What is Second-Order Revenue?

Second-order revenue is sales that are indirectly generated by an initial customer purchase. This revenue can come from a variety of activities, such as customer referrals, repeat purchases from original customers, or even customers changing employers and buying the product again at their new employer. These sales differ from first-order revenue, which is derived from initial sales to customers.

Second-order revenue represents a significant increase in the lifetime value of a customer. A business can encourage second-order revenue by creating an in-house team that works on the improvement of products specifically so that they contribute to the success of customers; this means monitoring how products are used through constant customer interaction.

It is easier for a company to build second-order revenue when it has invested in branding activities over a period of time, and has built a reputation for quality and ease of use. Once these issues have been addressed, a business will find that its customers have, in effect, become an ancillary sales force for the company. This should result in a continuing, gradual increase in second-order revenue over many years, and so should be treated as a key company strategy.