A government albeit a welfare state should
have an income so that it can make a system more and more efficient and modern.
With the onset of new technologies every year, a system has to be modernised
with the current and upcoming technologies and infrastructure to provide
smoother functioning to the system. Introducing a new technology within a
system requires a considerable investment of money.
Therefore, to generate revenue from a
system to equip it with modern-day tools & technologies, while also not
putting a load in the customer’s pocket, a recurring revenue model can be put
into the picture. This system will not only bring cash inflow but will benefit
the customer in many ways. It will also increase the utilisation of the
transport system.
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Recurring Revenue Model
It is a business model in which the vendor
provides access to a product or service in exchange for a recurring fee charged
on a regular basis (monthly, quarterly, or yearly). Subscription businesses and
membership services are built on this model. (Amy Fledman, 2015)
Customers purchasing the product or
service on a consistent basis ensures predictable cash flow and a sustainable
profit margin for the company. Unlike traditional one-time sales, in which the
relationship between the vendor and the customer ends after a single sale, the
recurring revenue business model assists in establishing a deeper relationship
with customers in order to achieve high customer retention. (Robbie Kellman
Baxter and Daniel McCarthy, 2018)
There are various kinds of recurring
revenue models used by companies to enhance their productivity and ensuring a long-term
relationship with the customer.
1- Hard
Contracts: There’s a predetermined price which
allows you service for the fixed amount of time. This ensures contingency of
cancellation of the service to be nil.
Broadband services are examples of hard contract. If one has to cancel the
subscription, one should pay a cancellation amount. (Keerthana Nithyakumar,
2021)
2- Auto-renewal
subscriptions: Up until the customer decides to
freely terminate their membership, the business automatically gets income.
Auto-renewed subscriptions are also known as evergreen subscriptions because
they can effectively continue indefinitely. (Keerthana Nithyakumar, 2021)
3- Sunk
Money Consumables: After making their
initial purchase or expenditure in a platform, clients make follow-up purchases
that facilitate ongoing use of the product or service.
Apple products can only
be synced with other products of the apple. In order to use an apple watch, one
must have an iPhone to sync and use it. (Keerthana Nithyakumar, 2021)
4- Tiered
billing: There are several tiers or levels of use
in the pricing system. Customers advance to the next tier, which often offers
more capabilities and usage units, after their consumption surpasses the limit
for one tier. SaaS solutions with various pricing tiers. (Keerthana
Nithyakumar, 2021)
5- Freemium:
Customers have free, unlimited access to the product or service under a
freemium model, but they must upgrade to a premium plan in order to access any
additional or advanced features. For instance, you can create playlists and
listen to songs for free using Spotify. However, you must upgrade to the
subscription plan in order to enjoy premium benefits like ad-free listening and
high-quality audio. (Keerthana Nithyakumar, 2021)
Applying the model to the current situation
To achieve an efficient revenue-generating
yet public welfare model, we will introduce the following things:
1-
Introduction of smart cards which will have a monthly, quarterly or
yearly recharge. This is a tiered billing system. A person subscribing for a
monthly subscription will get certain benefits but it will have lesser benefits
as compared to a quarterly or yearly recharge.
2-
Taking a subscription will reduce ticketing costs per day. For instance,
if a ticket for the entire day is £3 and the person with a month’s subscription
will be charged 45£.
3-
People using the service via cards will be given loyalty points that
they can redeem. Redeemed points will ensure discounts at various shops and
platforms. This will enable a rural person to get access to things at a lesser
cost.
4- The entire process will retain a customer making sure he gets used to the public transport system.
5- This will also cater to free marketing since the person availing this facility saves his cost of travelling which he promotes by discussing it with other rural people around him.
Therefore, this model will generate a
periodical and continuous cash inflow ensuring profit for the government and
the customer. The customer will be benefitted by saving his income and getting
more profits in the form of discounts and other coupons. The transport system
will ease the commute from rural to urban areas where there is more employment.
The government will be ensured a cash
inflow which it can use for future prospective such as building better
infrastructure and using the latest technologies. Additionally, the Government
can set up industries in the rural areas in the future, as there would be a
better transport system and infrastructure which will help generate more income
for the rural areas.
References
a (Image source: Admin, 2020, http://www.3cstrategicadvisors.com/wp-content/uploads/2020/06/Recurring-Revenue-Model-1.png
b (Keerthana Nithyakumar, 2021), https://www.zoho.com/subscriptions/guides/what-is-recurring-revenue-business-model.html
c CFO, The Magazine for Senior Financial Executives. 2018, Vol. 34, Issue 6, pages. 2
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