For over 20 years, Robbie Kellman Baxter has been a subscriptions advocate, literally writing the book on subscriptions (well, two actually). Today she shares her innovative outlook on subscriptions that she calls the “membership mindset.” It’s about building your organization, experience, and brand around helping people solve their problems or reach their goals for the long term. Whether you’re currently running a subscription or plan on launching one, this is an episode you don’t want to miss!
Jay Myers: Robbie Kellman Baxter, thank you so much for coming on our show. I know subscriptions are something we are so passionate about. I know they’re something you’re so passionate about. I have been excited about this conversation for a long time, so thank you first of all, for coming on.
Robbie: Oh, thanks for having me on, I’m looking forward to this.
Jay Myers: Robbie Kellman Baxter, thank you so much for coming on our show. I know subscriptions are something we are so passionate about. I know they’re something you’re so passionate about. I have been excited about this conversation for a long time, so thank you first of all, for coming on.
Robbie: Oh, thanks for having me on, I’m looking forward to this.
Jay Myers: Who is Robbie, first of all, and why are you so passionate about subscriptions?
Robbie: So I have been passionate about subscriptions for about 20 years, actually. So before business school, I was in consulting, a big firm consulting, and then after business school, I was in product management and I got laid off when my second child was born. I have three now and I decided I was going to hang up my own shingle and being control of my own career. For the first year or so, I was just doing general strategy and marketing work and then I got Netflix as a client and I fell in love with their business model. I had already fallen in love with it as a mom who was up late at night with babies and loved always having something to watch, never having to go to the store like that, I understood the value. Then as a business person, I loved their relentless focus on what I’ve come to call a forever promise, which is that they were going to give me a great selection of professionally created video content delivered with cost certainty in the most efficient way possible.
So lots of content, no late fees, you don’t have to leave your house and 15 years ago, that was three DVDs out at a time sent to you in the mail with someone else’s content on it, today it’s streaming and it’s Netflix proprietary content, but they have stayed true to that promise, which was, what do I Robbie need? I need a movie to watch, I need a TV show to watch if I’m up at three in the morning and I don’t want to run out. So that was really where I just fell in love with the subscription model and as I was falling in love with subscriptions, a lot of other people were too and I started getting a lot of calls from people saying, hey, we want to be the Netflix of news or music or software or bicycles or dental pain management products or coffee and so I just kept digging in and looking for patterns and trying to think about what could I apply from one company to another and that’s where I’ve been ever since.
Jay Myers: Well, you were certainly ahead of your time because now if you can’t subscribe to something, it almost seems weird. I’m subscribed to my treadmill and I’m subscribed to things that I would never normally think you would be subscribed to, but now we just take it for granted, but it’s normal now. So you’ve written a couple books on this topic, the forever transaction and the membership economy, both of which I would highly recommend to anyone listening, they are fantastic books. It was the membership economy first and then most recently the forever transaction; I guess, with the membership economy. Why did you feel that book needed to be written?
Robbie: I wrote that book in 2014, and the reason I wrote it was because I was seeing these patterns and these frameworks that were working across the industry. So I was working, I’m in Silicon Valley and I live in Menlo Park, California. I was seeing a lot of software companies, software as a service, consumer subscriptions, but then I was also working with some news organizations and I was also working with some professional societies that have been with membership forever and I was seeing how each could learn from the other and I was starting to develop frameworks and I was really excited about it. So I was kind of a zealot and I was sitting next to some executive or entrepreneur on an airplane I would say, I work with subscriptions and they would say, oh, that’s probably not relevant for me and I was like, no, it’s so relevant for you. So I wrote the membership economy to explain to people what was this massive transformation that I was seeing with all of these different industries, applying these principles with great results and to show how you, whatever organization, big, small bootstrapped, venture-backed big, old-time brand, small, edgy tech brand. Everybody could tap into these principles to build recurring revenue, greater lifetime customer value, better relationship with your customers and so that’s what I wrote the book was to explain what I was seeing and to try to help other people see that as well.
Jay Myers: Well, and I would say now that challenge of getting those big brands to see that kind of is essentially gone now, would you say?
Robbie: So five years later I don’t have to explain to anybody about subscriptions. Now if I’m sitting next to somebody and I haven’t been on an airplane in a while, but when I was traveling a lot, when I said I work in subscriptions, I’d get one of two answers; either, oh my company’s thinking about subscriptions or has just experimented with subscriptions or has had subscriptions and is trying to reinvent their subscriptions and we’re having this problem or that problem, that was one answer. The other one is, oh, I’m trying to cancel this subscription and I’m so mad at them and they made it so hard, but everybody is aware of subscriptions right now. I don’t think that there is a business out there that has not at least considered whether subscription pricing or a membership model could be effectively used in their organization regardless of size.
Jay Myers: Or a bit of a combination of both right? So I trend, I think I’m seeing now is from subscription to; well there’s subscription and there’s membership and then there’s as a service; let’s just take like a clothing company, so you can subscribe to clothing, you can have style as a service, so I’m getting my style, but it’s really, it’s not the clothing of subscribing to I’m getting styles of service, but then there’s an aspect of membership. So like, Fabletics is a great example, they have a subscription, I get my clothing every month, but it’s athletic wear as a service and they have a great community. So there’s a member aspect to it as well, too. So what are your thoughts on as a service, as it pertains to e-commerce and maybe product companies thinking about it?
Robbie: Yeah, I think it’s, if you imagine that designing this new membership oriented model is you have the painter’s palette to create it, I think as a service is one of the colors you can paint with, but it’s not going to make a beautiful picture by itself. So a lot of people, just for terms, at least the way I think about it subscription is a pricing decision, you pay somebody on a periodic basis in exchange for some ongoing value; a membership, there are sort of two ways of thinking about, well membership with a big M, membership with a little M. One of them is a lot of organizations have a product that they call our membership and it’s like, it’s got its own P and L, a lot of associations have that and you might say that for Amazon Prime might be a P and L like how many people pay us every month or every year to be part of this group. But then there’s the other kind of membership, which is what I write about, which is kind of overarching above subscription software as a service and membership products, which is a mindset, a member mindset that says I’m going to have a long-term relationship with this customer because I am going to solve an ongoing problem for them or help them achieve an ongoing goal and I am going to continue to layer value in and evolve my offering to deliver on that goal to the best of my abilities.
So newspapers 50, their forever promise, I would say is for most of them to help readers understand the world around them so they can make better decisions, more informed decisions. That was the same 50 years ago as it is today but the how has changed dramatically and the best news organizations have layered in digital and social and video and podcast and events and community and access to their journalists, all different ways to do what, to help people understand the world around them and make better decisions. There’s no reason that you would jump to printed newspaper if I said, how are you going to help people make better decisions? There are a million ways to do it, so that’s really, what’s at the core of any of these things. So if you’re selling clothing, for example, kind of the lowest order benefit is she needs a white blouse, I’ll sell her a white blouse, but I’m buying the white blouse for work and so if you can make me look professional and feel my best at work, you can tap into a deeper relationship with me. If you understand that that’s my journey, I’m trying to solve the pain point, me, Robbie, I hate buying clothes, I like to look nice, but I don’t really like to shop. If the right clothes for the occasion magically appeared in my closet just in time, I would pay a huge premium for that on an ongoing basis forever.
Jay Myers: That’s really what you’re buying is you’re buying the style. So a couple of things that hit me as you’re speaking that, first of all, I wouldn’t say would you say the statement is true that every brand should have a membership model or focused on memberships? Some membership models have a subscription, some don’t like, it’s not membership is primary?
Robbie: Yes, the way I talk bout it is it’s a member mindset. So some organizations are member-centric. Some organizations are product-centric and some organizations are, shall we say sales-centric or revenue-centric, very focused on how do we get to this number, let’s work backwards each quarter and being member-centric means not just being customer-centric, but thinking about that customer as somebody who’s going to stay for a long time. If you just look at your business through that lens and say, who are the customers that stay for a long time and how do we create more of them and how do we serve the ones we have better and deepen and expand our relationship, you’ll come up with all kinds of ideas, which may or may not require a subscription. So one really good example of that is Apple with their hardware products, until pretty recently, they were really mostly a hardware company. They’ve moved aggressively into software and subscription in the past few years, but even like five, ten years ago, people would still talk about themselves as I’m an Apple person. I just walk into the store if I need a phone, or if I need a phone case, or if I need a computer or a screen or anything, a printer, which they don’t even sell, I go to the Apple store first and I say, what do I do? And I trust them and I know that as long as I do what they tell me, everything will work together and they will support it. So there’s no subscription there.
Jay Myers: I actually think there could be; that’s funny you mentioned Apple. I was just talking about someone with this the other day. I think there will be and I’m going to go on record as betting that within two years, Apple is going to launch Apple as a service. I think their strength is actually their ecosystem and I’m one of those Apple people but at the end of the day, an Android watches pretty much just as good as an Apple watch and an Android phone is pretty much just as good as an Apple phone and a different tablet, different laptop, yada yada. But when you have them all together, the Apple watch, Apple phone and Apple tablet, Apple TV, MacBook, and then everything kind of syncs and it’s just like you grab one and all your stuff is there, that’s the value, it’s the ecosystem. So you get people to subscribe to that for, I don’t know what, you know, like 200 bucks a month or 300 bucks a month, and you can have different levels, you can pay 500 bucks a month and you get a premium MacBook Pro and an iPad Pro, or you can have the basic version or whatever. I think that’s where Apple actually needs to get to, in my opinion.
Robbie: Yeah, I’m totally with you. I just want to have a good layout and a good setup for my house and I would like for them to do it and I would like everything to work and if something doesn’t work, I would like them to make it magically work again and I will pay. Honestly, I mean, that’s where we’re going. If you run a nail salon, newsflash, nobody goes to the manicure, you go because you want your nails to look good or you might go because you want to be pampered. But if you tap into one of those needs, you realize like, it’s not perfect that I buy a manicure because I get my manicure, I leave, I chipped my nail and I have to go back in and either pay for a whole manicure again, it’s a production. I would like it to be optimized around my nails always looking good and frankly, if the nail salon came up with a pill I could take that made my nails always look good and it costs twice as much as I’m spending on manicures, I’d take the pill.
Jay Myers: Yeah. It’s so interesting, you say that, one of my favorites kind of quotes is like when the hammer for the nail thing, it’s like, when you’re selling the hammer and you advertise the hammer and it’s like, this is the best hammer it’s got this grip, it’s got this, but does the customer actually want your hammer or do they want the nail in the wall? And do they want the nail in the wall or do they want a bookshelf there? And do they really want a bookshelf or do they want a place to hang the forever transaction and membership economy book? So it might not even be the bookshelf it’s getting to what they actually want. I think you nailed it.
Robbie: And it’s such a good point that you bring up because with that bookshelf example and the hammer, there might be two different people. One of them is like, I am a contractor, I am a construction worker, I really care about the hammer because I care about its usability and how often, how well it will last and how strong it is. But if you’re again, Robbie, I would really like to find a better solution that does not involve me hammering my film into the wall. And so if you know that at the hardware store when I come in the hammer, you can actually maybe sell me the service and maybe even say, you know what if once a month we sent someone out to your house to see if there are any other projects to be done? Because that’s what I really want, I want my house to be nice and homey and to have a place for my stuff and so there’s always another level. If you buy coffee, you might be buying the coffee because it’s a treat for you, you might be buying the coffee because it wakes you up in the morning. You might be buying the coffee because that gives you a break in your day. There’s an understanding how it fits into the person’s life. It’s going to help you understand what to layer in besides the coffee that you sell. Do you want to learn more about coffee? Do you want to have more enjoyable coffee breaks? Do you want to travel to the place where the coffee is made and learn about the culture? All of those things can add value if you know why your customer came to you in the first place.
Jay Myers: Robbie, one of the things you talk about in your book, the membership economy is about building an organization that’s built for the membership model and that really stuck with me because here at Bold, we have around 16,000 merchants using Bold subscriptions today, trying to launch or scale a subscription business and I know so often they think about the product, they think about what’s their pricing model going to be, they think about all that. But they are a e-commerce business slapping on, if you will, a band-aid, slapping on a subscription and nothing else changes, like literally nothing else changes in the company, but they’re just like add the subscription option. But you talk a lot about having an organization built for the membership model. So what does that mean? An organization like built?
Robbie: So it’s an organization where everybody’s thinking about who are we serving and what is the longterm goal that they have that justifies their trust in us? So for example, one of the easiest models in commerce is a replenishment model, I’ll never run out of coffee or I’ll never run out of tuna fish or wine or potato chips, or what have you or diapers and there is some value there, but if you take it a step further, you can find more ways to layer in more value and differentiate your offering. So beyond replenishment, and I know you know this, there is curation, which is like a discovery box. I’m going to learn new things. I’m going to find new kinds of wine or new kinds of coffee or new kinds of bow ties and then there’s community and there’s access to community, to information, to learning, to education, to support, to concierge services, to classes. And so when you have a member mindset, the initial offering is just your starting point and you’re really thinking about how you solve that problem and so everybody in the organization needs to be thinking that way.
So acquisition, in a traditional model, acquisition, boom, your prospect learns about you, they find their way to your site, they buy your product, boom, that’s the end. You go back out and try to catch them or some other customer for the next transaction. In the membership economy, that first transaction is worthless if you’re not going to keep them. So you’re not just concerned about the headline benefit that brings them, hey, come try this product, but you’re about why they should stay, why they should trust you, why they should expand the relationships. So it’s different for the acquisition team. It’s different, certainly for the product team, that’s building that, what is being offered for the subscription and it’s different in terms of how you support it, how you treat those people.
Jay Myers: It has to be a better experience as a customer or slash member because you’re dealing with someone who’s not trying to just figure out how they can do the minimal support possible and save as much money or not even support it at all. Because like their whole business, your lifetime value is tied into your relationship with that brand. So like ultimately it’s kind of a win-win for the customer and in the store.
Robbie: Absolutely. It’s a win-win and that’s what it has to be because in a good subscription, the customer, the subscribers says, I don’t have to worry about this anymore, my dog food just shows up on my door. I’m always current on what my favorite musician is doing and I get all of their music first and I don’t have to worry about it, it just comes to me and I love it. Then the company or the organization says, when I go through all the effort of finding a great customer who loves what I have, I can more effectively keep them for a long time. So the cost of acquisition goes way down and I can learn from them what else they need? I get to know them. So I’m like, oh, I see what they’re asking for. I understand this behavior and you can model it for new customers, for lookalikes. So it’s really powerful on both sides.
Jay Myers: Yes, the data you have from having a direct relationship with your member, I think is probably very underutilized by a lot of brands and it’s extremely valuable. You talk a lot about onboarding as well, and the importance of member onboarding and I can also tell you, so as much as a lot of brands slap on us subscription, they also leave onboarding as an afterthought. It’s kind of like let’s get membership and subscription launched, and then they either don’t have any concept of member onboarding or it’s a year later when they have a massive churn problem and retention issues then they start to think about it. What are some of your thoughts and considerations for membership onboarding?
Robbie: If the people listening, if you remember nothing else or take nothing else away from this conversation, it’s please, the power of onboarding. When you have a brand new customer that is paying attention to you in that moment, there is a half-life on enthusiasm, so you want to take that moment when they’re considering your business and your product to number one, remove all friction and give them a great experience which most companies try to do. Number two, reinforce the wisdom of their decision by showing them what they’re saving or what they’re gaining or what they’re accessing and number three, to begin to guide them, to get the experience that your best customers get. So that’s about surfacing the features that they’re entitled to, it’s about saying do you know that you also, now that you’re getting our dog food every week, do you know you’re also part of the dog food community and there’s a special area for people with puppies? Did you know that we’re going to meet at such and such a dog park in your community? It’s about making sure that they’re getting the value that they’re paying for and if you do this and you can do this in any number of ways, if you’re really high margin or high cost, you could do it in person with a customer success team. If you’re on a budget or you really want to be totally digital, you can build it into the digital experience, the product experience, you can also put it outside the product experience as ongoing communications, emails, or texts, or in your social communities. There are lots of ways to do this but the important thing is that, right in that moment, you want to reinforce their decision and show them what your best customers do.
Jay Myers: I love it. I think I got a subscription to some health vitamins one time and the onboarding process said something, it was something to the extent of like over the next month, we’ll let you know what’s happening in your body as you start to take these probiotics. And it was like, after the first week you got an email, it’s like, here’s, what’s happening in your gut right now, it’s forming the good bacteria that’s now breaking down 10% more of food as it passes you and you’re probably feeling 5% more energetic or whatever it was, I can’t remember the details. Then like the next week, something else, something else but the knowledge that product became 10 times more valuable to me because of what I knew of it versus just I’m buying something that just says probiotics and I kind of know they’re healthy, but I don’t know and then like, I’ll never cancel that because I know what is actually doing. I think you said something about helping your customer, understand the product, understand the value, here’s how you use these features.
I recently did like the onboarding with superhuman, it’s like an email provider and they did personal it’s $40 a month so they can afford to do it. But it’s like personal onboarding. Someone walks you through how to use the email client and their whole thing is to like, to get through your email super fast using keyboard shortcuts and I would have never figured out all those shortcuts on my own. I wouldn’t have taken the time, but you can’t install the software until you go through their onboarding and when you do the onboarding and then you see the value in it. If you just search for superhuman on Twitter, people are like raving fans about this email software, but I guarantee you, they wouldn’t be, if they didn’t go through that onboarding process to understand all the value that’s in this simple email client. But I think it’s so important.
Robbie: Yeah. I love both of those examples. The probiotics one is a great example of reinforcing the wisdom of someone’s decision by saying, hey, you did something good for your body and this is what’s happening right now and I think that’s great. I think also requiring onboarding, it depends on your business, but there are a lot of businesses where that introducing that little bit of friction does two things. One of them is it makes you feel like you’re part of the club if you’re in there and it gets rid of the people that aren’t likely to get the value. If you hadn’t gone through that onboarding process with superhuman, you wouldn’t be using all the features and so you wouldn’t think it was as valuable, even though it is valuable, you would know because you wouldn’t have found those features or learn how to use them. So they can say, look, we’d rather not bring someone in if they’re not going to get value and that’s a very member mindset.
Jay Myers: And I am willing to bet anything that if, I don’t know what you call this, it’s like an emotional attachment to this brand because I’ve spoken to someone and I was onboarded; my first contact with them wasn’t when something went wrong. My first contact was being onboarded, having a great experience and if something goes wrong, I’m way less likely to say something mean about them on Twitter, or leave a negative review in the app store or something like that because I’ve actually been, I’ll always give them the benefit of the doubt and I guarantee that it’s like that with brands with someones. And I actually think there’s something to be said for hearing someone’s voice on a phone through that onboarding process. I think definitely don’t skip out on the email, onboarding everything else, but if there’s ever the opportunity to do that, like you said, though, if margins are high enough, definitely worth looking at. On that topic, member retention and churn is for a membership company is probably the biggest fear for so many brands and you talked a lot about building loyalty into member habits from the beginning. What does that mean building loyalty into your member habits and how can stores think about that?
Robbie: So one way to think of; if you’re thinking about retention and churn and you’re struggling with it, I think it’s helpful to work your way backwards and try to figure out what’s driving the churn, what are the different, you really want to get very precise about the driver of churn. So I sometimes think about this metaphor of party and like a house party or a party that a bar would have. So one thing is I go to that bar all the time, I’ve heard the band, I’ve heard every song they sing, I’ve had every drink they offer, I’ve tasted all the food, I’m sick of the people, I’m sick of the ambiance. I need something new. That’s like, I’ve used up the membership, so then what you need to do is you need to expand what you offer. So this might be true if somebody like you’ve gone through we were talking about discovery boxes and it might just be like, I’ve seen, it’s only so many ties one dad can wear, I’ve just had enough. I am maxed out. Maybe you should give me socks now, maybe you should give me cuff links, but the tie department is all full. Then you want to work your way backward and say, well, maybe it’s that something wasn’t really working in that product. I love the idea of this party, but the bar had really long lines and the dance floor was either too crowded or completely empty and I hate all the songs. So that’s a product problem as well, but it’s more of an operational issue. So you might have an operational problem, working your way backwards a lot of the problems come in what I think of is that onboarding phase or failure to launch is what lot of people say.
Which is somebody joins for the free trial or for the special early offer and then they cancel in the first month and a lot of times that’s because they never made it a habit, they never got the full amount of value because, like you said, maybe they’re just sending me the vitamins or the probiotics and I don’t really know what they do and they don’t taste good and I don’t really notice a big change, so I guess I’ll just stop. So that can all be resolved in that onboarding phase and that’s really where building habits comes into play. Reinforcing habits are all about guidance and reinforcement and recognizing and rewarding people who are doing the right thing. So all of that serves to build loyalty and engagement. Another thing to note that I think is really interesting and kind of counter-intuitive is that you talked about how it’s great to meet somebody before things go wrong, which I think is amazing. If you can do that and you can afford it when something goes wrong, how you handle that, if you treat them like a member who’s going to be there forever that’s very different than if you’re just trying to get them off the phone or just trying to get them to stop complaining.
If you treat them like you want to keep them for a long time, that could be the thing that makes them loyal and you hear these stories all the time, anecdotally. I ordered, I was getting this, I had a subscription to energy bars and my first shipment came and everything had melted and it was disgusting and I called them and they were so nice and the next morning I had a huge box of them with a note from the CEO and flowers and you’re like, I love them, I love them or Peloton that when somebody stops using their bike and you’re like, why aren’t they there somebody called in and said I broke my leg, that’s why I’m not riding the bike anymore and they sent her a box of merch and they also paused her subscription. They said, well, you’re certainly not going to be using the bike for the next six weeks, let’s not charge you for the next two months. And that builds great loyalty when you have a problem and they fix it for you.
Jay Myers: They must hear some funny things when they do those calls, oh, I got into this Netflix show and I’m addicted and I’m not exercising anymore.
Robbie: But it’s super important because a lot of companies wait to do retention until the person calls to cancel and it’s too late by then you want to do it when you notice their behavior is changing. I mean, ideally you want to know if their dog is eating the dog food, or if the dog’s food is piling up in the cupboard or the razors or the shampoo, you want to know that before they cancel, because you can pause, you can adjust what they’re getting. You can maybe help them use it more effectively if they’re not really using it, that’s super important to do before they decide they want to cancel.
Jay Myers: The days of keeping your customers by hiding cancel buttons are long gone. And you talk about subscription fatigue, subscription overwhelm, subscription guilt, and that kind of ties into this a little bit. Can you elaborate on what that is? And maybe how brands can help avoid that for their members?
Robbie: So we’re in a world right now where everybody is using subscriptions. So if you ask a consumer or a business person and you say, look in your business and personal life, how many subscriptions do you use or pay for the numbers are staggering and so people are exhausted. They love good subscriptions, but they’re also really cynical about bad subscriptions and so they’re going to wonder, why are you making me subscribe when I used to be able to buy it outright? They’re going to ask what are the cancel policies? They’re much savvier and so if you know you’re working in a world of subscription fatigue, you need to make sure you have product market fit meaning that you’re giving them enough benefit to justify the subscription, which is probably more than just sending them a box of stuff every month. You need to make sure that they’re getting the value that they’re paying for, because otherwise you have subscription guilt where people are like, I have this subscription, I haven’t watched a show in a month or all the energy bars are piling up in my pantry.
I remember one of my neighbors last summer had a subscription to blue apron and his wife and kids were out of town and so he came over to hang out with my husband and me, and we’re like, oh, why don’t you stay? We’re going to grill burgers and he’s like, oh, I can’t because there’s a blue apron box in my fridge and I promised my wife I’d use it because it’s going to go bad if I don’t use it today. But what’s interesting to know is he wasn’t going to lose any money, he’d already bought the subscription box and we were offering him free burgers. So he wasn’t going to spend any more money and it would probably, hopefully it’ll be more fun to be with us, but it made him feel bad about himself that he wasn’t using his, it was sort of nagging at him. Then the last reason for subscription fatigue is what you mentioned, which is hiding the cancel button and people feel really cheated when that happens. So don’t do those three things.
Jay Myers: Definitely not. That’s really an interesting one with the blue apron example. I think something I feel is there needs to be with every subscription, at least three times more value than whatever the product is and you talked earlier about whether that’s being community or that being access to something or that being maybe blue apron has partnerships with a whole bunch of other companies and you’re getting discounts at this and you get access to like gym memberships and maybe they partner with Peloton and you get 10% off Peloton every month because you subscribed to blue apron or whatever. It becomes less about the product and if you’re like, ah, you know what, I didn’t have it for a couple of days, but that’s okay because there’s all this extra value that might be a great way to tackle that problem, because that is a real one, the buildup of the subscription product, which happens to everyone, it’s going to happen. I guess, on that topic, you talk a lot about how pricing plays into this a little bit too. You were talking about free trials and first of all, I think you’re a proponent of the free trial model, correct? Your pricing should be the servant and strategy is the master.
Robbie: Yes, strategy is the master. Because subscription is a pricing decision and that’s just a tactic and what I think about is free trial and freemium both have their place, but you need to make sure that you’re getting a return on your investment, that you understand why you have it in your business model and what it does for you. So a free trial you give because somebody doesn’t understand what you’re offering or they don’t believe it’s as delicious or as great as you say. So if you know that in two weeks and it takes two weeks before somebody feels the massive change from taking your vitamins, you might want to give them two weeks to really experience that, they’ll understand what you’re talking about or if you say I have the best cookies in the world, I might want to taste them before I subscribe, that’s why you have a free trial. You did not want to fill them up, you do not want it to go on any longer than it takes for them to answer those two questions. If you don’t have those two issues, you don’t want to give a free trial period.
For freemium, which is an ongoing access to something forever. It’s very hard to do if you have physical product, but you can do it in the form of community, digital content, those kinds of ancillary services, which build a relationship with somebody so that when they’re ready to subscribe to the paid product, the paid subscription, they already have their relationship. You’ve changed their behavior but in physical product models, it doesn’t really make sense to send free stuff forever unless that person is an influencer, meaning they’ll bring in other people or they are a part of the product. Like for example, if you’re selling, back when Skype was selling headsets, every new person that used Skype increased the likelihood that other people were going to buy headsets because it made Skype more valuable.
Jay Myers: I agree with that. I think the free, the way I would phrase it in my head for it to make sense for me is a free trial should just help your answer the question of if it’s a good product for them. It should never be that they’re using the free trial to take advantage of it or you don’t need like extended versions of the trial. Like you said, it’s to let them know that, to answer those questions and then as a brand, you need to onboard the heck out of them during that period, educate them, bring them into your community, show them all the value because there is a much higher, I think it’s around 178% higher LTV for subscription customers versus one-time customers. So I look at it a little bit too, if you’re spending money on ads and Facebook and Instagram ads to get those customers, conversion is lower for subscriptions than one-time products. When we look at stores that sell coffee as one time and coffees conversions lower. So it’s harder to get a subscriber, but they’re more valuable. So I’m okay spending a little bit more to get those customers. So I think a free trial can work, but I think you’re right, there’s a time and place for it.
Robbie: It has to be because they don’t understand or they don’t believe you. Those are the only two reasons for a free trial.
Jay Myers: I want to jump into our lightning questions here before we run out of time. This has been really, really awesome. Robbie, thank you so much. I don’t know if you had a chance to read our lightning round question.
Robbie: Yeah, I’m ready.
Jay Myers: Okay. Well, let’s do it then. So I tailored them a little bit for you because you’re obviously in the subscription space, but Robbie, what’s a pet peeve you have when you are buying subscriptions online?
Robbie: My pet peeve is when they hide the cancel button. When I don’t know how I’m going to cancel it.
Jay Myers: A hundred percent. Does that still happen though a lot?
Robbie: All the time.
Jay Myers: People are still doing that?
Robbie: At the subscription show, which is an event that I know you know that subscription insider puts on every year. They have Leslie fare from the FTC com and they also have, I’m going to get her name right, Lisa, I can’t think of her last name, but she’s an expert on this space and they talk about things like font size and you can’t have silver font on a gray background in eight point font telling people what they need to do to cancel. People do it all the time, especially in the nutraceuticals space, in a lot of different spaces and in fact, continuity programs kind of have a bad rap now because there’s so much kind of associated baggage with this hiding of the cancel button.
Jay Myers: Well, they need to use bolts descriptions because their customers could cancel it. What’s one e-commerce trend that you are very excited about?
Robbie: I am excited to see brands, small interesting brands going direct to their customers and not having to go through the big retailers and seeing them have an opportunity to offer more than just the product, but offer their expertise around that product to really help pockets of consumers. I love that.
Jay Myers: Yeah and I think I am too. And I think that’s happening and what the internet is doing, it’s allowing this direct to consumer revolution that’s basically like you used to go back, a hundred years ago you would go to a store and buy from the person that was making the product. But then these distributors came in between and housed everything and we’ve lost relationships with the brands, but now that’s getting restored. I’m really excited about that as well too. What’s the smallest change you’ve made in your life or your business that’s made the biggest impact?
Robbie: In my business, I think it’s getting into a habit of writing down my three goals for tomorrow at the end of every day.
Jay Myers: I love it. I read something recently if you improve 1% a day, you have 37 next at the end of the year. So I like to always ask people not what the biggest thing is, but what’s something small and I’m going to pile all these together and apply them to myself and I’m going to be 37 times better. What’s your favorite thing about your job?
Robbie: Always learning. I’m always learning and I’m able to apply that learning to help other people, those two things really juice me. Always being like, oh, that’s a new industry or that’s a new idea or this morning I talked to a guy that’s a pricing expert and was really digging in on how that affects subscriptions. I love that and then I love being able to help people.
Jay Myers: Well, I think you probably know this Gartner’s research is predicting that by 2023, 75% of all direct to consumer brands are going to have a subscription membership offering on their stores. So you are in the right space and I think we’ll all be learning a lot in a few years. What’s your favorite business or leadership quote or something you live by?
Robbie: It’s kind of two parts. Somebody told me in a particular job where I didn’t feel like I was appreciated. They said, don’t go somewhere where they don’t think you’re a rock star or if your boss doesn’t think you’re great and move on and what I would say the corollary is that I use now is that the talent market is not efficient. So in other words, you might be worth a lot with one group of people and worthless in a different group of people. There’s that story about the kid who inherits his dad’s old car under a tarp and he calls three people in first, you know, the junk guy says, you can pay me 50 bucks and I’ll haul it off for you. And the second guy says, you know what, I see some useful parts. I’ll take your parts for, I’ll give you a hundred bucks for the parts. And the third guy says, that’s a collectible is a hundred thousand dollars good. It’s just, you never know what you’re worth, so to never feel bad, if you don’t feel like you’re being valued to kind of learn from that and find a better fit.
Jay Myers: That’s great advice for so many areas of lif I think. If you could make, this is the last one, if you could make sure there was one piece of advice that every store owner, listing, any platform no matter what they sell, but running a store, an e-commerce store, what advice would you give them?
Robbie: Know who your customer is and be really focused on them. And don’t try to be all things to all people start with a really clear idea of who you’re serving and then serve them as well as you can and as completely as you can. Don’t let the product that you sell in your store become the product of your store. In other words, it’s not just about the thing you’re buying, it’s about the full experience.
Jay Myers: Well, Robbie, I just want to say you live what you preach because to those listening right before this recording, Robbie and I were talking for a little bit and she asked me, who is the listener? What are they like, describe them. What size are they? And she wanted to know everything about who the listener was and here you are, your advice is know your customer. So I think that is very telling of you as a person, you practice what you preach. Robbie, thank you so much for coming on, for those listening where would you like to send people to learn? I know you do a lot of things, you speak at events, but where would you like to send people to learn more about you and what you do?
Robbie: So the easiest place is robbiekellmanbaxter.com. That’s my name, robbiekellmanbaxter.com and you can find out about my books there and if you slash audience, robbiekellmanbaxter.com/audience, you can get a chapter from my new book and a membership manifesto and some process visuals and then you can find me on LinkedIn. I’m very active on LinkedIn and so if you mentioned this podcast, I’ll be delighted to link in with you.
Jay Myers: Awesome. Robbie, thank you so much. It’s been a pleasure.
Robbie: Thanks Jay. It’s been fun.