Reoccurring–don’t you mean recurring–what’s the difference?
Recurring revenue is pretty well defined: this is revenue that comes in repeatedly, in predictable amounts, at regular intervals. There is also a sister category, which I’ll call “reoccurring revenue”. I can’t find a good business definition, so I’ll have to lean on the grammatical distinction between recurring and reoccurring. Things that reoccur happen more than once, but not always regularly or predictably. So by extension, reoccurring revenue is revenue that repeats, but for which there’s some uncertainty around timing or amount.
Technically, lots of repeat customer relationships could qualify as reoccurring revenue, but I’m more interested in steadier arrangements that might otherwise be categorized as recurring revenue. There are a few big categories that fit this bill
1. Payments, commission, and other B2B2C
While business-to-business-to-consumer (B2B2C) companies get revenue through the same business clients every month or year, the amount of revenue can vary based on behavior of the end consumers. Payments companies are a classic example: the revenue that a payment processor makes in fees depends upon end customer traffic, spending, and choice of payment type. Companies that make their money on commission or referrals, like travel aggregators, would also fall into this category.
2. Two-sided platforms and marketplaces
Marketplaces have always had to build their products around distinct buyer and seller user groups. Typically their revenue is proportionate to the traffic on their platform, so they need to drive utilization by both user types.
3. Contracted volume-based pricing
More and more SaaS and tech-enabled service companies are opting for usage or value-based pricing. Most end up still operating with some flavor a recurring model, but some move to pricing that’s completely variable and enter reoccurring territory. For examples, think about companies that opt to charge only for users active in a given period (like Expensify) or companies that charge per usage event (like Twilio).
Utilization is the name of the game
In reoccurring arrangements, there are often multiple customer types: service provider and service seeker, product buyer and product users, payer and payee. Usually, it’s something of a two-part sale, where you start with a larger “partner customer”, then encourage a smaller “utilization customer” to use the product or service. If you stop once you have the partner customer, you’re only half way there. Continue reading “Not quite recurring: driving utilization in reoccurring revenue businesses”