Chickens and Eggs – the importance of ongoing revenue

Sell meat, the eggs or both

There are two ways to make money from a chicken, selling it for meat or by selling the eggs! You can only sell the bird once, but eggs will give you income over time. This is analogous to many businesses, where is the money made, up-front, or over a period of time, or perhaps (and ideally) from both.

chicken and eggs

Razor and Blade model

King Camp Gillette, a late nineteenth century American businessman, invented the disposable razor. Although he initially tried to make money with both the razors and blades, he soon realised the more razors there were in the market, the more premium priced blades he would sell. The sales model was born, sell razors at a loss, then make money from the captive audience buying blades.

The business model is widely used today. Inkjet printers are a classic example: Complex printers are sold well below cost because the manufacturers know we will buy their cartridges during it’s life at a hugely inflated price.

gillette

Generating more continuing business

The razor and inkjet models are extreme examples. For most small and medium businesses, there is a balance between upfront and continuing business. It’s a widely held view, that smaller businesses are less successful at generating business from their customer base than larger ones. Here are some ideas for ongoing revenue for you to consider.

  1. Offer Service and Support contracts. Businesses and Consumers hate surprises, they also like spreading costs over the year. Some such services can be backed with insurance, to reduce your risk.
  2. Supplying parts and consumables. If your customers needs to buy items on an ongoing basis, as well as generating income, you maintain contact with your customer. If you work in a local area, your USP could be offering free delivery, giving you an advantage over internet sellers.
  3. Training. Staff move on, new ones start, training will generate income and maintain contact. You will also gain insight to see if there are opportunities to sell more products or services.
  4. Brand extension. If your customers are forced to go elsewhere for services or products you could supply, you are losing out. You also risk losing them. If you cannot provide it yourself, to “protect” your customer, it may be worth you finding someone to provide it on your behalf.
  5. Share of wallet. Larger buyers often source the same products and services from two or more suppliers. Savvy purchasers play off one against the other. This indicates there is room to sell more, don’t though be tempted to buy it at any price.

Customer Loyalty—The need for Quality

Marketing experts will tell you that it costs something like 5 times as much to win a new customer than to sell to an existing one.
It pays then to look after them, delivering excellent products and services at a competitive price is crucial.
Losing them is easy. Taking the inkjet printer example. If a customer is unhappy with the product, the cost to change is low. Manufacturers realise this, they will lose money if only a few cartridges are bought. If though, they deliver good products consistently, loyalty is assured and they’ll get a good return on their up front investment.

Knowledge Base – Marketing Know How:

2017-06-29T14:10:45+00:00