Recurring revenue is the key driver in subscription economy. Retaining the existing customers is as important as adding new customers. With the change in business model from ownership to subscription, the buying trends have changed.
Customers don’t believe in spending high initial costs. Rather than long term contracts, they prefer subscription based model.
The recurring business model needs high investment initially, but it can be compensated through renewals, upsell, cross sell and expansions. That’s why subscription models focus on LTV v/s initial costs revenue.
Recurring revenue can be predicted on the basis of churn rate, and Customer Lifetime Value (CLTV). Unlike traditional businesses, the success of subscription model is directly proportionate to recurring business.