Sharing is Daring – How to move to a recurring business model
Moving to a recurring services business model, or joining the ‘sharing economy’, is not an easy task. Whether you are an existing company adding services onto your products, or just trying to get in on the action with a ‘how didn’t I think of that’ idea, you need the right systems and structures in place, a lot of luck, and a decent head on your shoulders. But that doesn’t mean there aren’t plenty of inspiring companies out there that have done it right, and have done it their own way.
Here are five of our favourite businesses making the most out of recurring services and the sharing economy.
JustPark is an app-based service in the UK that tells subscribers where the nearest vacant parking spots are. The service lets drivers book commercial, public or private parking spaces, and opens up underused spaces to an extremely busy market.
This model is an example of one that really works for everyone. Subscribers get real-time information including how long the space is expected to be free, with the ability to reserve spaces in advance, and parking space owners can decide when spaces are made available, and get regular or one-off payments sent directly to a bank or paypal account.
JustPark’s Dynamic pricing model uses a similar algorithm to the now infamous Uber model, working on availability and demand to change pricing structures, and their system can be integrated with a company’s existing platforms to add extra value onto their original product, or as an incentive to employees.
This kind of flexibility is crucial in the sharing economy, but is no less profitable than traditional business models – JustPark promises a 20% higher yield for participating companies, and has already signed up more than 20,000 of them.
Dollar Shave Club
Dollar Shave Club (DSC) delivers razor blades and other grooming products to subscribers on a monthly basis. With a choice of three packages with a different razor for each (the Humble Twin, 4X, or Executive with two, four, or six blades respectively) DSC charges a respectable $3-9 USD for the different packages per month.
The company plunged into the beauty market in 2012 with a brilliant, low-budget viral video, and has been growing ever since to their current base of ~3.2 million subscribers. With a keen eye on their audience – young, and about 80% male – DSC offers a starter pack for $5 USD (including a ‘Sh*t, Shower, Shave’ toiletries set) and has a flexible joining and leaving policy to complete the ‘high-quality products direct to your door’ business model.
Dollar Shave Club, while not a connected company, have come up with a simple and effective subscription-based model that caters exactly to their customer base. Having such a close relationship with your client is all the more important when using a model like this, and with DSC’s ‘Butt Wipes’ and ‘level 9 yogi flexibility’, they have clearly done their research.
Another subscription-based company with their target market clearly defined is SurfAir, what you might call the Uber of air travel. Rather than buying tickets, SurfAir allows busy, frequent fliers to pay a monthly fee and fly as much as they want without any of the usual airport hold-ups. By using a secure mobile app, private planes and terminals, and in-depth security checks just to become a member, the service promises that members can arrive at the airport 15 minutes before take-off without any trouble.
Flying to ten destinations around Europe (including Zurich, London, and soon Berlin) and another eleven in California and Nevada, SurfAir are not planning to take over the whole world any time soon, but with all-you-can-fly European memberships starting at £3,150 (or $2,950 for the full American network) they don’t need to.
The value in SurfAir’s service is not that they are the cheapest, or that they can get you anywhere in the world – it’s that they save time for their clients. By stripping away everything time-intensive except the flight itself (and the luxury in-flight amenities), SurfAir ‘add four more hours to the work day’, which, as anyone who needs to fly more than once a week will tell you, is worth every penny.
Featured in our smart transport blog, Spanish moto-sharing company Muving offers a simple and intelligent way to reduce congestion and pollution (and free up parking spots) in cities. With a fixed cost of €0.21 per minute to use, and €0.10 while parked, these electric bikes provide a cost effective, decentralised, and eco-friendly transport method that is in ten cities around Spain, catering to the massive population of moto users in the country.
By fixing their pricing structure like this, Muving have followed a different model than the other services on this list, opting for a per-event system instead of a subscription that, in this case, could have limited uptake of the service. Because their audience was already used to riding motos around the city, Muving had to make sure their service was as easy to use and to pay for as possible – with the app users can even find out whether a moto has two helmets or one. By fixing their pricing, and leaving everything else as open as possible, Muving has become a common sight, at least in Pod’s home city of Seville.
Despite some unwise decisions (like removing the option to tip shoppers, which was reinstated just weeks later), InstaCart has gone from strength to strength with their independent grocery shopping and delivery service. With a team of shoppers and drivers working on a flexible basis, subscribers to the service get same-day delivery on their groceries without having to book an unreasonable delivery slot at 7am or 10pm, four days in advance.
By hiring both ‘full-service’ shoppers that shop and deliver goods (independent contractors with their own car and smartphone), and ‘in-store’ shoppers that only work, well, in-store, Instacart reduces costs by having their employees take care of the infrastructure, and uses a similar ‘busy pricing’ model to drive up revenues from a fairly low base margin.
Like Uber, InstaCart have come under fire for their aggressive growth strategy, and if they are planning to expand outside of the US and Canada they may want to iron out some bugs first, as the most important part of any business looking to get in on the sharing economy, is listening to your customer base.
Scaling up your Service
These companies all have one thing in common: yes, they are all recurring services that utilise technology in some way, but they have also all exponentially grown their size and/or profits since their inception. This is no coincidence. Subscription-based services are a much more stable base to grow a business than the traditional discrete sales model, and soon consumers will expect this level of freedom in all their business interactions.
Pod Billing, our hierarchical billing and management platform, is designed to help all companies (connected or not) move to this kind of business model, so that they can remain competitive in future, and profit from a closer, more frequently reinforced customer relationship.