The Automatic Customer, by John Warrillow is one of the five culture-shaping books at Church Fuel. Though we were already heading in that direction, it solidified the direction for our membership program – Church Fuel One.
The book gives lots of examples of subscription businesses and some best practices for starting or running one.
Here are my notes…
“Recurring revenue makes your business a lot more valuable, and it also makes your company less stressful to run.”
Examples of Subscription Businesses
- Content: European Map Makers in the 1500s, Newspapers and Magazines
- Entertainment: Netflix
- Software: Adobe Creative Suite, Quickbooks
- eCommerce: Amazon Prime
- Services: Car Wash, Mosquito Squad, H.bloom.
Seven reasons a subscriber is better than a customer.
- Subscribers drive up the value of your company.
- Subscriptions increase customer lifetime value. The average Prime member spends $1,224 on Amazon purchases each year, compared with $505 for non-Prime customers.
- Subscriptions smooth out demand. bloom provides weekly flower delivery to hotels.
- Subscriptions provide market research.
- Subscriptions are automatic payments
- Subscribers are sticky customers.
- Subscribers buy more.
The foundation of a subscription business is built on four numbers:
- monthly recurring revenue (MRR)
- customer lifetime value (LTV)
- customer acquisition cost (CAC)
- churn (MMR at the beginning of month divided by MMR at the end of the month)
How can we be essential? “The most profitable membership websites are usually business-to-business companies that solve a real problem, offering ‘must have’ information and maintaining constantly evolving forums that require that a subscriber stay loyal over the long term.”
What quick wins can we give people? “Like surfing, part of getting people to adopt your subscription product or service in the first 90 days is to give them a quick win that provides the motivation for them to learn more.”
Three Best Practices
- Free Trial: A free trial should not get someone to buy the product, it should get them to use the product.
- Ultimatum: Make certain things only available to subscribers. You can’t buy a single movie from Netflix.
- Delight: Drop happiness bombs to surprise your subscribers.
Every type of business can benefit from the subscription model. Pick up a copy of the book…you won’t regret it.