Membership and Subscription Growth

While pet owners enjoy spending money on their pets, the pet supply business is already crowded, cluttered and challenging to break through. But, with a keen eye to opportunity, Deena Bronz discovered an underserved group of customers that were a perfect fit for the subscription economy.

Deena Bronz is the co-founder of KitNipBox, a curated monthly box of cat products, including toys, treats, accessories and even Halloween costumes. Deena shares her advice for finding the right product or service to offer, building a community for the members, and focusing on retention. Continued

Within the middle of the huge subscription box boom is one person with a single website, MySubscriptionAddiction.com. Started from an obsession of subscription boxes, it’s become the single largest affiliate for almost all subscription boxes today. And, because their editors create so many unboxing videos, get feedback from followers and see what works from a sales promotion perspective, MySubscriptionAddiction.com is the perfect place to learn what’s working in subscription marketing today.

Liz Cadman, founder of MySubscriptionAddiction.com, is one of the best sources for insight into success in the subscription economy. MySubscriptionAddiction.com provides reviews and a directory of subscription boxes. They publish unboxing experiences and feature customer reviews to a growing and eager audience of subscription box enthusiasts. Her website currently averages a million visitors a month, with over 10 million pages viewed each month. MySubscriptionAddition.com followers are the most informed and motivated subscription buyers today.

According to Liz, the average viewer of her website is 95% female, in the age range of 25 to 34, who has subscribed to at least 2 or 3 boxes at any given time, and spends at least $100 per month on boxes. And this average viewer has about seven more boxes on her wishlist too.   And even though the MySubscriptionAddition.com audience is mostly women, they are still the top affiliate for a lot of the boxes that are targeting men. Women are the primary buyers for all subscription boxes, whether the box targets men or women.

With such an immense amount of data on boxes and their customers, Liz is positioned to share valuable and proven tips for those wanting to enter the subscription economy. For starters, when considering the price point of your box, she recommends going for a higher price point, around $39-$49, as opposed to starting off with a low-price box.

An additional recommendation for starters is “going quarterly so that they have more time to figure out what's working. This gives them more lead time on everything and they can do things in a seasonal manner. A lot of our readers who have quarterly subscriptions that they love would still love to get even more from them. So, start out quarterly and see how that type of timing is working for you. You can always add an add-on option in the future - maybe a $10 monthly boost where you get one of your favorite products a month in addition to the quarterly box.”

My SubscriptionAddiction.com recently launched an MSA Insider's Program. Liz shares that “we have a panel of thousands of super passionate subscribers who want to give feedback to subscription box companies. They fill out surveys for us. They give feedback on products. If you are looking for either testing out the concept of a box, or you're an existing subscription box company and you want feedback on future products, or just to get a better sense of our demographic and ask all sorts of questions, we have those opportunities as well.”

If you are looking for ideas and inspiration to create your own subscription box or grow your own membership program, Liz recommends studying Rachel Zoe Box of Style, FabFitFun, PopSugar Must Have, Loot Crate, Culture Fly, and Ispy.

Discover more insights from Liz and her followers of MySubscriptionAddiction.com by listening to her interview on Membership and Subscription Growth!

Be sure to visit MySubscriptionAddiction.com for reviews and information on the many subscription boxes available today!

 

https://s3.amazonaws.com/msgw-audio/Membership_and_Subscription_Growth_010_Discover_Subscription_Secrets_From_Best_Sales_Engine_Subscription_Box_Industry.mp3

It’s often a huge challenge to figure out what you should deliver to your subscriber members each month for maximum membership retention and renewal. Plus, you want to deliver something that’ll create referrals and social buzz. This challenge is even more difficult when you are a subscription box trying to negotiate with a company to deliver hundreds or thousands of items so you can ship them to your subscribers as part of their monthly subscription box. There must be a constant balance between getting your hands on products and investing the time and relationship capital to obtain the ones that’ll generate a huge impact. This is the same for a SaaS company choosing which new features to develop or a publisher working with editors to create content.

In my recent interview with James Erickson, owner and CEO of Stridebox, a subscription box service for runners, we discussed his solutions to the problems of getting items for Stridebox that drive engagement, how to balance content that members would readily appreciate versus delighting them with new discoveries, as well as how to engage subscribers to create a community.

James came from a background in newsletter publishing and transitioned into subscription boxes. From the outside, it may appear that these are very different, but to James, fulfillment and the need for membership retention were similar. He said, “…if you look at a printed newsletter you have a package, a newsletter, different inserts for the package and a mailing list. It's really very similar [to subscription boxes.]”

The big difference with newsletters and subscription boxes are the products that ride in the box versus the articles in a newsletter. What does it take to get the hundreds or thousands of products to ship out to your subscription box subscribers? James answered, “I found out very quickly that it wasn't that difficult. It's one of those that if you ask, somebody is going to say yes eventually. It's just a matter of putting your head to the grindstone and doing your research on the products, and figuring out what's a good fit for your audience.”

But then there’s a big question of which products will improve membership retention. Do you deliver products in your box that customers will recognize as valuable from brands that add to the prestige of your box, or do you focus on delighting your customers by helping them discover products they’ve never experienced before? James answered, “The first year, we tried to align ourselves with as many big companies as possible. We wanted the Power Bars in the box, because everybody knew about Power Bar. We wanted Gu in the box, because everybody knew what an energy gel was in our market. We tried to align ourselves with companies like Mizuno and Nike, and Adidas, and put their advertising or inserts in our boxes, or give discounts to our subscribers. We wanted to play ourselves as ‘We're that brand with those connections.’ Today a lot of our product choices are based on things you don't see every day - The mom and pop shop in Idaho that's cooking gluten-free, vegan cookies that are full of protein - The place out of Washington called ZipFit that not everybody knows about that's like a powdered drink mix company. We don't want to give somebody the same thing, the same brand, the same flavors, two or three months in a row, because that doesn't lead to longevity of the customer. If you wrote the same article for your newsletter three months in a row, people would kind of get tired of it.”

And while including the best products is crucial for success, membership retention always comes down to the power of the community you build. For Stridebox, they put their subscribers into their box. James explains, “we started doing a monthly card photo submission. Each month, we have what's called the Stride Guide. On the back of the Stride Guide are all of the products that are in the box, as well as a couple of sentences about them, a retail cost if you were to go buy it at your local running store, and then, a website where you can go to find more about it and purchase more. On the other side of that card we used to just put these motivational stock photos of sweaty runner people. At some point, we got tired of that. We thought, "Well, let's just email the audience and see if we can get them to submit pictures. We'll give away prizes. They'll get to see themselves on this card that will go out to thousands and thousands of people. The first one, I believe, was we did medals. Like, take a picture of your favorite race medal that you've earned and send it to us. I think we got about 240 responses of medal pictures to page through and look through to pick out 24 that were going to go on the cover of the Stride Guide. That created a lot of work, but, it was a lot of fun. People started sharing that on social media, which was kind of the big, "Aha," moment.”

From outside the subscription box industry it could look mysterious and challenging. In the end, it’s very similar to any subscription business. It all comes down to creating great deliverables your members eagerly use, delighting your members with something new each month and engaging subscribers into your vibrant tribal community.

Discover more of James’ membership retention secrets in the full interview of Membership and Subscription Growth. Click on the links below to listen to the podcast or download the transcript.

To continue to get updated and useful information as well as advice from some of the most successful entrepreneurs in the subscription economy, subscribe to Robert’s podcast: Membership and Subscription Growth.

Recurring revenue is the single biggest growth factor and stability for businesses today. Rather than having a revenue that is dependent on individual transactions, subscription revenue grows as you add new subscribers to the continuing revenue from subscribers that were added last month, and the month before. Yet, many subscription businesses struggle and fail.

Perry Marshall, one of the world's most expensive and sought-after business consultants, endorsed by FORBES, INC Magazine, and the most respected marketers in the world, recently interviewed Robert Skrob about the subscription economy. In addition to a wealth of information and advice for the subscription economy, Robert revealed what subscription businesses must do to grow recurring revenue including: how to launch a new subscription business to generate recurring revenue, how to generate new subscribers, and how to onboard new members to increase lifetime customer value. Continued

For 99 percent of the subscription economy, every subscriber receives the same thing. It would be unthinkable for a publisher to create a unique magazine for each subscriber, or for a SaaS company to create a unique software tool for each customer, or for an association to create a unique experience for each member. However, that’s exactly what the most forward-thinking subscription boxes such as PupJoy do every month. Continued

Discover how to grow your subscription business from the explosive growth of the subscription box industry. Subscription boxes have become the single fastest segment of the subscription industry over the last 12 months, as have the number of offerings. What leads to fast growth within subscription boxes can help you grow your own subscription economy business.

At the center of the subscription box industry is my recent guest on Membership and Subscription Growth podcast, Amir Elaguizy, the co-founder and CEO of Cratejoy. More than 4000 subscription boxes rely on the Cratejoy platform for marketing and fulfillment. Amir has seen what works within the subscription box industry and what leads some subscription companies to fail.

Membership retention comes down to subscription fundamentals, understanding what your customer wants, delivering tangible value and delivering a terrific unboxing experience. ...Continued

Every group exhibits language and behaviors that are unique to them. What makes certain cultures so effective at innovating change, while others are a misery to everyone who participate? How can you change a culture to unleash your group’s potential, grow your company and increase your membership retention?

I talked with Dave Logan, co-author of Tribal Leadership, about what the beliefs, attitudes and loyalties of a group can reveal about its culture, and how to improve that culture for better results.

Dave is a bestselling author, management consultant, and faculty member at the USC Marshall School of Business. Dave co-founded CultureSync in 1997, a management consulting firm specializing in cultural change, executive coaching, and strategy. CultureSync’s clients dozens of Fortune 500 companies, major nonprofits, and governments around the world.

Logan’s insights will lead you to breakout performances within your corporate team and to greater satisfaction and membership retention for your association, training program, or any other type of subscription organization where members interact with one another.

How Diagnosing Your Tribe’s Culture Can Lead to TransformationThe basic building blocks of any culture is the tribe— a group of 20 to 150 people focused on making an idea successful, Logan says. Big organizations are made up of smaller tribes that join to form a larger tribe of tribes.

If you measure a tribe’s culture on a scale of one to five, and then elevate that culture just one level, performance can increase by 300 to 500 percent, he says. “It’s the most important thing you can focus on,” Logan says. “Culture eats strategy for breakfast.”

To identify a tribe’s stage, look at what the people in the tribe say and do:

Stage One – This tribe believes “life sucks.” Life is unfair, and God just messed this up. People in Stage One steal, commit fraud, punch each other in the face and worse.

Stage Two – This tribe believes “my life sucks.” They behave passively and avoid accountability. They spend their time griping and complaining and do just enough work to not get fired.

Stage Three – This tribe believes “I’m great (and you’re not).” People in this stage are busy self-promoting and competing with one another. They get very little done.

Stage Four – This tribe believes “We’re great (and they’re not).” Think of sports. There’s usually a common vision and a common adversary. The team sets aside individual egos and takes ownership of group goals.

Stage Five – This tribe believes “Life is great.” There is no “us” and “them.” Stage Five tribes are driven purely by values, and that produces world-changing innovation. However, they can sound a little crazy and unstable, like the dot com companies which said, “We don’t need revenue, all we need is eyeballs.”

How to Move Your Tribe from “My Life Sucks” to “I’m Great”Tribes at Stage Two feel unempowered. To get them inspired, it’s best not to take on the whole group, Logan says.

“The negativity is just too great. It'll overwhelm you,” he says. “They'll make sarcastic jokes about you and character assassinate you without you even knowing that it happened.”

Instead, find one person in the tribe who wants things to be different and mentor him. Offer specific advice, like “Let’s start by getting organized.” Or, “Let’s start by setting some goals.”

“You're not trying to improve the tribe, you're just trying to elevate that one person,” Logan says.

After a week or a month, that person moves to stage three and says, “I’m great.” But they look at everyone around them, and they all really suck.

“And at that point, you make that person a mentor to someone else in the tribe,” Logan says.

Four Strategies to Move Your Tribe from “I’m Great” to “We’re Great” and Increase Membership RetentionThink about the sports team that suddenly starts to win lots of games. Their story is never about having the best talent, Logan says. It’s about the individual journey the players make from “I’m great, and you’re not” to “We’re great, and they’re not.”

How do the best coaches and managers get their teams there? Here are four strategies:

1. Find something that trumps individual ego. Find a common enemy that everyone has to compete against. “Maybe the opponent is better organized. If the team’s not going to die, they have to close ranks,” Logan says.

2. Identify core values. Find commitments that are more important than each person’s individual desire to be the best.

3. Find a noble cause. This is different than a core value. It’s when the status quo gets under people’s skin. There’s something that is just not right about the industry. There’s some service that people should be receiving and they’re not. “It’s something that actually makes them angry and anger can be a huge motivator,” Logan says.

4. Build triads. These are three-person relationships where everyone has two goals: to build the relationship, and to solve a problem. “There’s an issue that they're working on together. But it’s within this context of this three-person relationship, that makes it become a very, very strong commitment for them,” Logan says.

Grow Subscriptions by Improving the Culture Between Members Tribal leadership can work for your corporate team, but also for your subscription members. How many times do you find a person at your coaching meeting who thinks he’s too smart for the room? He says, “I’m great. I’ve heard this stuff before, I don’t need to hear it again.” You need an antidote to protect your group’s synergy.

Look for a common enemy, find core values, identify a noble cause, or steer people into triads. Whether you use it for your membership or for your corporate team, tribal leadership creates empowering relationships that increase productivity and group participation.

Subscription businesses benefit from the advantage of recurring revenue. Acquire new members and keep your existing ones. Sounds simple, right? We understand it’s not that easy. How do you keep your recurring revenue if your members’ credit card charges are declined? When you charge the credit card that you have on file, send the product or service, and then find out the charge was declined, that’s called involuntary churn. And, it sucks. It sucks out your revenue, and the hassle often sucks out the member’s subscription.

I met with Paul Larsen to discuss this challenge. In addition to a lengthy list of credentials and experience, Paul is the owner of PaulLarsenConsulting.com, a company with a focus on helping businesses conquer involuntary churn and increase their recurring revenue.

You will discover:

• Why “lowest price” merchant services firms can lead to increased credit card declines and decreased recurring revenue from existing members.

• Why you are getting so many credit card declines (and it’s not necessarily because your customer doesn’t have available credit) and what to do about it.

• Current trends in the credit card industry and how they impact credit card declines.

• Auto-updater services that get you credit card data when your customer receives an updated card with a new expiration date.

• How to identify a credit card processor that can help you get more charges approved each month and increase your recurring revenue from your existing members.

What are the Biggest Causes of Credit Card Declines?You see the recurring revenue of your existing members decreasing at a rate higher than your churn. This is what happens with involuntary churn. The charges on your members’ cards start getting declined. Incorrect card information is the biggest cause. When a member’s card information changes, you are not often notified. There are several unintentional reasons for the change, and the customer often fully intends for you to receive your payment.

Card information changes when members are issued new cards. This happens when they lose a card, experience fraudulent charges, change out their card preference for a new rewards program… and the list goes on.

An additional disruption in the system is occurring because every card in America is being reissued with chips. Almost all of them are reissued with new expiration dates if not new account numbers. “Because every card has a new piece of information, the old legacy information has been switched out on which the last charge for that subscription took place,” explains Larsen. “So, we've seen overall decline rates steadily rising over the past two years again, in large part because of this mass reissuance.”

“The period of great volatility has been about four years now because, even before the chips, there were the massive breaches at Target and Home Depot, so those two breaches alone caused 110 million credit cards to be reissued. Plus, we're all losing our credit cards it seems, at least once a year,” adds Larsen.

Companies who have merchant processors who don’t deal with this issue have seen self-involuntary churn triple in the past 18 months. And it’s not over yet. While most credit cards have been reissued with chips, still many hundreds of millions of debit cards are yet to be chipped.

At a time when you are doing all you can to keep your members, this problem becomes a huge hassle for them. They have to proactively update their information. It’s giving the member the opportunity to look at their subscription and decide if they want to renew or not. When often, a card that is regularly charged goes without their attention and the subscription continues.

In addition to changing card information, another cause of card declines is the prepaid cards. When prepaid cards are purchased and used to buy a subscription, they become a declined charge when the money runs out. “Fraudsters endeavor to gain the system using prepaid cards,” warns Larsen.

He adds, “here’s where the right processor makes a big difference. If you integrate with a best in class processor, you can either have them filter out those prepaid cards for you or take advantage of what they call enhanced authorizations, which provide indicators that tell you that the card is a non-reloadable prepaid card. So, you can deal with it right up front.”

“Knowledge is power and, if you have this kind of knowledge as you're engaging the customer, you have a better chance of not being fleeced.”

Advice to Protect Against Fraudulent ChargesLarsen advises that, “CVV is an absolute must. It's the first line of defense against fraud and in fact maybe the only thing that you actually have to implement in terms of fraud screening.”

“There's greater abandonment when CVV is not asked for, because people know that this is an extra layer of security. People doing business on the web legitimately want that security. And most people know their CVV just as well as their account number. One thing we do know, for sure, is that conversion and lifetime value absolutely is greater with a CVV customer, a customer that you brought in by CVV.”

Highest fraud used to occur at the point of sale. Now with the use of chips on cards, this has decreased, causing the offenders to turn to online purchases for fraud opportunities. “Fraud is moving online very rapidly. And merchants better have fraud screening either operable or at least ready to go,” warns Larsen.

Choose Your Merchant Processor Wisely“I would say that a merchant's choice of processor has always been important, but never as much as now, because there's never been so much downward pressure on authorization rates as there is now,” states Larsen.

When you see your recurring revenue decline, your first thought is to cost your costs. “Of course, pricing is important but, at the end of the day, that pales in comparison to the importance of performance over price. Obviously if you can get them both together that's great, but it's the processor's policies, procedures and practices that will ultimately deliver the bottom line results that can help a merchant succeed because of credit card processing… not despite it.”

Everyone in the revenue chain loses, including the consumer, when a membership or subscription or a payment can't be captured. No one asks for a relationship to come to an end but it does.

As a result, the best merchant processors have developed policies and procedures that allow merchants to overcome this churn using those tools and weapons that they make available. “Selecting a payment processor is really important because some of them have really developed these tools and weapons to reflect both an art and a science in accomplishing authorizations over time,” says Larsen.

“Some processors don't even make these tools available at all, so the merchant is left high and dry with all these failed transactions… these imploded customer relationships.”

Larsen adds, “When your processor brings forward your charge on your behalf and presents it to your customer's credit card company, they're seeing you as a merchant through the lens of your processor because the processor is the one bringing the charge. And if it's a high-risk processor or somebody that deals with a lot of fraud, that's going to trip off those algorithms and you could get a failed charge even though there's available credit on that card.”

Updating Services are Available to Help You Recover Your Recurring RevenueWhether the card is replaced because it is a chip, or it's replaced because it was lost or stolen, there actually are updating services that you can subscribe to as a merchant that would provide you with the updated credit card information.

Larsen says, “It was originally positioned as a courtesy to consumers to create a database into which updated information could be loaded and then merchants through their processors could query these databases to get the fresh information and overcome in large part the churn caused by this reissuance. Visa, MasterCard and Discover now have robust databases that merchants can take advantage of if their processor offers that service. I can tell you that these services have been a lifesaver for many merchants throughout this period of great volatility.”

“Being able to tap into these account updater services is really essential. The best of the processors not only offer account updater and other services, they've created a much more useful and robust authorization response. It also includes country of issuance of the card.”

When looking for the best merchant processor, Larsen advises that you “Talk to the right people. It's all about networking with others in the industry, your peers. That's really the best place to find those things out. And then once you get a sense of the features and functionality that these guys utilized to help overcome churn, then you forge and sculpt that list into your business needs. And then you use it as the wedge to crack open the treasury of golden tools at a world class payment processor.”

“I'd like to remind merchants that you don't have to be in the top tier of your vertical to engage a world class processor,” says Larsen. The best processors really want to underwrite who you are. They want to take a look at your sales pages. They want to have some sense of what your product is and really get an understanding of your business because before they stake their reputation on you as a merchant they want to do their own due diligence and check you out. Those are the types of businesses or merchant processors that you really want to do business with,” Larsen adds.

He continues with, “Viewing this as a commodity or a client vendor relationship is a big mistake. This truly has to be understood, and you have to really believe, that you've entered a partnership in which not only are they’re scoping you, but you're scoping them. Ultimately you want to work together to increase the kind of sales that are meaningful....

Why would your company want a member instead of a customer? Studies show the valuation of companies in the membership economy are anywhere from five to 10 times the size of similar companies which use transactions. That’s according to Robbie Kellman Baxter, author of The Membership Economy. Baxter is a Silicon Valley marketing consultant whose clients have included Survey Monkey, Netflix, Yahoo, Oracle and eBay.

I recently talked with Robbie about what she calls “the forever transaction,” a customer who sticks with you forever. You will learn insights she’s gained from advising nearly 100 organizations on growth strategy.

Why Would A Company Want Members Instead Of Transactions?Long-term members give entrepreneurs a more predictable cash flow, says Baxter. Also, companies are able to invest more time and money to acquire a new member than they could for a one-time sale.

“So many transaction-based companies invest in acquisitions, and then don’t retain the customer,” Baxter says. “They’re on a constant treadmill, and it’s like a hamster wheel. You’re always running to keep up with new products or enough offerings, and you have to keep finding new customers.”

A membership business lets entrepreneurs get to know one set of customers and continue to serve their evolving needs. Acquisition costs go way down, and profitability goes up.

Why Would A Customer Want A Forever Transaction?So why would a customer buy a membership instead of, for example, a course that teaches them a skill one time? It’s because a membership can keep solving their ongoing needs, Baxter says. But, it’s also important to structure a business that does so.

For example, if a customer takes an online course teaching him how to draw, once he’s learned all he wants, he doesn’t need the membership anymore. But if the business gets to know its customers, and really understands their challenges, it can continue to expand its offerings. It can teach how to earn a living from drawing, how to use drawing software packages, or how to get into art galleries.

“Then they will stay for life,” Baxter says. “Because they want you to solve their problems forever.”

How Do You Change A Company’s Culture To Fit The Membership Model?To move from a company based on transactions to one based on memberships demands a different mindset. One that’s focused on the long-term happiness of customers as opposed to short-term revenue, Baxter says. That can mean weening owners away from over-reliance on the metrics found in quarterly reports.

“Because the transaction isn't as important as retention,” Baxter says.

The company should also evolve to focus more on member satisfaction and engagement. Members will expect better treatment than one-time customers. They’ll expect to have more of a voice.

“If I buy a Hershey's candy bar, I don't expect to get Hershey's to listen to me. It’s a completely anonymous transaction,” Baxter says. “But if I own a subscription to the Chocolate Garage, where my membership lets me buy chocolate every month, if I don't like the selection, they're going to hear about it. The company will need to have customer success philosophies in place to manage that feedback.”

How Do You Build A Relationship That Keeps Members Long-Term?“Onboarding is one of the most overlooked opportunities to engage and deepen valuable customers relationships,” Baxter states. She lists the following three activities that companies are doing to have effective onboarding.

1. Reinforce the wisdom of the member’s decision. When a customer buys something, he almost immediately wonders whether he did the right thing.

“So, if you say right away, ‘Congratulations you're taking the first step toward having the career of your dreams. We're going to help you. You're already better than 99 percent of people who don't even take one step,’ It reinforces their good decision,” Baxter says.

2. Give some value right away. Pandora does this well. The customer only has to pick one song, and Pandora starts streaming a radio station.

3. Tell members how to get the most value from what they've already paid for. American Express offers loads of benefits beyond simply using a credit card—free admission into airport lounges, global entry, free upgrades to first class. And, the company tells members about those benefits immediately, to make sure they get that value.

Should Free Trials Be Part Of Your Growth Strategy?Not necessarily. Sometimes a free trial simply gives a product away to someone who isn’t interested in it. But, many companies do grow their businesses with free trials. Baxter lists three scenarios where free trails may work:

1. To get a buyer hooked on a product they don’t understand. Before Mrs. Fields Cookies became a household name, people thought it was crazy to pay a dollar for just one cookie. Then, they tasted a free sample.

“It was literally a delicious bite and they were like, ‘Oh, I understand now. This is not Chips Ahoy,’” Baxter says.

2. To build a network effect. One example is LinkedIn—each new person who joins makes it more valuable for those who are paying.

3. To create new marketing channels. Survey Monkey will let a buyer do a survey for free if it’s only sent to a few people. But, the people who get the survey, may decide they like it enough to buy the larger, paid version.

A membership economy business can bring in lifelong customers and build recurring revenue for companies. To master the business model, marketing guru Robbie Kellman Baxter says you should tailor services to match members’ evolving needs, focus on customer retention and happiness, reinforce the sale and help customers learn your service when onboarding. Also, use free trials only when they are likely to create revenue. The customer loyalty and steady cash flow of the membership model will deliver a peace of mind that allows you to truly enjoy your business.

The subscription economy is exploding and everyone is wanting the benefit of recurring revenue. Today the world is awash with subscription options-Netflix, Amazon Prime, SalesForce.com, Dollar Shave Club, and so on. Sure, you offer a dynamite software as a service company, a great training program, a unique product, or vital business intelligence, but how can word of your business cut through all the noise?

To gather some insight from an expert in the subscription economy, I talked with John Warrillow, author of bestselling books like Built to Sell - Creating a Business That Can Thrive Without You and The Automatic Customer - Creating a Subscription Business in any Industry. John is also the founder of a subscription-based company called The Value Builder System, where advisors help company owners increase the value of their businesses. Before that, he founded Warrillow & Co., a subscription-based research business dedicated to helping Fortune 500 companies market to small business owners.

The lifeblood of every business is repeat customers, says Warrillow. “Automatic customers,” people who buy subscriptions, are the best way to ensure that your recurring revenue continues forever. To give yourself the market edge, you’ll want to pay attention to three numbers: 10, 90 and 3.

Make Your Subscription 10x More Valuable Than a Single SaleOnce upon a time, the monthly credit card statement had five or six charges—the utility bill, cable TV, etc. Today, small incremental charges—the Netflix subscription, Microsoft Office 365, Birchbox—fill the pages and stretch on. Consumers are feeling subscription fatigue. They’ve raised the bar on what they’ll buy. How do you compete?

Warrillow advises that you consider the 10x versus 10% theory. “Try to develop a 10x value proposition that makes it ten times more valuable to subscribe than to simply buy on a one-off basis; because, nobody is going to subscribe to your product or service to save ten percent,” he explains.

California-based information marketer New Masters Academy does this. It developed an online learning library. When you subscribe, you can learn watercolor painting, how to make better pottery, and more. Their competition is the community college, where it might cost $600 or $800 to attend a live training workshop.

“For $29.95 to subscribe to New Masters, you can make the case that the customer got 10 times the value they would have gotten from going to a single live workshop,” Warrillow says.

Build Subscriber Loyalty Within the First 90 Days You’ve sold a membership, time to move onto the next buyer. Wrong. You’ve got the first 90 days to get your customer to be transformed by, or learn to depend on, your product. Otherwise, the member won’t keep the subscription, and that recurring revenue you counted on decreases. The key is to keep your buyer engaged.

“Statistics show if you're able to change their behavior, get them to interact with you, feel good about you in the first 90 days, their likelihood to churn (cancel the subscription) drops off a cliff,” states Warrillow. “They will be subscribers for a very long time.”

On the other hand, if you ignore the customer for 90 days, and then see they never used the product you sold to them, you’ve lost them. “There's virtually nothing you can do after the 90-day period that will re-engage them,” he warns.

“It’s why companies like Amazon and Netflix have entire teams, boardrooms full of whiteboards choreographing and storyboarding the first 90 days of their relationship. They will go to the point of really looking at whether to send a third email on the sixth day. They even statistically validate whether it's better to send that email on the sixth day or the seventh day. It has that big of an impact for them,” Warrillow says.

A Lifelong Customer Should Deliver 3 Times His Acquistion Cost It’s the value of selling subscription programs. Rather than getting a one-time payment you get that recurring revenue coming in. Your business will grow, but there are also cash flow impacts.

“The most important ratio a subscription owner should track daily is the lifetime value of the subscriber compared to the cost it takes to acquire a single subscriber,” advises Warrillow. He adds that most professional investors considering your business want at least a 3 to 1 ratio.

Otherwise, you could be trying to scale up a membership program—quickly signing up new members—only to find the money disappears as fast as it comes in.

Subscriptions Provide Profit ContinuityIf you’re selling a product, training course, or a business article one at a time, your income is always tied to your last product launch. Re-engineering your business model to become membership-based can create recurring revenue - income that continues long after the first sale.

But subscriptions are harder to sell than other types of products. To set yours apart, design a membership that delivers a 10x value, engage your customers during the intial 90-day window after the sale, and build a model where a lifetime customer spends at least three times what it cost to acquire him.

I encourage you to listen to the audio, or read the transcript, of this interview. You’ll find additional nuggets of wisdom if you do so. The links are below.

In addition, I recommend that you read John’s books, Built to Sell - Creating a Business That Can Thrive Without You and The Automatic Customer, if you haven’t done so.