A revenue model is a critical component of your connected customer business model.
A revenue model identifies which sources of revenue to pursue (aka, your customers with whom you transact business), what type(s) of value is/are offered (product/service value, customer value, business value, employee value, supplier value, channel partner value, etc.), and at what price and who pays for the value offered (based on type of value defined and how it is distributed).
Yesterday’s gone. Yesterday’s revenue model focused on deriving income from: a) the types of customer segments your products, services and platforms were well-suited for; b) the type of cost structure your company needed to generate top line income and bottom line profitability; c) the type of infrastructure and personnel required to create tactical and strategic value; and d) how you articulated value so you could transact business.
Yesterday’s revenue model assumed customers were fairly homogeneous so revenue could become predictable. Companies assumed customers did business with them because of products and/or capabilities delivered in a timely manner at the lowest cost. Marketing materials and value propositions presumed that a One Size Fits All format would win and retain customers. Similarly, sales assumed a One Spiel Fits All script applied to any type of customer.
Focus on Tomorrow. The Internet of Things (IoT) creates a connected customer: one in touch and in sync with their marketplaces, suppliers and partners. Connected customers access data to make decisions. They are skeptical and not shy about providing feedback on the quality of their experiences. They interact and influence each other’s decisions.
Tomorrow’s business model and revenue model are far more complex than today’s. Your customers, markets, revenue and value are anything but homogeneous. Tomorrow’s business model and connected customer revenue model leverage data-driven customer insights. Your focus: to redefine how value is created for and leveraged within your increasingly heterogeneous customer segments over their lifecycle doing business with your company.
Customer focus is table stakes. Customer-focused models involve execution of business strategy to create consistently high quality service delivery and relevant experiences at each customer touchpoint. All customers receive the same level of service. The goal of customer-focus is to build and retain a loyal customer base. Your revenue model is fueled by repeat purchases. Examples of customer-focused models in the B2C (Business to Consumer) marketplace include iconic brands like Apple®, Amazon®, Nordstrom® and Disney®.
The same holds true if you are a B2B (Business to Business) company such as technical and manufacturing companies contracting with clients like IBM, GM, Boeing and Raytheon. Each supplier and client focuses on creating a consistent, high quality level of experience when working with one another. The mutual collaborative experience impacts everyone’s revenue stream.
But wait, there’s more.
Being customer-friendly and offering consistently good service is your current and potential customers’ baseline expectation. There’s more involved in your future revenue model than retaining customers by being customer-focused.
Tomorrow’s revenue models are customer-centric and customer-connected. Customer-centricity focuses on how well you understand, capture and manage high-value customer segments throughout their lifecycle with your company. To read more about these concepts, take a look at the Mother-Ship of customer-centricity, Dr. Peter Fader’s book.
The IoT connected customer revenue model allows your company to gain granular analytic insight into what each of your customers is “worth” to you over the lifecycle of your relationship. Different methodologies and analytics are applied depending on whether your business is contractual or not, factoring in variables such as cost of acquisition and customer lifetime valuation.
Customer-centric businesses only place value on revenue generated by an organization’s highest value customers. Special customers receive special treatment, products, services and operational and organizational capabilities.
Redefine Your Customers. Consider how much time your company currently wastes serving high maintenance, diva customer types. These C-List customers consume time and resources and negatively impact profitability without guaranteeing recurring or repeated lifecycle projects.
Utilizing data-driven analytics and customer insights to create a connected customer revenue model changes your playing field. Assess the value of your current end-user customers. Define who you want to do business with Tomorrow. Evaluate how your business and revenue models are intertwined with your suppliers, channel partners and financiers.
Tomorrow’s connected customer revenue model is dynamic and responsive to the pace of technology and the global, competitive business ecosystem.
What is your strategy for growth, expansion and sustainability for Tomorrow? Are you overdue to retool and recalibrate your mindset and strategy? To hit Tomorrow’s target, leverage technology to continuously refine your definition of market segments and value.
Babette N. Ten Haken is a strategist, analyst, author and blogger. Her focus: the interrelationship between teams, leadership and culture in technology and manufacturing. Her Workshops target excellence in the execution of strategy. Babette began her career in clinical research where she was asked to bring clarity to stalemated cross-functional conversations. Her Playbook of collaboration hacks, Do YOU Mean Business? is available on Amazon.com.
Photo courtesy of iStock.