Platt Perspective on Business and Technology

Online store, online market space – part 24: balancing one-off and recurring sales revenue streams 3

Posted in startups, strategy and planning by Timothy Platt on September 2, 2013

This is the twenty fourth installment in a series on building an online store as a new business (see Startups and Early Stage Businesses, postings 20 and loosely following for Parts 1-23.) This is also my third posting to this series where I have explicitly discussed repeat and recurring business revenue streams (see Part 22 where I explicitly defined these terms for purpose of this discussion, and Part 23.)

I wrote in Part 22 about what repeat and recurring business mean, from the providing business’ perspective and from the consumer’s perspective. Then I followed that in Part 23 with a high level overview discussion of how building for ongoing customer relationships fits into a business and into its operational and strategic practices and corporate culture. I stated at the end of that posting that I would shift its discussion to pursue a lower-level, more detailed perspective on these issues. And at least starting that discussion is my goal for this posting, and I begin that from the fundamentals:

• Your basic business model and your overall business goals and vision that serve as its foundation point, tell you what basic type of business you would develop and what basic category and types of products and services you would develop and offer.
• Your target marketplace and your customers and prospective customers tell you what they value and how much they value it – how important it is for them to acquire the types of offerings that you could provide and what basic price points they would consider acceptable as their cost for that acquisition. And if you conduct effective marketing research these customers and prospective customers can go beyond that to tell you precisely what features they do and do not see positive value in, and what features they would see as distractions, clutter or otherwise problematical too.
• You can build the basic outline here, but your customers and potential customers can be your best assets for bringing what you offer into effective marketable focus.

This posting is all about reconciling the first two points of those bullet points so as to achieve the goals of the third – that a providing business and an acquiring customer base come together in agreement and to their mutual benefit – and in this context, specifically through systems of long-term sustaining relationships.

Start with what you offer, and with a goal of really understanding what this is from the consumer and marketplace perspective. That is important. As I have repeatedly noted, any value that a business offers is ultimately consumer defined, as the consumer decides whether or not to buy, and if so from where. I sometimes write of this value determination as arising through collaboration between business provider and consumer, but ultimately the consumer decides. And the business’ contribution to this is largely a matter of listening and of offering options and supporting (marketing) documentation to help make a valuation case. Turning to more specifically consider repeat and recurring business here:

• From a consumer perspective, what does your business offer now and what could it offer that would bring a significant market share of customers to see increased value for them if they enter into repeat and recurring business transactions with you?
• One obvious source of such apparent value is that entering into an ongoing business relationship might directly reduce their ongoing expenses while offering them continuity of received value.
• Would repeat business come with preferred customer discounts or services or other incentives that to them, would favorably shift the balance of what they pay and what they receive?
• If a first purchase agreement is made, could its initial investment can be maintained and at a reduced ongoing cost with only incremental and smaller new outlays needed to maintain value? Recurring business relationships based upon provision of ongoing value added enters in there.
• If a consumer can retain a source of value to them at lower overall and ongoing cost to them through repeat and/or recurring purchases, that gives them positive incentive to stay actively engaged with that business.
• But this is only part of the story. If a customer makes a purchase and is satisfied with it, that serves to validate their source of that purchase too, limiting need to find and evaluate a next provider that might not be as good. And due diligence of possible providers does not always succeed in fully, accurately identifying potential problems or reduced value received per unit cost. Good experience and continuing a relationship with a reliable product or service provider reduces this risk, and the potential for making a bad purchasing decision next time and losing out as a result of that.
• So both direct cost/benefit, and risk management due diligence issues enter in here and effective repeat and recurring business relationships can positively and beneficially shift both of these areas of concern for the consumer.

Design and develop, build and market and sell, and post-sale support what you offer with this set of organizing principles in mind, and with a goal of both reducing immediate costs to the customer while offering better value, and of reducing their longer term risk/benefits due diligence concerns as well.

I stated that I would move in from the high level overview of Part 2 in this posting, but I have only started that process. My next series installment is going to walk this approach through a series of specific operational processes and systems, from product design and manufacturing, to marketing and sales and on through post-sales support where recurring business can become a very direct and specific strategic business goal. Meanwhile, you can find this series and related postings at Startups and Early Stage Businesses and also at Business Strategy and Operations and its continuation pages Business Strategy and Operations – 2 and Business Strategy and Operations – 3.

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