Instead of trying to fight for retail space, GreenTeaDaily decided to bypass the traditional ways of selling tea by going directly to customers and asking them to pay for their tea like a cable bill: on a monthly subscription.
If you are a customer, for $49.99 a month, GreenTeaDaily will automatically ship you a box of green tea every month. You don’t need to remember to stock up on the fat-burning wonder drink, and save $10 per box.
The company can count on you as a customer in the coming months, which allows it to stop pouring money into advertising to remind you to buy a box of green tea every time you’re at the mall.
If you’re thinking of evolving your business model to a recurring billing arrangement, you’ll have to think through what’s in it for the customer to commit long-term.
Consider these four ways to get customers to agree to the recurring billing model:
1. Set it and forget it
Some basic services (alarms, spring water) are no fun to shop for and therefore some customers will allow you to bill their credit card monthly just so they don’t have to remember to buy from you each month.
2. Be pre-emptive
Some customers will switch to a recurring billing model if you promise to pro-actively manage the relationship.
Instead of waiting for customers to call, home maintenance firm Hassle Free Home Service Inc. sets up its customers on an annual home management contract and pre-emptively manages the customers’ homes. In the fall, Hassle Free shows up to clear the leaves from customers’ gutters without being asked. Come winter, the furnace filters get swapped out, without the homeowner having to remember.
3. 911 service
Salesforce.com sells its customers service packages like the “premier success plan.”
Instead of having to report an issue or ask a question online like the regular folk, premium success plan subscribers get a special phone number to call, which promises, among other things, a response to a query within two hours.
If all else fails, simply offer customers a discount in return for agreeing to a regular billing relationship. GreenTeaDaily customers who join its loyalty program and agree to a monthly recurring billing arrangement save $10 on each box of tea.
Because they don’t have to regularly resell to customers, recurring -billing companies are often the most valuable and profitable businesses in their category.
Now all you have to do is figure out what’s in it for your customer.
Special to The Globe and Mail
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. You can download a free chapter of his new book, Built to Sell: Creating a Business That Can Thrive Without You.
Join The Globe’s Small Business LinkedIn group to network with other entrepreneurs and to discuss topical issues: http://linkd.in/jWWdzT