Netflix vs Blockbuster

10 years ago Friday nights were more often than not spent at Blockbuster Video browsing through movie titles and hoping you got there before the hottest new release was gone.

You could walk into one of these video rental stores on a weekend and see all of your neighbors and friends picking out movies to watch.

Blockbuster Video is out of business now, so I’m showing my age here, but I remember looking forward to the weekly trip to see what movies had come out. It was exciting and FUN.

This monolith of a company rented VCR tapes, and then DVDs and Blu-rays when the technology changed. They completely dominated the movie rental business and seemed invincible.

But then, a small startup started slowly eating away at Blockbuster’s business. You’ve probably heard of them. They’re called Netflix.

At first, Blockbuster pretty much ignored Netflix (or laughed at them), confident they were the king of movie rentals. But… Netflix had something valuable the Blockbuster didn’t.

A subscription service.

This was before streaming video and broadband Internet was widely available. Netflix would actually have you fill out an online (or mail in) form about your preferences for movies, and then ship them to you in the mail. You would return them in the prepaid packets when you were done.

For this unique and disruptive service, you were charged a small recurring monthly bill.

And because of the recurring subscription members, Netflix was perfectly positioned when video streaming became broadly available.

Netflix became the Blockbuster killer, in large part because they had reliable, recurring revenue baked into their business model.

A subscription service or recurring revenue is one of the most important things you can build in your business. It guarantees a stable and predictable income and a high lifetime customer value.

And no matter what business you’re in, from dog grooming to pizza making to selling products online through Etsy, you can and should develop subscription part of your business.

Here are 5 tips that will help you start your own recurring revenue stream.

#1. Low ticket recurring revenue options.

This is the Netflix model (even today). Netflix charges a small fee and provides a TON of value. The reason that small fees work so DARN well is that people forget about them. I don’t give any thought at all to my $10.59 a month Netflix subscription.

But I DO really care about my $200+ a month cable bill. Both are recurring revenue models, but low-cost models (or what is sometimes called micro-continuity) also have the HUGE advantage of having a very low drop off rate.

A newsletter subscription with niche specific information or a “box” delivery service both work VERY well with these models.

#2. High ticket recurring revenue options.

High ticket recurring revenue options are PERFECT for service businesses.  Many HVAC companies have a yearly inspection and service model where you pay a yearly fee to have your heating and air conditioning inspected and then get a discount on any repairs.

Nearly EVERY service company can implement a high ticket recurring revenue option. These are often billed quarterly or annually and are typically geared to save customers money.

#3. The “Amazon Prime” model.

This is a recurring revenue model that focuses on giving away “goodies” and “perks” in exchange for being a member.

For a moderate yearly fee, Amazon Prime members get free two-day shipping (and spend more on Amazon) as well as free streaming content and other perks.

Some businesses frame this as being a “Platinum” or “Premium” member.

Other examples of perks that people like (and are willing to pay for) are speedier tech support and special white glove service.

#4. Exclusive “clubs” and groups.

Triple AAA is one of the best examples of this. But so are trade organizations and coaching clubs.

Any group that promises exclusive rewards, knowledge or benefits in exchange for a recurring membership fee does this well.

If you have a specific area of knowledge, this might be a good approach for you.

#5. Recurring revenue and subscriptions work GREAT as an upsell.

Unless you have name recognition like Netflix or AAA then it can be difficult to get people to sign up to be billed every single month right off the bat.

But if you sell them a product or service that they LIKE and APPRECIATE and then offer them your subscription as an upsell (especially if you give them the first month FREE) then they are more likely to bite.

And just 10 subscriptions for a 5.99 monthly recurring revenue product a day can produce a $10,000 to $18,000 a month revenue stream in a year (depending on the attrition rate). So it’s certainly worth doing.

Monthly, quarterly, or yearly recurring revenue can create a HUGE amount of stability in your business. Start brainstorming good options for YOUR business and most importantly – GET STARTED!

5 simple ways to create recurring revenue with an online business.

Brian T. Edmondson
Brian T. Edmondson

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