How can you optimize prices in a changing market?
At a glance:
Recurring revenue isn’t “How do we slap a subscription on this?” It’s “What can we keep doing for customers over time that they’d happily pay for because it reliably solves a recurring problem?”
WHAT IT IS
Recurring revenue levers are the specific ways you turn one-off transactions into ongoing value and predictable cash flow: subscriptions, memberships, service plans, monitoring, data and insights, replenishment, and long-term contracts.
Subscription and recurring models have boomed across industries and now span everything from software to compost pickup. The common thread? Customers pay on a regular cadence for continued access, outcomes, or peace of mind over and above a one-time deliverable.
WHY IT MATTERS
Well-designed recurring revenue:
Smooths cash flow and boosts durability. Investors and lenders often treat recurring revenue as more valuable because it’s stickier and more predictable than one-off sales.
Improves unit economics. When retention is strong, the lifetime value of a customer (CLV) can far exceed acquisition cost, which means you can invest more confidently in growth.
Deepens relationships. Ongoing touchpoints give you data and context that competitors without recurring ties simply don’t have.
CASE FILE
Planet Fitness: Keep the Base, Grow the Black Card – Recurring Revenue in the Wild
“Based on our learnings, we decided to change the price of the Classic Card to $15. It drove the most significant increase to average unit volumes with the least impact to the rate of joins.”
— Interim CEO Craig Benson (Q1 2024 earnings call)
Setup. With a member base of value-focused, price sensitive individuals and seasonal spikes (New Year’s, back-to-school), Planet Fitness faced the question of whether they could change their $10 “Classic” pricing – a decades-long stalwart for the value gym.
Move. After significant testing, Planet Fitness opted to shift the Classic membership from $10 to $15 for new members, keep the PF Black Card tier (multi-club access + perks) as the premium bundle, run limited-time $1-down promos, and keep “price-for-life” for legacy members.
Outcome. The switch resulted in higher ARPU with minimal join friction, a clean willingness-to-pay ladder (Classic → Black Card) that monetizes perks without broad discounting.
Lessons.
Harness recurring-revenue levers with tiered memberships. For Planet Fitness, that means adding guest privileges, any-club access, and spa perks to move willing members up while preserving a sharp entry price for the rest. The upgrade path drives ARPU without cutting the base.
Consider your deposits and payment terms. For example, run time-boxed, low-friction terms (see the $1 down promos from Planet Fitness) to catch seasonal intent and reduce sign-up friction. It’s pricing relief via terms, not list-price cuts.
Keep an eye on the KPIs and cadence. Regularly review signals like joins, cancels/freezes, promo conversion, and legacy cohort size to throttle promos and tweak messaging (rather than changing list price).
Framework:
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These models work best when they wrap ongoing value in a simple, predictable structure. That value usually shows up as:
Access: Continued right to use a system, platform, or facility
Uptime/reliability: Somebody is on the hook to keep things running
Convenience: Automated replenishment, scheduling, or coordination
Compliance/risk reduction: Staying within code, law, or standards, or
Insight: Reporting, analytics, and recommendations based on usage
Takeaway: Customers will pay repeatedly when the service is clearly saving them time, money, or headaches, or when it’s helping them make more money. Consider:
Is the problem you’re addressing recurring and meaningful?
Can you reliably deliver on the promise every period?
Does a recurring structure make the customer’s life simpler, not more complicated?
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If you’ve got a simple subscription with stable behavior:
CLV ≈ (Average revenue per period × Gross margin %) ÷ Churn rate
Where:
Average revenue per period (ARPU) is how much you collect per customer per month or year.
Gross margin % adjusts for variable costs (delivery, support, etc.).
Churn rate is the percentage of customers (or recurring revenue) that cancel or meaningfully downgrade in a period.
Small improvements in churn and expansion have outsized impact on CLV and growth. That’s my serious recurring revenue operators obsess over retention, net revenue retention, and expansion, not just new logos.
Takeaway: Revenue retention is one of the primary indicators of long-term business health.
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Recurring revenue also changes how you think about customer acquisition cost (CAC). If you earn revenue once and never see the customer again, CAC must remain small. In a recurring world, you can afford a higher CAC if retention is strong, gross margins are healthy, and payback happens quickly.
If you need a sanity check, check your CAC payback period:
Payback (months) = CAC ÷ (ARPU × Gross margin %)
Takeaway: Benchmarks vary, but recurring businesses with short payback, strong margins, and high retention tend to have more options in downturns and more room to experiment.
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Subscription fatigue and mistrust are real (says everyone who’s struggled to cancel that app subscription). As recurring models spread, regulators and consumer advocates are raising concerns about “subscription traps” (free trials that quietly convert, complex cancellation flowers, or subscriptions where value is unclear).
Takeaway: Earn the renewal each period, make cancellation easy, and avoid junk subscriptions.
OPERATOR CHECKLIST
Use this as a quick gut-check before pushing another “subscription” live:
◻️ Recurring job: Can we point to a specific recurring job or risk we’re handling every month or quarter?
◻️ Clear promise: Can we state the recurring value in one sentence a skeptical customer would agree with?
◻️ Unit economics: Have we estimated ARPU, gross margin%, churn, CLV, and CAC payback for this offer?³
◻️ Retention focus: Is someone on the team explicitly accountable for renewals and expansions, not just new sales?
◻️ Capacity guardrails: Have we put in usage caps, SLAs, or fair-use policies so heavy users don’t blow up margins?
◻️ Customer friendliness: Is sign-up and cancellation straightforward, with no gotchas or dark patterns?
◻️ Relationship test: Does this offer deepen our relationship if it works, or does it risk burning trust if it doesn’t deliver?
(If you answer no to more than two, you probably have more work to do before launching.)
SIGNAL TO WATCH
If you turned off all new sales tomorrow, how much of next year’s revenue would still show up from existing customers. What mix of that is truly contractual vs. “they’ll probably renew”?
ONE QUICK ACTION
List your top 20 customers. For each, write down one recurring job you already help with (compliance, uptime, planning, replenishment, reporting, etc.). Circle three where you could credibly deliver ongoing value every month or quarter. Pick one and design a simple pilot offer with a clear promise, cadence, and price.
COMMON TRAPS
“Warranty plus” disguised as value. Slapping a monthly fee on basic support or a legally required warranty without adding real, ongoing value.
Underpricing unlimited promises. Selling all-you-can-eat service where a few customers predictably use 10× more than average.
Ignoring churn math. Celebrating new recurring deals without tracking who quietly cancels or downgrades.
One-size-fits-all offers. Forcing every customer into the same subscription when some only need episodic help.
Treating recurring as pure finance. Thinking of it as smoothing revenue for you instead of compounding value for them.
Experiment 1:
MAP: RECURRING VALUE
What it’s for: Identify 2–4 recurring offer candidates by mapping repeat pains, current “DIY/self-insurance” behaviors, and a one-line recurring promise per segment.
Who it’s for: Leadership/product/pricing team designing new recurring revenue streams (subscription, retainer, monitoring, maintenance, replenishment, managed service).
What it does: Turns “we should have a subscription” into specific recurring offers customers would actually keep paying for.
Use when you need…
Clarity: Converts fuzzy subscription ideas into concrete, segment-specific promises.
Speed: Produces multiple candidates in one leadership session.
Strategic insight: Reveals which pains are truly recurring and monetizable.
Experiment 2:
SNAPSHOT: RECURRING UNIT ECONOMICS
What it’s for: Sanity-check whether a recurring offer can be profitable by estimating ARPU, margin, churn, CLV, CAC, and payback before you invest heavily.
Who it’s for: Founder/GM + Finance + Growth/Product owner who need quick, directional unit economics.
What it does: Helps you avoid launching recurring offers that grow revenue but quietly destroy margin or require impossible retention.
Use when you need…
Clarity: Makes churn and margin requirements explicit.
Speed: One page to decide “pilot or redesign.”
Strategic insight: Highlights the real levers (retention + cost-to-serve).
Experiment 3:
PILOT: RECURRING OFFER
What it’s for: Run a controlled pilot to validate that the recurring offer compounds value (retention, NRR, adoption) without overwhelming capacity or creating trust problems.
Who it’s for: Offer owner (product/GM) coordinating Sales, Ops, and Finance for a limited rollout.
What it does: Tests the recurring offer on a small slice to learn fast,and avoid scaling something that erodes margins or trust.
Use when you need…
Clarity: Forces explicit in/out rules and success criteria.
Speed: Small pilot replaces endless internal debate.
Strategic insight: Shows whether recurring revenue is truly recurring value.
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