-> *I got this from Scott Galloway on the [[Pivot Podcast]] as well as from the Prof G Strategy Sprint* A Recurring Revenue Bundle, aka. "Rundle", is a customer commitment to an organization to pay them in regular intervals: > "Recurring revenue is the portion of a company's revenue that is predictable and expected to occur at regular interval going forward." So the "recurring" part might be a straight up subscription. These mostly work as we (humans) are bad at judging time and everybody has an example where they forgot to cancel a subscription at some point. Also we are terrible at calculating true value of subscriptions, based on realistic estimates of usage against cost over time: Price for time period vs. How often do we actually consume in that period. That said, if a subscription does make sense, it is a very strong attractor: They offer you dependable value for a fixed price, aka a partnership. This is quite similar to [[Brand#Branding according to Klaus Brandmeyer]] where the goal of each brand is a *"sustainable relationship between an organization and it's customers"*. While this sounds like loyalty programs, the second aspect is to "bundle" multiple tangible customer benefits. They bring together multiple (usually transactional) products and services into one subscription. And in contrast to standard subscriptions (think gym membership) they are more vertical, offering a number of different products and services (see [[Vertical Integration]]). In other words: Just offering a subscription or just bundling things won't work. A Rundle needs to remove friction from consumers and offer a clear value proposition. "If it requires a calculator or people start wondering if it's worth it or not, it's not a Rundle." Companies with dependable relationships to customers tend to outperform transactional ones. They do get long-term insights into the behavior of their customers and can optimize and adapt accordingly. A recurring revenue company is evaluated based on a multiple of revenues ("How often can they sell the bundle?") while transactional companies are values as a multiple of EBITDA (= "Earnings Before Interests, Taxes, Depreciation and Amortization" = "How quickly can they sell through their inventory?"). ## Rundles vs. pure players If the products and services are comparable, branding comes into play, for example video streaming services. Netflix, Disney+, BBC Player, HBO, .. all cost roughly the same. They do invest in original programming to differentiate, but in the end they have the same product: Me sitting still while consuming a video. This is where a revenue bundle comes into play: Amazon or Apple bundling a video service into something I consume already (Amazon Prime giving me Prime Video and Twitch), will strengthen my relationship with Amazon while discouraging me to even look into other video streaming services. Such a Rundle will outperform pure players, even if they have the strictly better product. Example: Apple Music eating into Spotify, by virtue of being bundled with an iPhone / Apple services, even though it's the inferior product. Slack vs. Teams (being part of Microsoft 365). By eating into the market and getting users as a part of a larger bundle, the Rundle-product can out-innovate the pure player over time by simply having more capital: Amazon Prime also investing heavily in original programming or Teams integrating with all other Office-products. ## Rundles require initial investment Going from transactional to subscription is initially expensive. An example is Adobe, selling each product individually for a relatively high price (Photoshop, InDesign, Premier costing thousands of Euro), changing that to a subscription where a consumer gets access to all products for a fixed fee of 60+ Euro. They also did the same thing in enterprise, investing in content and asset management systems, building up an enterprise marketing suite bundle that is easy to transact (vs. buying individual technology stacks). Both removed a major point of friction: Upgrading to a new version / license every year with the new annual version. Instead people used their respective version and most likely skipped a version or two. With a Rundle model, all customers would have the opportunity to upgrade right way without any friction. However in both cases, it completely changed the business model with revenue going down at first, however exchanging it for long term revenue streams. In that sense, they exchanged [[Business Strategy#Margin]] for [[Business Strategy#Growth]], but with the ability to scale the margin way better as the initial investment would apply to all customers (increasing profitability). And to make this work it comes down to leadership that believes in the Rundle offering, takes down initial margins, backed up by the board, as they (most likely) take an initial market hit. ## Rundles as partnerships A Rundle might not only be created by one organization. If beneficial, multiple companies can form overlapping customer ecosystems, bundling specific interests or catering to a specific audience or customer group. Example: Offering a "Sustainable urban lifestyle" Rundle, bringing together sustainable mobility (bike + scooter + public transportation + e-vehicles) and clothing (sustainable and fashionable urban brands) and lifestyle (gym + clubs + magazines) and so on.