A Lesson in Recurring Revenue

So there is a guy who owns a candy store. One day, while some of his customers are browsing around, a little boy walks inside. The store owner turns to one of his customers and whispers in his ear, “watch how dumb this kid is.” The store owner calls the boy over and in his hand places a dollar and in the other, fifty cents. The man asks the boy, “which one do you want?” The kid quickly grabs the two quarters and runs out of the store. The store owner looks at the customer and says “see, I told you.” Later in the day, the customer walks outside and spots the boy buying ice cream. He approaches him and asks, “why did you take the two quarters and not the dollar?” The boy looks at the customer and responds “if I took the dollar, then the game would end.”

There is a significant lesson to be learned here in regards to recurring revenue. We must make our customers authentically feel that they are getting extraordinary value. In exchange, they will continue their participation.

I can try to sell you a one time, large-fee service or I can sell you something that is a recurring model but at a smaller fee. With a smaller fee, there will be continued engagement. The store owner will continue to play this game, thinking he is winning, because the entertainment only costs him 50 cents. We can do the same with our customers. Reduce your fee but make it recurring so that, in the long run, the revenue you generate will far surpass what you could have made in just one sale.

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