Course 4.  Revenue Stream

A revenue stream is a defined market of selling activities that produce sales revenue for a company.  It's usually focused on a particular product or service. Companies create a variety of revenue streams to create a consistent flow of sales revenue.

In this course you'll learn about:

1. Introduction to Revenue Streams
2. How To Build a Revenue Stream
3. Managing Revenue Streams

Introduction to Revenue Streams

We hear the term "revenue stream" often.  Below are some recent headlines from an Internet search for "new revenue stream":

·         MSNBC - On demand games offer new revenue stream

·         Hip-Hop Artists Gain New Revenue Stream Through UrbanWorld ......

·         Palomar Enterprises, Inc. Adds New Revenue Stream

·         Helicopter simulators could be new revenue stream for Fidelity

·         ValuAmerica creates new revenue streams for financial institutions

·         New Revenue Stream for Microsoft

A revenue stream is a defined market of selling activities that produce sales revenue for a company.  It's usually focused on a particular product or service.  Here's a description of a revenue stream from an article:

"The digital distribution of video games, commonly known as games on demand, is exciting game publishers like Atari which, three months ago, launched Atari On Demand to extend the life of its vast portfolio of older, mainstream titles. Gamers can pay $14.95 a month and play to their heart’s content or try a game and then purchase it with the click of a mouse and a blazingly fast download. There’s no need to head to the local Blockbuster or even subscribe to a games-by-mail service."

The defined market is video gamers.  The product is games on demand.  The price is $14.95.  The video gamers buy games on demand from Atari on the Internet.  Atari is competing for revenue with the likes of Blockbuster.  This formula creates a revenue stream.  Atari hopes to introduce Atari On Demand to video gamers and create consistent, reoccurring sales revenue. 

This is a revenue stream.

Underlying every revenue stream is the sales stages of a sales cycle.  A revenue stream consists of a target market for a particular product or service with sales stages to manage the transactions between buyers and sellers.

Sales stages are the seller's version of the transaction.  Marketing efforts engage buyers in buying cycles.  When sellers in sales stages engage buyers in buying cycles and transactions occur you have a revenue stream.  Sales stages are at the root of revenue streams.  The sales results from an operating revenue stream are shown in the sales funnel in the opportunity report.

How To Build a Revenue Stream
A revenue stream is another name for a sell-through campaign that runs continuously. It runs from target market to transaction.  Here's a working formula for building a revenue stream. 

Reach and Pull, Inform, Persuade, Close (RPIPC)

This is a step-by-step strategy for building a revenue stream. 

1.  Reach into the market. 
A business has a location from which it operates.  Marketing has to reach into the market to deliver the company's messages.  Your business needs consistent channels of communication into the market at a cost you can afford.  Identify a target market.  Develop your method of lead generation.  Create your marketing campaign and engage the market.

2.  Pull your market back in.
Once you reach into a market you need to pull the targeted companies back to your location.  After all, the reason we market is to pull people from our market into our business to share our opportunities.  Another term for "pull" is "response".  You get a response from your marketing and you capture the interest in the form of a sales cycle.  The sales cycle is tracked in your contact manager.

3.  Inform them about your opportunity.
You’ve reached into the market and you’ve pulled the audience to the location.  Now you have to inform them of your opportunity.  Sales presentations or demonstrations as well as marketing material are used to inform the market.

4.  Persuade them to buy.
We use selling tools such as product features, advantages and benefits to persuade our target market.  It takes helping relationships to persuade a customer to buy our products.  The sales process is a form of persuasion where we believe in our product and we assist in helping the market to purchase.

5.  Close transactions.
Closing a transaction requires transaction processes, product delivery methods, and inventory and customer service.  "Closing a deal" is a typical sales phrase that signifies the completion of a transaction.  Agreements, payment methods, policies and procedures are developed to close a transaction and create a customer.

If you perform the steps of Reach, Pull, Inform, Persuade and Close you will be building a revenue stream.

Managing Revenue Streams
Revenue streams are hard to build and maintain.  They are built within a channel.  A channel is a segment of business you sell into.  Manufacturing, distribution and retail are all channels.  Channel strength flows up and down.  If you enter a new channel attempting to build a revenue stream when a channel's flow is down you're going to pay a high price.  Try to enter channels when the channel is healthy. 

Here are the steps to managing a revenue stream:

1.  Build the quantity of sales cycles in the revenue stream.  To get a new revenue stream up and running it takes a lot of sales cycles.  The magic number is approximately 500 sales cycles.  Once you hit about 500 sales cycles and your revenue stream is consistent you are entrenched in the channel.

2.  Grow your average revenue per transaction.  You want to get the most revenue out of a revenue stream.  Determine how much revenue you are receiving per transaction on the average.  Your goal is to increase the revenue per transaction but not at the sacrifice of quantity.  There's a happy medium where revenue is at its highest and so is the quantity of transactions.

3. Reinforce your competitive advantages.  As you become successful in the channel the competition will catch on and go on the offensive.  Reinforce your competitive advantages.  Competitive advantages are the things you have or can do that your competitors can't. 

4.  Learn to shorten the sales cycle time.  In each revenue stream there's an average amount of time it takes to complete a sales cycle.  While some cycles are very short and others are very long, identify the average.  Then brainstorm and figure out ways to shorten the cycle.  It usually includes some special, limited offer that compels people to buy.

5. Service the channel.  It's important to do a good job servicing the customers in the revenue stream. Revenue streams exist within channels like manufacturers, distributors or retailers.  These people know each other.  They talk.  If you are poor at servicing your customer, word will travel and you'll lose sales cycles.

Summary
A revenue stream is a defined market of selling activities that produce sales revenue for a company.  It's usually focused on a particular product or service. Companies create a variety of revenue streams to create a consistent flow of sales revenue.

We learned the definition for a revenue stream and used Atari's Games on Demand as an example of a revenue stream.  Next, we introduced a simple process for creating a revenue stream called Reach Pull Inform Persuade Close (RPIPC). 

1.  Reach into the market.  
2.  Pull your market back in. 
3.  Inform them about your opportunity. 
4.  Persuade them to buy. 
5.  Close transactions.

Next, we discussed managing the revenue stream.  Five key points to revenue stream management were discussed:

1.  Build the quantity of sales cycles in the revenue stream. 
2.  Grow your average revenue per transaction. 
3. Reinforce your competitive advantages. 
4.  Learn to shorten the sales cycle time. 
5. Service the channel.