The Digital Deep Dive With Aaron Conant
The Current State of Subscriptions, Retention, and LTV
Thu Jun 29 2023Description
This episode explores the importance of lifetime value and customer retention in the subscription business model. It discusses different types of subscription models, such as subscribing save, subscription box, and membership/access model. The episode emphasizes the need for customizability and building a community within subscription models. It also highlights the significance of touch points, email communication, and AI tools in driving engagement and cross-selling. The episode further delves into shifting marketing strategies, the impact of Google search results, and the challenges and benefits of implementing subscription models. It concludes with insights on hard work, logistics challenges, AI tools, and the importance of consistent improvement and experimentation in subscription models.
Insights
Subscription models offer customized pricing and benefits to subscribers
Brands can create a subscription revenue stream by offering customized pricing and benefits to subscribers. This allows businesses to tailor the offering to their specific vertical, product, and price point.
Retention is crucial in the subscription world
Retention should be prioritized in the subscription world, as building a loyal customer base is more important than solely focusing on acquisition. Marketing efforts should aim to engage with customers through conversations, touch points, and valuable content in emails.
Building a community is key in subscription models
Subscription models should focus on building a community rather than just selling a product. This can be achieved through offering Facebook groups, in-person events, and early access to new products. Educating the community about subscription models and providing additional value through upsells and cross-sells are also effective strategies.
AI tools and Google search results play a significant role
AI tools are necessary for driving AI-driven campaigns, providing insights, and optimizing fulfillment centers. Google search results heavily impact revenue, with the majority coming from page one. However, the landscape may shift in the future with advancements in AI and performance max campaigns.
Consistent improvement and experimentation lead to success
Consistent daily improvement, even by just 1%, can result in significant overall productivity and cost reductions. Allocating time for experimentation with AI tools and regularly auditing the tech stack are crucial for seamless integration and efficiency. Employees should strive for mastery of skills over time through continuous learning and experimentation.
Chapters
- The Importance of Lifetime Value and Customer Retention in the Subscription Business Model
- Maximizing Lifetime Value and Customizability in Subscription Models
- Building a Community and Engaging with Customers in Subscription Models
- Utilizing Touch Points and Email Communication in Subscription Models
- Shifting Marketing Strategies and the Importance of Retention in Subscription Models
- The Impact of Google Search Results and AI Tools in Subscription Models
- Hard Work, Logistics Challenges, and AI Tools in Subscription Models
- Efficient Integration, Shipping Expectations, and AI Tools in Subscription Models
- Consistent Improvement and Experimentation in Subscription Models
The Importance of Lifetime Value and Customer Retention in the Subscription Business Model
00:04 - 06:23
- Recharge, a leading subscription management solution, focuses on maximizing lifetime value for e-commerce merchants.
- There are three common types of subscription models: subscribing save, subscription box, and membership/access model.
- Subscribing save is for consumable or replenishable products with recurring purchases and discounts.
- Subscription box offers curated boxes with different products each month.
- Membership/access model provides access to services or digital content like Amazon Prime or Netflix.
- Membership model is particularly suitable for fashion and jewelry brands that can't send physical products every month.
- Brands can create a subscription revenue stream by offering customized pricing and benefits to subscribers.
Maximizing Lifetime Value and Customizability in Subscription Models
06:03 - 11:53
- Subscription models can offer a guaranteed monthly income by providing store credits to customers in exchange for a monthly fee.
- Customizability is key in subscription models, as it allows businesses to tailor the offering to their specific vertical, product, and price point.
- For higher-priced items like jewelry, offering a lower-cost monthly subscription with store credits can make it easier for customers to eventually purchase more expensive products.
- Membership models work best when there is already an engaged community around the brand and strong customer loyalty.
- Creating scarcity and exclusivity within the membership model can be achieved through early access to new products or limited availability of memberships.
- The membership model is still in its early stages, but it has great potential for growth in industries like fashion and jewelry.
- Starting a membership model can be low-risk and easy to test by offering a few benefits and store credits for a monthly fee.
- Marketing strategies for promoting membership models are still evolving, but creating a landing page focused on community rather than individual products can be effective.
- Retention is crucial in the subscription world, so marketing efforts should prioritize building a loyal customer base rather than solely focusing on acquisition.
Building a Community and Engaging with Customers in Subscription Models
11:27 - 17:28
- Instead of selling a product, drive towards the idea of a community
- Educate customers about what they're looking for
- Avoid offering deep discounts that taper off, provide additional benefits instead
- Build a community by offering Facebook groups and in-person events
- Engage with customers through conversations and touch points
- Use upcoming charge notifications as an opportunity for education and value
- Implement easy upsells and cross-sells to provide additional value
Utilizing Touch Points and Email Communication in Subscription Models
16:59 - 23:38
- Using touch points as value adds instead of notifications can lead to brand growth and community building.
- Including valuable content in emails can increase engagement and showcase the range of products or services offered.
- Cross-selling and upselling is easier with existing customers than acquiring new ones.
- Emails sent to subscribers can be used for cross-selling and upselling, making it a convenient way to promote additional products or services.
- SMS communication can be effective, but it depends on the brand and what is being sold.
- Transactional text messages may have more opportunity for engagement compared to marketing texts.
Shifting Marketing Strategies and the Importance of Retention in Subscription Models
23:09 - 29:06
- Marketing strategies are shifting towards more personalized and interactive approaches.
- Engagement with the brand is becoming a priority, even if it doesn't immediately lead to higher revenue.
- Some brands are focusing on building strong communities as a long-term revenue strategy.
- Coffee meetups and pop-up events can help foster community engagement.
- Investments in startups and brand promotions have significantly decreased compared to previous years.
- Survival is currently the main goal for businesses, leading to increased scrutiny of spending decisions.
- Educating the community about subscription models and finding creative ways to retain customers are important during this challenging time.
- The current financial situation may unlock creativity and lead to innovative solutions in the future.
- Acquisition has become difficult, so businesses need to focus on retention strategies instead.
- There is pressure from executive teams and investors to perform well, but they may not fully understand the complexities of digital marketing.
- Google's revenue heavily relies on page one search results, but this may shift in the future.
The Impact of Google Search Results and AI Tools in Subscription Models
28:47 - 35:04
- 25% of Google's revenue comes from page two to the end of Google, while 75% is on page one.
- Only 13% of people make it to page two in Google search results.
- OpenAI's chat GPT will shift the percentage of people making it to page two to 5%.
- Performance max campaigns by Google will make it so that nobody goes to the second page.
- AI tools are necessary to drive AI-driven campaigns and provide insights due to the amount of data involved.
- The e-commerce landscape is constantly changing, with new trends emerging every six months.
- Subscription models need active management and thoughtful implementation for success.
- The lift required for implementing a subscription model depends on various factors and needs careful consideration.
- Recharge is an easy-to-install app for setting up a membership model quickly, but it may not produce long-term results.
- Successful membership models require thorough research, understanding of the ecosystem, and investment in marketing.
- Testing and learning are crucial in e-commerce, with continuous improvement being necessary for success.
Hard Work, Logistics Challenges, and AI Tools in Subscription Models
34:45 - 40:54
- Success comes from working harder and longer than others
- Consistent practice leads to significant improvement over time
- Hard work is the key to success, along with understanding and learning
- Selling ideas to executives is crucial for progress
- Logistics and fulfillment are major challenges for brands
- Micro fulfillment centers are becoming more important for efficient shipping
- Data-driven inventory deployment can optimize fulfillment centers
- Tech stack assessment is necessary to identify and prioritize needed technology
Efficient Integration, Shipping Expectations, and AI Tools in Subscription Models
40:39 - 46:52
- Tech stack audits are crucial for ensuring seamless integration and avoiding wasted money.
- Shipping and logistics are challenging for many brands, and setting clear expectations is important.
- AI tools can improve productivity and efficiency in various departments, so it's worth experimenting with them.
- Individuals should identify tasks that can be made more efficient with AI and research corresponding tools.
- Regular experimentation with AI tools can lead to marginal gains in sales, marketing, HR, finance, etc.
Consistent Improvement and Experimentation in Subscription Models
46:34 - 48:31
- Employees should spend 30 minutes a week experimenting with tools in different departments to achieve marginal gains.
- Improving by just 1% every day can lead to significant overall productivity and cost reductions.
- Allocating time during the work week for experimentation is important.
- Consistent daily improvement leads to mastery of skills over time.
- The conversation was enjoyable, and there may be future events with other brands.
- Listeners are encouraged to subscribe to Chase's podcast at retrovepayments.com/hitsubscribe.