Recurrence economics: what it is, benefits and more!
Want to know more about the recurring economy? So, read on to understand this business model that has been conquering the market!
What is recurrence economics?
The recurrence economy is a business system based on providing access to products and services, with periodic billing via a subscription method.
This type of payment allows companies to offer their customers a range of options for purchasing goods or services with greater flexibility, convenience and loyalty reward programs.
Also known as the subscription model or subscription economy, the concept is not that new. In the past, it was widely used by print media companies – subscriptions to magazines and newspapers, for example.
However, it was with the arrival of the digital age that the model really got stronger.
In recent years, the system has gained more prominence with streaming platforms, which have opened up space for the method to go beyond the entertainment market.
Today, the recurring payment model can be applied to countless other industries such as transportation, e-commerce, healthcare, and even insurance.
How does this business model work?
The economy of recurrence basically depends on an automated payment system. In general, the system is simple to understand: the customer pays a monthly fee and has access to the company's solutions.
In practice, this whole process happens automatically. This means that once a customer has signed up for the service, they will automatically be billed each billing period.
The benefits of the recurrence economy
The advantages of this system range from cost reduction compared to traditional sales models, with greater control over payments, to the reduction of customer attrition due to loyalty programs and greater convenience.
To better understand all the benefits of the recurrence economy, let's talk about how the model adds to both the daily lives of companies and the public's consumption habits.
For companies, the recurrence economy model brings financial, operational, and management benefits, in addition to contributing to strengthening customer relationships.
Check below the advantages that the recurring payment system can bring to your business.
Billing predictability is perhaps the biggest advantage of the recurrence economy. As the company has more tools to know the average number of subscribers in the next month, it is easier to determine future revenue with greater assertiveness.
The recurring system allows you to calculate this revenue based on active customers and the churn rate, ensuring a more stable cash flow.
This is a very positive point for the financial planning of the business since it is possible to obtain more concrete reports.
With this, the chances of having unexpected problems, such as very large fluctuations in billing or lack of funds, is reduced.
Decrease in default
As payment in the recurrence economy model is usually automatic, the number of defaulting customers tends to drop.
The automated method of recurring payments ensures more convenience for consumers, avoiding forgetfulness, delays, and debts.
Billing predictability also helps to avoid this problem that affects many companies.
With this system, companies can reduce costs compared to traditional sales models while having more control over payments.
This allows them to focus on providing quality services or products rather than worrying about how they will be paid.
The fact that retaining customers costs less than attracting customers also contributes to the reduction of CAC, the Customer Acquisition Cost, one of the main retail metrics.
Efficiency in operations
Companies using the recurrence economy system can access a detailed analysis of customer data.
This can help to further adapt your products and services to meet the public's needs, increasing efficiency in operations and assertiveness in campaigns.
Along with this, the predictability of sales facilitates operational management, both in relation to inventory control and logistics and in more strategic actions.
In addition to ensuring recurring sales, this business model allows you to increase these sales, bringing scalability to the company.
The more satisfied with the services provided, the greater the chances of consumers investing more in their solutions.
In this way, it is possible to increase the company's average ticket with personalized offers for its audience – in addition to, of course, maintaining customer loyalty.
Greater customer loyalty
Loyalty programs can help reduce customer attrition by promoting retention through discounts and rewards for consumers who shop more frequently.
One consequence of this is cost reduction since maintaining customer relationships requires a smaller investment than actions to attract new consumers.
For users, the subscription system brings convenience and provides several benefits that traditional business models cannot guarantee. This strengthens the relationship between the brand and the consumer.
In addition to a differentiated and more exclusive experience, check out other advantages of the recurring savings model for customers below.
Attractive monthly fee
One of the main advantages of the recurrence economy for the consumer is the value of subscriptions, which are usually much more attractive than individual purchases.
In addition to access to services at a lower price, the company can also offer other exclusive benefits to the customer, such as discounts on selected products and loyalty programs, for example.
This is a very common practice in subscription systems, applied exactly to attract more consumers. In the end, everyone wins: the company increases customer loyalty and users are able to save.
Service provision made easy
When opting for a subscription model, the customer has access to optimized services, much simpler and more practical than the conventional sales model.
This is because the updates of these services usually happen automatically, as well as the payment.
Another positive point is that the consumer has specialized support and exclusive tools at more affordable prices.
The practicality of the recurring payment is one of the great attractions for consumers. Once you subscribe to the service, there is no need to worry about payments or separate purchases.
Access is provided automatically and charges are also made monthly in a fully automated manner.
In addition, the process of canceling these services is usually much less bureaucratic, bringing greater freedom to the consumer. The same goes for the upsell process.
If the customer wants to switch to a more complete plan, the transition is also simple and can usually be done directly on the company's platform, without the need to contact an attendant, for example.