A couple of weeks ago I met with the founder of a startup that is on the 3D printer market. We discuss long about how crowded this market is and what is the purpose of this product however there was an interesting discussion when we came to the subject of recurring revenue.
Making the mistake of applying old business models to new products.
I shared some of my thoughts with the founder:
The business around printers (paper ones, e.g HP) is not in the printer itself but in the cartridge. The ink by itself doesn’t add any value. HP doesn’t have a secret sauce for the ink that makes it 10x better than Epson or Canon. Ink is a commodity. But the fact that once you buy a HP printer you can only buy the cartridges from them is what I call “lock the customer”. You have no alternative to buy from them because the printer will not work with anything else. So as long as the printer works and deliver their functionality you will be a “HP customer” (or recurring revenue).
I gave him another example. At home my wife likes to drink bubblying water. SodaStream gives me a simple and easy (and eco-friendly) solution for this. I’m skeptic to believe they actually make money (profit) when they sell the machine to me, but for sure they “lock” me down as a future customer. Due to the way the gas container is design you can only buy from SodaStream. This way the company knows that they will obtain recurring revenue from those customers that buy their machine.
So I left the question to him of how will he create recurring revenue when the PLA (or ABS) used to print in 3D printers is a commodity. You can try to use the same business model I mentioned before but I strongly believe that he should found a better way.
What do you think the “new business model” could be?
Old ideas into a new world is not always the answer.
If you want to share your thoughts write to me at jd@phari.co
Thanks for reading. Here is another one:
