Add Ons and Tuck Unders

The following post was originally published in May 2010.

In a recent interview with Forbes magazine, billionaire entrepreneur Mark Cuban offered his insights into the future of media.  His thesis is that media can create a world outside of Google’s reach using Facebook, Twitter, and custom apps, then “potentially start charging for content.” 

What most caught our eye was Cuban’s thought on “creating a path of least resistance”.  In this, he suggests that charging for media is less of a challenge than how to get people to pay.  One solution is to “go where the credit cards already are”.  In this simple statement, we believe Cuban is right on the money (so to speak).  

Market leaders from online retailers, to telcos, to credit card issuers are consistently seeking new forms of revenue enhancement.  Each has two prized assets that are the envy of product and service providers:  a customer list and a billing relationship.  In our experience, these organizations are willing to open these assets to other partners, but only on satisfying three conditions:  first, if doing so will improve their net margin per customer; second, if it can enhance customer loyalty; and third, if it is a strong fit with the brand. 

The key for prospective service providers is to design compelling offerings that are easy for the billing partners to integrate.  They need to ask themselves:  “can we re-think our current revenue model in order to access these alternative distribution channels?”;  “can we re-imagine our current offering in such a way as to compel new forms of customer interest?”; and “can we create a unique benefit for the distribution partner to want to carry it on their bill?”.   Try to think like an App developer.  The result may be a simple ‘add on’ – a stand-alone transaction line item – such as a monthly newspaper subscription charge on your utility bill.  Alternatively, it may be isolating a single feature that can easily ‘tuck under’ a service already on the bill – for example, embedding a unique benefit into an existing bundle of a cable provider.  Either way, the effort can be well worth it.

The Bottom Line

Telecom, cable, utility, credit card, insurance, online retail, and membership organizations have built large communities of paying customers.  Service providers (including media companies) would do well to think of “app-ifying” their business to create synergies with these organizations that hold the promise of a paying audience.  For help on how to build solutions for billing partners, contact Stratum Five today.