What is a digitized services revenue model and why do you need one?
Author: Leanne Knowles
First published: September 2020
Article updated: August 2024
3-4 minute read
Introduction
The post-Covid world has created previously unimagined challenges for small and medium sized business operating in the services sector. Going online is the not-so-obvious answer to generating more revenue, but how do you do that when you are in a services business?
What is A digitized services revenue model?
A digitized services revenue model repackages a traditional service that was previously delivered in-person, into a digital version of the service, that either adds value to the traditional service, replaces it, or provides an additional delivery option for a similar outcome.
Why is it important?
This provides your business with not only a new stream of revenue, it also opens up opportunities for reliable, consistent recurring revenue. Lumpy cashflow that has long been a characteristic of services businesses, becomes a thing of the past.
At the same time, it has the potential to massively increase value for your customers, differentiate your brand, and drive long term sustainable profitability.
Business owners in the services sector now have a clear pathway to digital and recurring revenue, so they can start getting excited about the future again.
The infographic below outlines the transition that businesses in all industries are making from the traditional, linear revenue models that tend to focus on new customer acquisition, to the new digitized model with a focus on customer experience and customer retention.
TRADITIONAL MODEL
Focus on customer acquisition
In the business traditional model, your products and services are sold and delivered to your customers via your marketing and distribution channels in a linear and transactional way.
To keep revenue coming in the door, you need to find increasingly more new customers. It can be a labour intensive, largely inflexible and often inconsistent model. While there tends to be a focus on customer acquisition, this comes with a tolerance for higher customer churn rates.
You do what you can to keep customers returning, but this takes a back seat to new lead generation and new sales. Nurture programs, up-selling and cross selling don’t necessarily play a central part in the sales and marketing focus.
DIGITIZED MODEL
Focus on customer retention
Many businesses have already moved on from the Traditional Services Revenue Model to a Digitized Services Revenue Model.
This means that anyone who is lagging behind, could find it increasingly difficult to catch up as time goes on, with the unfortunate consequences associated with any industry disruption.
This model is a dynamic, differentiated, experiential, and provides a more predictable service delivery… It is also potentially more cost-effective.
It includes a focus on retaining customers first and foremost, then maximising total earnings and value from those customers over their lifetime with you. Thus, measuring Customer Lifetime Value (CLV) is now an essential strategic business metric.
Download Infographic
Examples of digitized services
Digital services are already being delivered globally and in all industries using powerful, tried and proven revenue models.
I have provided here some examples of well-known businesses, as well as small niche players. However, you will find a digital services revenue model in this list that can work for your small or medium sized business.
- Managed Services – Network Overdrive, Sugarshot
- Software as a Service (SaaS) – Salesforce, Dropbox. Clickfunnels
- Affiliate selling of SaaS – Anyone and everyone is doing this
- Content Subscriptions – AFR, Washing Post, The Point Magazine
- Memberships – Rental Rookie, Keto Connect
- Online Training – Aviator Training, TrainingBeta
- Evergreen online courses – Headswitch
- Digital Contracted Services – Telstra, AT&T
- Digital Advertising – Google, Facebook
How do you digitize your services business?
The objective here is to add value to your customer’s experience, differentiate your service, and at the same time generate new streams of revenue.
You are only limited by your imagination!
Service business can convert some of their traditional services or knowledge into digital products to create recurring revenue.
Even if you can’t replicate your service in a digital environment, there are many ways to add value, differentiate, and create new excitement around your business.
Product sellers can digitize service options and package products with services using technology and automation to expand revenue streams.
Here’s a list of information, services and support that help customers get better results from your traditional services.
- Digital Information products
- ‘How To’ Videos
- ‘Ask Me Anything’ Videos
- Online courses
- Virtual mentoring
- Scheduled accountability calls
- Virtual memberships
- Automated email nurture
- Virtual project accountability support
- Virtual events
- Access to research reports and whitepapers
How to take the next step to digitize your service…
If you run a business in B2B or professional services, and you want to grow and scale your business for sustainable profitability, there’s lots of ways you can get started with a new digital revenue model.
Here’s 5 simple steps to get you started…
- Review the opportunities inside your business
- Do you have skills or knowledge you can record in a digital format?
- Are there customer frustrations and challenges you are not yet addressing?
- Can you bundle services and projects with coaching or online courses?
- Create an irresistible offer that makes your competition irrelevant
- Adapt your systems for upgraded billing and service capabilities
- Automate your marketing and sales activities where possible
- Ramp up your customer onboarding with videos and automated email sequences
My Recurring Revenue Checklist
In the meantime, here’s My Recurring Revenue Checklist that I have used in my own business to help me build out my digital services strategy. It’s yours for free and it’s an easy download, so just click on the link below and you’re on your way to the next step.
About Leanne Knowles
Leanne Knowles is a former professional skydiver turned Business Growth Strategist, who started two successful businesses in the adventure sport industry at 24 years old and sold them both ten years later. Leanne founded Headswitch as a marketing consultancy in January 2000, and now helps business owners in B2B and professional services to grow and scale their business using smart, simple strategies, the latest tech tools, and productive business relationships.
