The primary role of the corporate treasury department ensures that the business survives, e.g. getting cash/liquidity in the right place at the right time to support the business, and managing risks related to changes in interest rates, credit, currency, commodities, and operations. BUT they also have a vital role – in a way a duty – to support and help the business to spot and open up new business opportunities, even new business models.
Recurring revenue/subscriptions business model
The purpose of a business is to create AND KEEP a customer, so in keeping a customer there must be recurring revenues. The issue is how to consolidate your relationship with the customers so they always buy the service or good direct from your company cutting out third parties. In short, turn the customer, who has used your services for years, into subscribers. This is the new Business Model:
the Recurring Revenues / Subscription model
in which you turn each of your regular customers into subscribers – weekly, monthly, quarterly, etc. This consolidates and locks in a major part of your revenues.
The recurring payment disciplines
Understanding the ebbs and flows of subscribers behaviour is complex. Not surprisingly, as with other areas of payment collections, service supplier platforms are turning to artificial intelligence machine learning technologies to improve efficiency, e.g. reduce declines.
Recurly, a leading subscription platform, has developed a Revenue Optimization Engine which “takes a highly tailored approach to each invoice, using statistical models and machine learning to improve collections—increasing their customers’ monthly revenue by an average of 9%.
Some of the key differentiators between recurring payment service providers include:
- Ease of use and setup, and how long to go live
- Validate card details at signup
- Keeping subscriber details up-to-date in real-time
- Recovering lost revenue from card expiry or cancellations by optimizing your billing and retrying strategies
- Maximizing payment success rates with data and machine learning.
Opening up the new business model
Getting a recurring revenue/subscription model started requires:
- The right resources and leader
- Money and patience, i.e. the understanding it will take time to build revenues
- Understanding what customers really require.
CTMfile take: In the current COVID-19 crisis corporate treasury departments can play a huge role in spotting and exploiting new business opportunities.
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