• January 1, 2017
  • By Brent Leary, cofounder and partner, CRM Essentials

Are Chatbots and Recurring Revenue the Future of Business?

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Many of the 2016 conferences caused me to think, reevaluate positions, and seek further knowledge on subjects such as machine learning and artificial intelligence, to name two. But HubSpot’s Inbound conference, my last one of the year, might have caused me to react to what I heard more than any other. In fact, I can boil it down to two statements, one each from HubSpot’s cofounders, Dharmesh Shah and Brian Halligan.

1. Chatbots are the most important technological development in the past two decades. Considering we’ve seen the rise of the iPhone, the iPad, Amazon Web Services, and cloud computing in general just in the past decade, no other statement surprised me as much as Dharmesh Shah’s prediction about chatbots and their potential significance. So when I asked him later if I had heard him correctly, he said, “Absolutely. Chatbots are the manifestation, but the underlying trend that’s the biggest thing we’ve seen in two decades is conversational interfaces. That’s what a chatbot essentially is. It’s allowing you to get around the software using either text or voice.”

Speech-to-text technology’s rapidly accelerating speed and accuracy are enabling users to communicate with their devices in more direct, natural terms. They don’t have to translate the thoughts in their head into keyboard strokes; they just say the words. And because of the rise of conversational user interfaces (UIs), companies have a chance to understand what customers need in a way they haven’t been able to before, Shah says. However, while speech might end up being the most efficient interface for bots, phones, and devices like the Amazon Echo, the most effective output might be visual, to allow humans to comprehend results more expediently.

It’s this environment that has Shah and HubSpot betting that companies will be building chatbots in the future the way they are building websites today—bots won’t replace websites, but they will be used to complement them, with bots also being created to live in messaging apps and voice-activated devices, all toward the goal of improving interaction experiences with customers and prospects and building longer, deeper relationships.

2. Recurring revenue business models are becoming mandatory. While Shah’s bot talk grabbed my attention on the technology front, Halligan’s statement that companies should move toward recurring revenue models did the same on the business side. While the subscription economy is not new, I was struck by Halligan’s reasoning that subscription models force you to think in terms of constantly adding value to customers by creating better experiences and services, as opposed to the more traditional idea of focusing on ways to extract value from them.

This switch in philosophy helps companies stay aligned with customer needs and expectations as they evolve over time. You replace the short-term gains from value-extraction activities with steadier, longer-term gains derived from deeper relationships, including lower customer acquisition costs due to higher referrals and more upsell/cross-sell opportunities coming from longer customer lifetimes.


In a sense, both Shah and Halligan are saying the same thing. With chatbots and other conversational UIs, Shah believes companies can remove friction, provide better interaction experiences, and have a deeper understanding of what customers and prospects are looking for. Not only do these technologies provide improved and more efficient interactions, they allow us to scale up and handle more interactions.

Is this enough to make chatbots the most significant technology in decades? I have no idea. I think there’s steep competition for that title. But these UIs could set the stage for potentially knowing more about customer behaviors, needs, and expectations than ever before. And if they fulfill that potential, bots should at least be on the short list.

Recurring revenue business models are also about staying connected with customers in a way that provides ongoing value to them, and more long-term revenue opportunities for you. And by optimizing your business around consistent, recurring revenue streams, you’re also creating more ongoing interaction opportunities to improve engagement.

Whether or not chatbots live up to Shah’s lofty expectations, combining new engagement technologies with modern business models should help drive better, deeper customer relationships going forward. There should be little disagreement on that.

Brent Leary is cofounder of CRM Essentials, an Atlanta-based advisory firm focused on small and midsize businesses. He is also the author of Barack 2.0: Social Media Lessons for Small Businesses.

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