Revenue Stream Model :: Ben M. Bartlett - Business Strategist, Strategic Planner, Business and Executive Coach

Archive for Revenue Stream Model

How to Stair Step your way to higher revenues and profits

Posted by Ben Bartlett on Saturday, June 25th, 2011 in Revenue Stream Model

Here's a variation of the basic continuity revenue stream model which I introduced to you in the last post. I call this the Stair Step Continuity model:

Before explaining the model, let me quickly go over the basic principle that drives it:

The most effective way to increase revenue and profitability is sell more, more often to existing customers. And, one of the best ways to do that is by having a stair step increase of the sales transaction and unit margin value of your offerings. This is the basic premise behind the stair step model.

As shown, the key idea behind this model is the increase in the transaction value from first sale to subsequent sales. The visual suggests that your back end sales are of different products that have higher transaction values than your first sale. So from a strategic planning perspective it is important to establish a product portfolio that allows stair step transactions via different products to take place.

Ideally, products in your product portfolio need to be related to each other, catering to specific customer needs. This will help ensure your strategic position doesn't become too diluted and will also help you to maintain closing rates.

However, if you can't stair step by offering different products, you should look at an option such as packaging your existing products in a stair step manner. For example you could offer a basic, premium and super premium version of the same product, with each product version sold at different price points.

Stair stepping allows you to better target high users of your products – the top 20% of your customer base in other words. This top 20% is likely to represent the biggest proportion of your revenue and profitability and they are also most likely to be your most loyal customers. Therefore, stair stepping is one way to tap into this loyalty.

There are actually a bunch of variations of the stair step model and the basic continuity model that you can use in your business. Put another way, there are many ways to skin a cat.

For instance there is the installed base or razor and blades revenue stream model that some companies use. This is the stock and standard model used by companies such as laser printer manufacturers.

In short, laser printer manufacturers will sell you a cheap printer, knowing that their back end comes in the form of consumables you will use such as cartridges. Indeed, it's a smart way to lock in customers and build brand loyalty. Is this something you can apply to your business?

In summary, developing the right revenue stream model is crucial to your business and is a key part of the strategic planning process. If you don't know what your revenue stream model is, or have trouble explaining it in your strategic plan or to your people, then you have a planning issue that needs to be addressed. Bottom lines?

1. You must have a clearly defined revenue stream model.

2. That model must have a back end.

The stupidest way to grow sales revenue

Posted by Ben Bartlett on Thursday, April 7th, 2011 in Revenue Stream Model, Tactics

Following on from my introduction to the four types of sales revenue, I want to share with you one of the stupidest revenue stream models you'll ever come across. It represents an extremely short-sighted approach to business development and fails to take into account that the big money in business is on the back end.

Funny thing is, so many businesses use this model in their business-building efforts. What about you? Here is the model:

I think the visual explains it quite well:

1. A business creates brand awareness for itself and its products

2. From that brand awareness, the business generates sales prospects/opt-ins which – if the business owners has half a brain – go into the business's database.

3. The prospect is then converted into a customer. KA-CHING, a sale is made!

4. That new customer then falls into a black hole, never to be heard from the business ever again.

5. The business misses out on additional revenue from that customer. Instead it focuses on getting more new prospects and customers. In essence, the black hole represents a wasted opportunity.

Why do some business owners operate such a dumb model? Two reasons:

1. Mental and behavioral. Some business owners just couldn't give a stuff about the back end and so their whole mentality is about getting new business. They operate a dumb model because they themselves are dumb.

2. Strategic. Many business owners understand the concept of the back end, but don't really know how to put it in practice in their business. So, in this respect they need to know how to strategically develop and implement a sound revenue stream model. In particular they need to know how to create a focused product portfolio, develop the right price points, position their products to the right target markets and develop a proper sales process.

If you have a mental and behavioral block towards developing a back end in your business, it's unlikely that I can help you.

However, if you want to develop a back end, then continue to read the next few posts as I go through some other, more effective revenue stream models you can create and implement in your business.

Remember these key points.

1. The black hole revenue stream model is for dummies.

2. The big money is on the back end.

In the next post we'll look at a basic back end revenue stream model and I'll also introduce some model variations for you to consider.