They got me - I had no choice but to buy...
Wow, talk about a powerful recurring income strategy.
A couple of years ago, I bought a Samsung 61 inch DLP television. Let me just preface this by saying, I absolutely can not live without that TV.
Yesterday I woke up, turned on the TV and BAM! - I heard a fizzing sound and the screen went blank. "OMG, my TV!" I thought as I starred at it in disbelief.
I turned it off and on about 17 times with no luck. I couldn't figure out what was wrong with it so I started looking for my papers. Of course I had a two year warantee which had just expired two months ago. Grrrr!
As I spoke to the rep on the phone, I discovered that the TV wasn't actually broken. All it needed was a routine replacement of the lamp. But guess what, the darn lamp is $159 and the only place you can get it is to order it through them. Coincidence? I think not.
They could have made it so you only have to change a bulb and pay $5 to replace it - but that would be dumb. Instead they make you change the whole lamp so that they can get you for $159 instead.
They got me - what else could I do? I'm not going to pay $3k for another TV. So as it stands, every two years or so I'm going to have to pay them another $159.
There's a marketing lesson in this. If you sell a high ticket item, a small recuring add on charge is not viewed as a big deal. The $159 seems like nothing compared to the original $3k I spent. This is a way to increase the lifetime value of your customers and generate recurring income.
You see software vendors do it all the time. They sell you the software and then charge an additional fee down the road for updates.
Traffic fusion is an example. It was a high ticket item with an ongoing licensing charge which doesn't seem like a lot compared to the original price you paid. Once you've started using the software and making money with it, you will continue to pay the ongoing charge because it's probably too much of a pain to migrate to another solution.
Aweber is another example. As your list grows, their revenue grows with it. It's a pain to switch to another autoresponder so you're sort of locked in with them.
What other ways can you produce recurring revenue with a high retention rate?
A couple of years ago, I bought a Samsung 61 inch DLP television. Let me just preface this by saying, I absolutely can not live without that TV.
Yesterday I woke up, turned on the TV and BAM! - I heard a fizzing sound and the screen went blank. "OMG, my TV!" I thought as I starred at it in disbelief.
I turned it off and on about 17 times with no luck. I couldn't figure out what was wrong with it so I started looking for my papers. Of course I had a two year warantee which had just expired two months ago. Grrrr!
As I spoke to the rep on the phone, I discovered that the TV wasn't actually broken. All it needed was a routine replacement of the lamp. But guess what, the darn lamp is $159 and the only place you can get it is to order it through them. Coincidence? I think not.
They could have made it so you only have to change a bulb and pay $5 to replace it - but that would be dumb. Instead they make you change the whole lamp so that they can get you for $159 instead.
They got me - what else could I do? I'm not going to pay $3k for another TV. So as it stands, every two years or so I'm going to have to pay them another $159.
There's a marketing lesson in this. If you sell a high ticket item, a small recuring add on charge is not viewed as a big deal. The $159 seems like nothing compared to the original $3k I spent. This is a way to increase the lifetime value of your customers and generate recurring income.
You see software vendors do it all the time. They sell you the software and then charge an additional fee down the road for updates.
Traffic fusion is an example. It was a high ticket item with an ongoing licensing charge which doesn't seem like a lot compared to the original price you paid. Once you've started using the software and making money with it, you will continue to pay the ongoing charge because it's probably too much of a pain to migrate to another solution.
Aweber is another example. As your list grows, their revenue grows with it. It's a pain to switch to another autoresponder so you're sort of locked in with them.
What other ways can you produce recurring revenue with a high retention rate?
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