Platt Perspective on Business and Technology

Online store, online market space – part 25: balancing one-off and recurring sales revenue streams 4

Posted in startups, strategy and planning by Timothy Platt on September 9, 2013

This is the twenty fifth 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 1-24.) This is also my fourth 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, Part 23 and Part 24.)

I began the process of operationalizing a business’ approach to offering products and services that can lead to repeat and recurring business in Part 24, and add here that that was a pretty abstract discussion, focusing on value and maximizing it for the customer and as they see it. I said at the end of that posting that I would turn here to at least begin 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.

And with that, my goal here is to bring this overall discussion closer to real world and day-to-day business practices with more precisely specific business cases and examples. And I begin that with design and manufacturing, and for purposes of this discussion, I include both products and services here as services have to be designed and planned out and assembled into complete offerings too. As a slight aside, I add that in many respects software and products that are built as information and cyber structures in general, blur the line between product and service and can virtually always be seen at least in significant part as being both at once. But my focus here is on design and manufacturing – assembly and actualization, per se and not on what is being built.

I begin with a software manufacturing example:

• You have a software development company that specializes in information systems security – antivirus and anti-spam detection and response software and related products that would in most cases be offered as a bundled, functionally integrated package.
• The details of, and even the basic nature of the threats that your products would help protect users from are constantly changing and evolving as, in the professional terminology of your industry, the basic threatscape that your customers and potential customers face is always changing and evolving. So what you offer has to continually change too.
• Any business in your industry is by definition going to be built around cultivating repeat and recurring business relationships with its customers. These software packages require ongoing and recurring updates to remain current and effective as new threats and challenges emerge, and as new types of threat go live and have to be addressed.
• But simply adding more and more patches and updates to a software package, and no matter how carefully developed, eventually leads to reduced overall performance efficiency. So periodically it is necessary to release entirely new next-generation products too, that are built from their core foundations to be up to date with all of the insight from earlier products and updates built in from the beginning.
• And every software developer in this industry has to do this and follow this basic design and development process too. So offering updates and building for recurring business, and developing next generation software products and going for repeat business sales have to be core elements of every one of these businesses’ underlying business models.
• So how can any one of them stand out from its crowd of peers and competitors as a best choice, as it seeks out market share?

In a way, I began answering that question when I posted my series: Information Systems Security and the Ongoing Consequences of Always Being Reactive (see Ubiquitous Computing and Communications – everywhere all the time, postings 185-188 for Parts 1-4 and its continuation page, postings 189 and loosely following for Parts 5-17.) You can strive to build and maintain the most rapidly responsive and even proactively responsive systems for developing, updating and releasing your products as possible, so as to minimize the lag time between when new threats emerge and when new threat corrective responses are offered to address them.

I more specifically delve into issues and challenges such as zero-day attacks in my above cited information systems security series, and leave further discussion of this industry and its challenges to that, at least for now. But there are several more general principles that can be found in this example.

• This is an example where every business that is in any way competing in an entire industry has to be centered in its business model and in its actual ongoing practices, around developing repeat and recurring business opportunities.
• The key to making this work and work best for any business participating in this type of competitive arena is to know and in operation detail, where a customer would see greatest need for improvement and change in what is being offered, and where that customer would see greatest value.
• And this is all about knowing where this complex of customer-perceived needs and priorities can most rapidly and reliably and cost-effectively be met, and finding better best-practices ways to do that.

Many businesses, and I add many entire industries are built around repeat and recurring business, and even if they do not always face the pressures to innovate that are found in software development, and in more niche industries such as computer and network security software development. To cite a bricks and mortar example, local drycleaners survive on repeat business and on developing steady customers. In their case, geographic location and convenience are key elements for bringing their customers back to their store, assuming that they meet acceptable standards for quality of work offered, to be effective participants in their industry at all. But many businesses and types of business do not, too. As a working example, consider highway service stations.

They sell gas and diesel fuel and often offer emergency service repairs. And they often sell food and offer the services of food concession courts and have small convenience store offerings for sale too. And much of their business is one-off as only a small percentage of their customers and potential customers regularly and frequently travel the same highway routes. Software can obviously be sold online, and automobile and truck refueling and other highway service center offerings cannot be, but there are also a lot of potential online businesses where repeat and recurring business might not seem an obvious possibility either. I am going to continue this discussion in a next installment where I will more explicitly delve into the issues of online stores where seeking out repeat and recurring business opportunities would be more of a unique value creation opportunity and a path to new competitive strength, in and of itself. 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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