Different Types of Recurring Revenue Streams
Before we begin talking about how to set one up and plan one, let's look at the different types of recurring revenue streams you can generate online. There are basically three different forms of recurring revenue.
The first one is a subscription based model, where people subscribe to your brand through something like a membership where they gain value each month. As long as you are performing for them and meeting their needs, you can secure your income with minimal drop offs.
The reason many consumers enjoy belonging to an online membership program is because they are a part of a community where they can connect with each other, ask questions of you, and even support each other in their goals.
They also like receiving ongoing value from someone they know and trust. They get to look forward to new information such as courses, templates, and other elements of content that meets their needs.
You can also offer different tiers of subscriptions so that people can choose one that fits their budget. When promoting this type of recurring revenue stream, you can offer a free trial to prove value before they make a commitment and drip teasers out to non members so that they can get a sneak peek of the type of value that waits for them inside.
The second type of recurring revenue business model is licensing. With this type of option, you are going to charge your customers for the right to use a product for a specific period of time, where it renews each month, quarter, or year.
Many online software developers use this type of recurring income model and the price is more attractive for a longer commitment, such as purchasing annual rights rather than monthly.
With this type of business model, you can have other ways to earn from it, such as charging for a single user or multi user license and having tiered licensing where they can access different functionality or features.
Digital product models with recurring revenue are the third option, and this allows you to bill customers on a regular basis for the of your product. So if you develop a product that is cloud based, such as storage or a product such as an artificial intelligence tool, keyword research tool, etc., you can charge customers for using what you created.
If you think about it, you are probably using this type of business model as a consumer. For example, if you have an email autoresponder system, you are likely paying a certain fee each month for the number of subscribers you have, which increases the more people you get on your list.
Or, you might be paying OpenAI for access to ChatGPT plus. You pay each month for the use of that tool, and as soon as you stop paying, your access goes back down to the free level or stops altogether.
The great thing about this type of revenue model is that customers only have to pay for the level that they are using, so they see it as a fair deal, where their price is less when they are using the product less.
As your product is proven to be useful to them, and you entice them with elevated features and perks to different levels, they can upgrade and contribute more to your recurring income stream.
