Classic pricing models on the brink of extinction?

Oliver Roll from the management consultancy Prof. Roll & Pastuch - Management Consultant predicts that the classic payment models have had their day."The classic payment models need to be put to the test," Professor Oliver Roll of Prof. Roll & Pastuch - Management Consultants is convinced. Music and video services have been successfully and almost exclusively relying on the "recurring revenue management" pricing model for some time now: customers no longer pay once for a single CD, audiobook or DVD, but instead purchase music and film by stream on a subscription basis or as a flat rate - "and with a price advantage of up to 91 percent," says Roll. Providers are providing clear incentives to switch to this pricing model, because they benefit from closer customer loyalty and secure, regular incoming payments. Those who opt for Spotify & Co. once are very likely to remain loyal. "The trend of recurring revenue management is most advanced in digital products, but the new payment models are also causing upheaval in other industries," notes pricing expert Roll.Industries in transition: subscription commerceBoth established online retailers and startups want to turn one-time buyers into regular customers and secure a permanent income with product and service subscriptions: Whether socks, diapers, deodorant, or dog food - there is hardly a product for everyday needs that is not available on a subscription basis. "The subscription payment model is ideal when it comes to products that are used regularly. The price advantages for the customer are lower than for digital products. Instead, the advantages of convenience and security of supply take effect here," says Roll.B2B: Those who dare new pricing models winCompanies in the B2B sector can also gain a competitive advantage by replacing the "goods for price" model with recurring revenue management. "However, this requires more creativity and sometimes the courage to take risks with classic B2B products compared to digital products and subscription commerce. But it pays off," Roll is convinced. One example: the machine and plant manufacturer Zwick Roell offers a warranty extended to 60 months on machines if the customer signs a contract for maintenance and calibration. Instead of individual repairs or spare parts orders, this means a constant flow of income over the entire period. Roll: "This gives the company a triple advantage: constant revenue, high customer loyalty and less administrative work, as expensive goodwill provisions can be priced in directly. For the customer, the main advantage is security and process relief." One-time payments are also declining in the software industry, as more and more providers are switching from one-time purchases to monthly fees, for example pricing software providers such as Price f(X), CRM providers such as Sugar, and market leaders such as Oracle. The combination of a low barrier to entry and long-term customer loyalty is so attractive that these companies prefer to focus on long-term profitability rather than short-term revenue.Win Win for customers and companies"The new payment models offer advantages for both customers and companies: More profits with greater customer satisfaction - that's a rare opportunity. Many companies should not and will not miss it," predicts Roll. For companies, it is now important to review their business models in terms of revenue and earnings potential: "As a basic measure, the model is certainly suitable for all industries. Particularly in industries with products that can be digitized, recurring revenue management will displace the other pricing models," Roll is convinced. Recurring Revenue Management is also active risk management and offers profit opportunities for hairdressers just as it does for providers of machine parks. In particular, suppliers of products that are purchased on a regular basis should consider introducing recurring revenue management. The advantages for customers are obvious: firstly, they receive a price discount; secondly, they experience mental relief, as new orders are eliminated or simplified; and thirdly, they have security of supply. From the supplier's point of view, recurring revenue management significantly supports customer loyalty and also ensures regular payment flows.