Subscriptions are your best source for recurring revenue. So, how do you keep customers from churning? The key is flexibility. Some people want their subscription to be as regular as clockwork, while others want to pause and pick up at their leisure. A flexible subscription model will help you keep both sides of your audience coming back for more. In this episode, Ben Fisher shares his experience as a serial entrepreneur, the importance of flexibility in subscriptions, and how convenience keeps customers happy.
- Spend money to save time
- Focus on returning customers
- Let people pause
- Offer flexibility
- Create a unique experience
- Give perks to direct buyers
- Build a middle ground
- Create convenience for customers
- Maximize LTV
- Give customers a happy medium
- Check out PipeCandy
- Connect with Ashwin Ramasamy on LinkedIn or Twitter
- Check out Rodeo
- Connect with Ben Fisher on LinkedIn or Twitter
14:51 – Spend money to save time
As people get older, they tend to have more disposable income, but less time. So, they use that disposable income to buy more time through subscriptions.
“As you have more money and less time, generally what you do is you use the money to buy back your time. And so I think subscriptions, and we saw this also with Amazon. Amazon introduced subscribe and save however long ago. I think that there are aspects of subscription that can be super convenient because you don't want to have to think about it. And I think most of us, part of the reason I've eaten the same meal every single day for the last eight years for lunch is I just wanted to make a decision and not have to think about it again. Because it's the same decision I have to make every single day. And no one wants to think about when they have to buy toilet paper again, no one wants to have to think about when they have to get more coffee. With that said, subscription's not perfect. And so, I think that the familiarity with subscription as a business model, as well as just, I think more and more brands offering subscription, with the whole D2C channel blowing up, now shoppers wherever they go they see a subscription option.”
18:53 – Focus on returning customers
Retaining an existing customer is worth a lot more revenue to your company than acquiring a new customer.
“We'll go back to the cliché thing of, ‘An existing customer's worth let's say 10 times more than a new customer.’ That's not new. And so in business, it's always been that basically, to build a great business, you basically need frequency and then increasing average order value, because ultimately lifetime value is the lifeblood. I mean, you can get into the nuances of that around cash flow. The lifetime value over the course of 10 years matters, but for most brands they need a 90-day payback period on their ad spend. So it's more nuanced than that. But what I'll say ultimately is that this idea around how do you get people to come back and repurchase? And then how do you also get them to ideally spend more when they come back?”
22:11 – Let people pause
As a brand, you should offer one-time purchases of your products and let people pause their subscriptions.
“I've even seen a lot of brands not even offer one-time purchases of their products, but instead just trying to push the subscription model. I've always pushed back on that, because as a customer and as a consumer that drives me freaking bonkers. But what I'll say is the trend that I've seen, and in some ways I think VC money has pushed this in part because every brand, every CPG brand wants to say that they're a subscription brand. What's weird about that to me though is it's not really a subscription, in the sense of you can't skip paying a month of Netflix. You can't skip a month of paying for Adobe Cloud. When you talk about recurring revenue, especially as someone in B2B SaaS, recurring revenue is recurring revenue. And in CPG, a lot of the challenges are around anticipating replenishment. And so the fact is that people need to be able to skip. People need to be able to pause. The number one reason people cancel is too much product. It's pileup. And so I think the weird thing of that is that the subscription model, as powerful as it is and as attractive as it is for a lot of ecommerce brands, it's not always the right move for the consumer.”
24:56 – Offer flexibility
No one wants to be locked into a subscription. If you are flexible, people will be more likely to come back to you eventually instead of leaving once and for all.
“If you don't have a way of offering flexibility within the subscription or membership, as a consumer, no one wants to be locked into something. And so if you're only offering subscriptions, for example, how are you getting returning customers? And going back to your stat, let's say the average American household spends $200, and let's say that represents four brands. Now there's thousands of companies offering subscriptions. So how many brands in parallel is someone actually going to subscribe to? You’re not going to have a subscription to everything. And given that the average order value is so high it’s, from a financial perspective, not possible. I know we kind of went on a tangent, but I was going to say one other thing I've been thinking a lot about. I think it was like a triangle where most people probably have a primary subscription in the category, where they'll have maybe their primary one or two subscriptions. Then we'll have secondary and tertiary subscriptions. And so those are things where their primary subscription is maybe their favorite coffee like Jot or whatever, where they're like, ‘I know I want this every few weeks to show up to my house.’ And then they'll experiment with or incorporate some flavor in exploring and incorporating other brands in the mix over the course of a year, but they're not going to be subscribing in parallel to 10 different products.”
31:39 – Create a unique experience
Selling through another vendor like Walmart, Target, or Amazon keeps you cut off from your audience. To get back that personal connection, offer a unique experience on your brand’s site.
“If you sell through Walmart or Target or whatever, you’ll have the same issue as selling with Amazon. But when you look at how much money, and from a cash flow perspective for these brands, when you get to the stage of actually or the scale of being able to sell through those, it can be such a substantial amount of money that you just can't ignore it as a business owner. I think for most people, D2C really becomes the place where you can create a unique consumer experience and your D2C channel is a place to really double down on that experience. What can you get through your D2C channel that you wouldn't be able to get through Amazon or by buying at Target?”
32:41 – Give perks to direct buyers
Make people want to buy directly from your company by offering them special perks or deals when they order directly from your site.
“I think that's where the subscription model but also membership are both really interesting ways for a brand to add additional value through their D2C channel. Some consumers might be like, ‘Yeah, I'd rather buy on Amazon, but I want these perks of buying it directly through the channel.’ I'll give you one example. Jot coffee, who's one of our customers, they have a product that is only available to subscribers. So you can only buy it through their D2C channel. It's basically an artisanal, small-batch coffee that changes every month or less. And so that product itself changes also. And so that's one of those examples of having a cool perk where some people might still buy the product through another channel.”
35:22 – Build a middle ground
You’ll always have people on both sides of the subscription fence. It’s important to cater to both audiences by offering a middle ground.
“You still have this gap between sometimes people want subs, sometimes people want to be reminded to replenish, and there's no way to close that gap. And it wasn't until Shopify announced their subscriptions, API, where I was like, ‘Finally, we can take what we were already doing with One Click Pony and try to effectively create what I consider the consumer-centric way of providing a great experience.’ There's a continuum. I don't want to always be a subscriber. And I don't always want to be having to think and buying. And so there's this wide middle ground that, I think Repeat has done an awesome job bridging or at least around the replenishment function. So, that to me is interesting.”
49:00 – Create convenience for customers
If subscriptions are inconvenient or if people end up with way too much product, they’ll cancel their subscription. Make your subscription options more convenient.
“I've talked to enough people and asked, ‘How convenient is your subscription really?’ A lot of people will say, ‘Oh, it's great not having to think about it.’ But then the flip side is everyone has stories even around Amazon subscribe and save of, ‘Yeah, but it sucks when you open up your cabinet and you basically have a year's worth of beef jerky, for example.’ So the downside around subscriptions in my experience is that it can lead to you churning out what would otherwise be a great customer. And so, for me, it's really looking at I think for the last several years, and even Recharge was really built from the point of view of merchants, how to help merchants drive repeat purchases, or let me reframe that, how to build recurring revenue. The challenge with that is once everyone's doing, and if it's not great for consumers, consumers are going to gravitate towards solutions that are great for them.”
53:09 – Maximize LTV
Don’t force feed subscriptions to your customers. Keep them coming back by offering options that are convenient for them and still profitable for your company.
“Ultimately, and I think it's probably cliché at this point, but part of what was great about the D2C categories we were talking about. D2C brands were building a great consumer experience. I think what's ironic is that most subscription experiences of a brand, there's really not that much to it beyond basically a contract that I'm going to force feed you every month. You might save 20% off, but I live in New York City. I have a relatively small kitchen. You're taking up physical space in my apartment. And so I think that with brands, especially with what's happening around VC money, as well as just changes in the economy and uncertainty around the economy they're going to need and they're looking for ways to be creative to, I hate saying maximize LTV over and over again, but really it's like, how do you retain your customers in a way which it works for both the brand as well as your customer?”
56:31 – Give customers a happy medium
On-demand or just-in-time subscriptions are a great way to keep people as subscribers. Cater to what your customers want—and don’t want.
“On-demand subscription is a happy medium where some people just want a subscription. Some people will never want to subscribe. This is a way to bridge that gap where you can probably get a higher number of people who would otherwise never subscribe to your product, but if you gave them full control over the subscription cadence, then they would. And there are people who, they've experienced your product, they like the convenience, but they are either anxiously waiting to be overcharged or charged when they're not expecting it, or worried about pileup. This is again a way of keeping someone engaged with your brand, basically without kicking them out of your program. And there's some mechanics that we've built into the just-in-time subscription or on-demand subscription that help merchants around basically perks. You get certain perks as long as you're buying within a certain period. But the idea here and the goal here is to give the consumer the control of when they're being charged and making sure that they actually in fact, want it to be replenished.”