bottle, they used a few. The same goes for Vitamins/ Minerals etc.
- Supermarkets like WalMart serve a reoccurring billing model. They give you what you need on a weekly basis and they also throw in there items which you want. Superstores like this make a fortune because they have made it very easy for you to get everything that you need quickly and efficiently.
- Medical professionals. You need them on a regular basis. We had people coming to us every 6 weeks wanting the same treatment. Many patients book in advance and most Doctors have waiting lists.
- Amazon Prime. Pay an amount per year and get access to books and other stuff for “free”. Has it’s flaws, might not be the best for authors in the long run especially as more authors get attached to it, but it is a model.
Authors and eproduct developers?
Very few offer a reoccurring billing system. Some offer a “membership” but the drop off of paying customers is very great and you need to market regularly to make sure that you are posting reasonable profits/ month. So if you are charging $10/ month you really need 100 paying people per month every month to achieve $1000. Many marketers roll out these systems to huge email lists and the first 1-3 months are great, then it always drops away. Some marketers have even suggested you find a “get out strategy” so that the membership site only lasts for 6 months.
But these membership sites have poor foundations because they do not offer anything that the consumer needs on a daily basis. Most are “go to” places or house information that can be downloaded in a day. Then you cancel the membership. And who cares if they have an interview with someone that tends to be plugging their own product?
Adobe seems to have it spot on.
Most people who use Adobe products love them. Usually professionals, they spent a great amount of money on some of those products.
Now Adobe knows that people want to use their products wherever they can. They know that downloading huge products and large prices is a pain. They also know that paying for updates is a pain.
So what did they do?
They put all their software on the Cloud and then created a reoccurring billing system that professionals pay per month to use the suite of tools of their choice and not worry about updates or whether the computer is matched to the product.
Adobe is minor genius. They have realized that they hooked people onto their products and people have invested time and resources to use their products.
And do you know what has happened?
They have now removed the middleman Amazon. No need for box items, no need for that plant to operate any more. They have now got back control of who has their items and how they distribute to those people.
The same happened to Bloomberg. This is the “computer terminal” that many stock brokers use. A big bulky item that is very slow, hard to use and cumbersome. It also costs about $20k/month to use. The Internet is quicker, but the box has been given time and has had many resources dedicated to it, so why stop using it especially if it is needed and does the job equally as well?
But again when you create a product you sell it and then…back end it?
Sure, but you still need an amount of people going into that “funnel” that buy your product and then convert to buying the second product.
It is harder than you really think and needs 3 factors to tweak:
Larger sales price of both products.
If you do reoccurring billing then you have to find a way that people will come back and use your item/ product on a regular basis. Membership sites are generally useless for the long term- especially if your product doesn’t deliver.
For authors it is especially hard. They have a book, sell it…and erm…that’s it.
The AmazonPrime method only really works if you have a large backcatalog of items which people want and you can convince enough of them to pay a certain amount per year.
With software you really have to have something that people require right away and that someone will not create for free (FriendsReunited vs Facebook?)
Or you can go advertisment.
Adsense and all advertisements are reoccurring billing. It is what has helped Google and Facebook reach Billions in revenue. In this way your service is free and then your competitors have a hard task to catch up.
You can then get advertisers to pay to advertise on your site- reducing the risk of abysmal low click costs and other Adsense roller coasters.
All it needs is traffic. More traffic the increased likeliness of a click on your ad or at least providing advertisers the benefits that their ads are actually being seen by someone.
A reoccurring billing strategy which is ages old. Because once you do get a following you just need to email out potent emails which sell your product.
The problems are numerous though:
- too much selling is a turn off
- too little selling is bad for you
- you need a steady stream of products so that subscribers do not get used to free stuff
- I would question the use of affiliate products because your subscribers will get put onto their lists and only use affiliate products if you have actually used them yourself.
- you need subscribers that are now wary of email lists
There are plenty of models for a reoccurring billing system and in many way they are much better than the one off payment model. Obvious, but the model you choose can equally be damaging and time consuming if it doesn’t fit the necessary audience that you are trying to target.