Business Model Basics: Hybrid Models

Hybrid Revenue Models

Businesses which have components of both Recurring and Non-Recurring Revenue Models deal with products and services that are purchased on a frequent or regularly recurring basis, but, for which the customer is not contractually tied to the merchant. Examples of such businesses include: restaurants, grocery stores, dry cleaners, lawn care companies, dentists, family practice doctors, chiropractors, etc.

Businesses that fit the Hybrid Model typically analyze their ROMI similar to the Recurring Revenue Model businesses, however, they also recognize that special investments should be made in loyalty and rewards programs to encourage more frequent visits and increased revenue per visit. Such programs must be factored into the ROMI calculation.

A list of companies with Hybrid Revenue Models would include:

Mortgage Companies

  • Recurring – monthly payment stream
  • Non-Recurring – long time between New Client Acquisitions and Low Repeat Business

Insurance Agencies

  • Recurring – monthly payment stream
  • Non-Recurring – annual renewals are not guaranteed and people shop on price

Grocery Stores

  • Recurring – everyone eats every day so recurring revenue
  • Non-Recurring – no contract so the customer can switch any time they want

Petroleum Companies

  • Recurring – if you have a car you buy gasoline regularly
  • Non-Recurring – no contract so the customer can switch any time they want

Restaurants

  • Recurring – People eat out frequently, especially for lunch
  • Non-Recurring – no contract so the customer can switch any time they want.

Many companies with Hybrid models implement Loyalty Programs that are designed to incentivize the customer to make recurring visits. Grocery Membership programs, Special Discounts for Gas Purchases if you have the company branded credit card, Frequent Diner Cards that give you the 10th sandwich free, etc. Customer Loyalty Programs are a very popular tool that many companies who have Hybrid models use to increase the frequency of purchases.

Many retailers are in the Hybrid Model… they deal with a product, such as clothing, that is purchased regularly, but they have to engage in constant marketing to attract the customer’s attention. These types of companies often resort to Sales and Discounts and Clearance advertisements to get the customer to return to the store.