Matthew Barnes, founder of Proteus Digital Lab, knows how to help DTC brands optimize their conversion rates for subscriptions. A conversion isn’t just an event; it’s part of a larger customer experience. If you want to get a customer to commit to a subscription, you can’t just focus on the conversion point. You have to consider the entire life cycle of the customer. On this episode of Subscription Radio, Ben and Matthew talk through ways to sweeten your subscription services for customers, how to get past that initial growth plateau, and why going headless isn’t necessarily your best option.
- Use data to accelerate growth
- Sweeten the subscription offer
- Grow your website alongside your business
- Follow customers over time
- Think about lifetime value
- Use subscriptions where they make sense
- Have a clear interface
- Don’t disincentivize customers
- Don’t reinvent the wheel
- Know your customer’s needs
- Check out Proteus Digital Lab
- Connect with Matthew Barnes on LinkedIn
- Check out Rodeo
- Connect with Ben Fisher on LinkedIn or Twitter
4:10 – Use data to accelerate growth
Once you’ve found all of your easy customers, you have to learn how to sell to everyone else so your company can continue to grow. And the best way to do that is to use data.
“If you're doing approximately a thousand orders a month, that's a pretty good product market fit. The numbers have stabilized a little bit, you're not in the game of every time you send out an email, that's when all your sales happen, you're actually acquiring new customers, that sort of thing. But typically there's a wall you hit where the easy ones are done. All the easy customers that are just going to sell themselves are done. And oftentimes they look like the founder. The founder is super into mountain bikes and can sell to all the people that look like him that buy mountain bikes or something along those lines. And so everybody looks to the CEO and says, ‘Okay, what do we do now?’ And they're not qualified to answer that question, which is fine. They got up to that stage and now it's, ‘Well, I don't know. I don't know how to sell to my mom. I don't know how to sell to my cousin.’ And that's where data comes in. And we use data to answer those questions, and that's when we start getting into optimization.”
9:19 – Sweeten the subscription offer
Don’t get rid of your one-time offers. Instead, make the subscription deal so good that your customers will feel dumb if they don’t take it.
“You hit a point there where it's like, ‘Okay, now what's the deal?’ So beyond the product, we got to work the deal, which is how do I convince you to take this other product we sell for free or get two of them or engage in a more frequent subscription option and that sort of thing. And oftentimes we'll move and help people get into landing page territory. People will spend an awful lot of time building landing pages around getting the content just perfect. And it's the deal that is really the thing that matters. And people don't like that answer because it's not sexy, but figuring out how to, how do I say? You want the customer to feel dumb for taking a one-time offer, basically is the thing. You don't want to take it away. That's a terrible idea. Everybody thinks, ‘Oh, what if we just take it away?’ It never works ever. You definitely want the one-time there to anchor it, to make them feel dumb for not taking the subscription.”
10:18 – Grow your website alongside your business
As your business grows, your customers’ needs will change. So don’t be afraid to change your website to reflect that.
“You have this lovely thing that happens once you are in the several thousand orders a month stage where you actually have to come back to your website, because it now serves a different crowd. You have lots of returning folks that are now coming directly to the site, and it's no longer your new acquisition. Or is your new acquisition for people that are at someone's house and see the drink that they poured you and then they go and they look it up and they get it. So the nature of what function different parts of your website serve changes over time as you grow. And I think that that's a really easy thing for people to miss conceptually, is that your website's not for new customers anymore. Actually, now it's for new customers again that are coming to you through word of mouth, or now you've gotten into TV or whatever the thing is.”
13:21 – Follow customers over time
Optimization isn’t just looking at what people are doing on your website in the moment, it’s following customers over a period of time.
“The aggressive thing that was the hotness like a year and a half ago was 50 percent off your first order if you subscribed. And what you find is that you just get a bunch of crap customers, basically, because it's people that are just taking a steep discount and then hard churning. So one of the things that we do is, optimization isn't just, ‘What are people doing on the website?’ It's actually following that customer over time. And so we were tagging people as they come, as they exit the gift shop. In order to follow them then and we look at that. So we may run a test for a month and then follow that cohort for like two months afterwards after the test runs to see what their retention levels are like. But yeah, it's a fine balance where there are great customers who will start as a one-time situation.”
17:06 – Think about lifetime value
A conversion isn’t just an event, it’s part of a larger experience. You have to consider the entire life cycle of the customer, not just the conversion point.
“I think too many people treat a conversion as just an event. It's just a thing. ‘Oh, we just want the conversion to be higher.’ You want the whole experience to be higher. They don't have an experience if they don't buy anything, but you have to think about the holistic life cycle of the customer, because it's too easy to optimize for terrible customers in the name of, ‘The number was bigger in this variant than that variant,’ and you don't think about the lifetime value or long-term quality of that customer. I’ve seen lots of people run businesses where they're like, ‘Oh, we're going to develop this very inexpensive product as people's gateway into it.’ And what they actually do is they create two businesses inside of the business. They just sell the cheap, small product to a subset of terrible customers and then scale all their ad spend on it. And they never cross over to the more expensive products.”
21:03 – Use subscriptions where they make sense
If you want your subscription service to be successful long-term, you have to have a product that’s worth subscribing to.
“For products where subscription is actually convenient and actually makes sense, that will just remain durable, like dog food. Do I want to go buy dog food? No, I don't want to buy dog food. My dog’s just going to keep eating the same food. So subscription is a terrific idea for dog food. T-shirts. I don't need a t-shirt subscription. I will just have t-shirts and I will wear them. And when they wear out or I get tired of them I will give them to the charity shop, I will buy a new t-shirt. I don't need a subscription for t-shirts to remind me to buy t-shirts. That is incredibly stupid. But if you can get people to take subscriptions on t-shirts your valuation, your company goes up and you get more favorable VC terms of whatever. So everybody's going to try subscription, and then eventually you’re just going to see a long tail on that not working out for brands where it's totally inappropriate, and the VCs will stop asking for it and then people will do it a little bit less. But for actual products that make sense on a subscription, I think that that trend is just going to keep happening.”
26:47 – Have a clear interface
To keep your customer from canceling, simplify the steps to pause their order. That way, they’re more likely to pause than they are to outright cancel.
“If I have to multi-step or text message back a robot in order to do the thing that I want to do, that is somewhat inconvenient. Having a clear interface that lets me quickly do whatever the thing is that I want to do, as a consumer that's what I want. I want to be able to just, if I want to pause this stinking order, or skip it, or cancel it, or whatever the thing is, I just want the stupid option to do the thing quickly. Having to log in, that's basically the cardinal sin is having to log in to anything. So if I can just one-click a deep link and I have the thing open, I think then from the brand's perspective, it's great because it's like, ‘Hey, I can incentivize you to do the thing that's a healthy life cycle thing.’ And as a consumer, I will just take the path of least resistance.”
38:57 – Don’t disincentivize customers
If you want to keep your customers subscribing, give them incentives that actually make sense and save them money.
“One of the things that you can do unintentionally is disincentivize customers from subscription through things like shipping costs or stuff like that. And so by giving them a discount that drops them below the free shipping threshold, that's a funny one. And so there's other things that you can do there in terms of inviting them to, ‘Hey, get twice as much half as often,’ that kind of stuff that you can do in the checkout I think is quite helpful. And then beyond that, everybody always forgets about it, but the account management portal is actually where subscription happens. The purchase is happening on the website. But as you pointed out, that doesn't make you a customer or even a subscriber, that makes you a purchaser. The subscription happens in the account portal. And so for us having the flexibility to be able to go in and say, ‘Hey, we're going to use the API, but do this switch or move this item or make this this month's featured add-on,’ or whatever the thing is, is really powerful for us on a testing side of things.”
49:45 – Don’t reinvent the wheel
Going headless means a lot of work for your company, so consider carefully whether you want to spend time recreating the basic structures of another platform.
“I've never worked with a brand that's gone headless that we haven't spent more than half of our time basically trying to recreate things that exist on just using the damn platform to begin with. And it is just a giant exercise in engineering. It's sort of like, ‘Hey, we adopted this platform for ecommerce for all these benefits. And then we threw away all the benefits and went headless so that we could totally engineer them and recreate the wheel ourselves.’ And I think to get to parity now, I mean, frankly, I think the pandemic and then Shopify dumping gazillions of dollars into making Shopify 2.0 structure be a thing is now made. I used to have a tier where I was like, ‘Oh, if you're at 2 million, you could start to consider headless.’ And then I was like, it's more like five, it’s more like 10, now I'm like $50 million. Unless you have the world's most complicated distribution and you're doing brick and mortar as 80 percent of your business or something like that.”
56:14 – Know your customer’s needs
When you’re thinking of ways to optimize your customer’s experience, you have to take into consideration who your customer is and what they need.
“Another thing that I also try to bring into the realm of context is, who's your customer? Do they all just have whatever the newest iPhone is on 5g? Because there isn't a single website that loads too slow on Shopify no matter how many damned apps you have installed on 5g internet on a phone. And that is going to become more true every year. How long is it going to take you to spin up your headless build and then maintain it just to be out-Jonesed and then have to flip the darn thing back in two years. The amount of time for technological upgrade just keeps shrinking and shrinking and shrinking and shrinking. And if you're going to go headless, you're now responsible for running that race in addition to running an e-commerce business. It's possible, I wouldn't recommend it.”