Picking the Perfect Subscription Platform

In this video from SUBTA's 2021 SubSummit, Dan Burkhart, Recurly Co-founder and CEO, speaks with Paul Chambers, Co-founder and CEO of SUBTA, about Recurly and his thoughts on how the subscription industry will continue to evolve.

Topics include:

1. What makes Recurly a great subscription management and billing platform

2. What kinds of subscriptions Recurly works best for

3. What Recurly’s onboarding process looks like

4. Dan’s predictions for the future of subscriptions

5. Dan’s advice for companies just launching a subscription offering

Paul Chambers:

Hello, everybody. Welcome back to another episode of Picking the Perfect Platform. I am Paul Chambers, co-founder, and CEO of SUBTA, and I'm so grateful to be joined here today by co-founder and CEO of Recurly, Dan Burkhart. Dan, thanks so much for joining me.

Dan Burkhart:

Thank you for having me, Paul.

Paul Chambers:

Awesome. Recurly, you guys have been around the block. You've been in the industry for many, many years here, supporting recurring revenue businesses from SaaS to subscription boxes and beyond, I know. Give us a little bit more background though, for the sake of our audience, about Recurly and what makes it so great.

Dan Burkhart:

Happy to. Recurly has been around for 12 years, we were founded in 2009, believe it or not. It was at the, thinking back, to the advent of SaaS, Salesforce, and NetSuite, and those kinds of companies had been public. But there was generally a movement towards direct-to-consumer and the recurring revenue model. A lot of this came with some inherent surprises to the industry in that credit cards were originally designed for one-time transactions. So when you want to go to a self-serve pay-as-you-go model, irrespective of what you're doing. Whether it's products, apps, services, media, box of the month, as you said. Credit cards are dependent on a variety of players in the value chain in terms of payment processing and so there is inherent breakage as we say, and that results in an involuntary churn and a reduction of lifetime value and reduction in your compounded revenue.

Dan Burkhart:

So there's just inherent operational challenges. But then when you add on top of that, the fact that no subscription is really set it and forget it. And in fact, the more sophisticated players like to encourage the cross sell upsell life cycle if you will, to expand, share of wallet throughout that timeframe of the active subscription, there's a lot of changes of state. So those changes of state tend to include a number of different moments along that life cycle that can introduce complexity. And so this was a well understood pain point, is the first part of the answer to your question and for us, that inherently includes user experience design. So we were designing a platform that not only serves the needs of the business side of the equation, but also the end customer side, and to make sure that those two things were in balance.

Dan Burkhart:

So from our perspective, what makes our platform great is that we started out from day one with a really clear understanding for the fact that we had to be exceptional at understanding payment processing across all these different players and not just be holed into one single rail, but really understanding how credit cards and debit cards behave across all the different unique combinations. And then on top of that, build a platform in order to largely abstract complexities, to allow for merchants to get onboarded really quickly and allow for good user experience designs and [inaudible 00:03:02] upsell offers to be presented in a seamless way that eliminates friction.

Paul Chambers

Yeah. And you guys, you've been doing this for some time and you've helped so many businesses grow in this space. So I'm excited to talk to you more about what's next. And that's later in the program. You're one of the O.Gs, though, I like to say repeatedly, as you've been here for quite some time. It doesn't seem like 12 years is a long time, but in our world, 12 years is a long time. So, now as you've been growing this business and, seeing all the different things in this space, are there certain business types that are better fits for Recurly than others? Is it whether it be a specific vertical or specific company size? What'd you say is your sweet spot, the companies you'd like to help?

Dan Burkhart:

Yeah, that's a great question. And yes, we do have a sweet spot. There are other companies out there that have taken on recurring billing. And when you go search for recurring billing or subscription billing, you'll find a couple of dozen companies out there. And so it can be a bit confusing. I think from the initial outset, we've always been very focused on credit and debit cards, and we also support manual invoices as well, but when it comes to the application of machine learning and really, truly understanding how we deconstruct all of the unique participants in that value chain of payment processing credit card-based and debit card based-transactions, that's really our sweet spot because we're able to eliminate or largely reduced the degree of breakage or credit card declines that are false negatives effectively. So in terms of processing, all of this has false positives and false negatives. And false positives can be fraud, false negatives being an involuntary churn saying this credit card is bad.

Dan Burkhart:

And we are able to really tremendously mitigate that cost to companies, which means that the... Now 12 years in, when you take a look at our customer base and those that we have attracted and retained for many, many years on end, many publicly traded companies, but they all typically fit that initial descriptor of they're offering a product app service media, you name it, it could be box of the month, in a pay-as-you-go direct-to-consumer kind of fashion. And there is a credit card on file or a debit card on file. So, that means typically large audiences, typically lower average invoice amounts. So it's not the classic SaaS, B2B that tends to be invoiced in a manual invoice manner. You can get up into the tens of thousands of dollars for per seat per month licensing models.

Dan Burkhart:

And while we do that, we typically do that in the lower end of the market, where there tends to be a higher velocity, as we think about it, that velocity is really where we add a lot of value. It's in recovering a lot of that breakage and making sure that there's more seamless user experiences. So we've amassed a really tremendous list of customers and it spans the gamut from a pretty deep domain expertise in media and publishing and entertainment. So many of our media subscriptions, Sling TV, Showtime, STARZ, 15 CBS properties, including CBS Sports, CBS All Access. We now do Paramount+, Viacom CBS's property. We just launched them in Latin America and the Nordics. We have publishing—traditional newspaper companies, LA Times, Tribune, Time Magazine, Washington Post, et cetera. These are companies that typically have been credit card-based, and there might be a print component and a digital component.

Dan Burkhart:

So they're trying to figure out how to transform their businesses and innovate their way into a digital format that allows them to deliver in a more efficient way. Print publishing, I don't want to say is gone, but we all know that there are inherent challenges with the ad model. And then there's also inherent challenges and maybe a waning business opportunity for physical print as consumer behaviors change and expectations change. So we are helping so many different kinds of companies out there that are in their various forms of transformation, figuring out how to position themselves for success in the future. And what's neat about it is that the customers really span the gamut from software business services, media streaming, and entertainment publishing, but it also gets into some pretty interesting, call it, extremities of memberships, dues, donations, insurance. One of my favorites that just went live is a Singer sewing machine subscription for embroidery templates. We get super fun, interesting, innovative companies that come to us all the time and it always makes me smile.

Paul Chambers:

Yeah, that's awesome. And what a big year for that industry, as you know, throughout the last year and a half. We're all in various states of lockdown, various states of staying at home and turning towards streaming solutions, turning towards different media publications and different things like that. And I know, our numbers we've seen, and looking at some of your numbers as well from the Recurly data team have been phenomenal for that space. I'm sure you saw a lot of new entrants coming into the space as well. And that kind of leads me right into my next question of, what does that onboarding process look like for somebody who may be just getting started with Recurly? Is it a self-service sign up, they go in and get started? Is there a team that's there to assist them? Is it a blend of the two?

Dan Burkhart:

It is a blend of the two. We started out as a very self-serve company and that has served us well in the beginning days. We also, during the same day, signed up some of our largest customers today. We call it “seed corn grew up into sycamore trees,” which I know is a mixed metaphor. But, some of those biggest customers publicly traded customers, master services agreement with Amazon, we're power billing for Twitch. We're power billing for the 15 CBS properties I mentioned. And so some of these early companies have grown with us and pushed us where... We do customer-driven development. We listen to our top customers, and then we triangulate based on the requests that come in and say, "Okay, how many of these requests are unique just to this specific business? Or is this a request that we've heard before, and we think is going to expand our business opportunity in terms of total addressable market and relevance for models that we can serve?"

Dan Burkhart:

And that has been a really nice way for us to think about growing our business. And it's kept us, I think, quite focused on snowplowing into these new opportunities. So, that is also part of the beauty of subscriptions, in my opinion, is that, in the old days, so to speak that when it was 1990s classic enterprise software model was to pitch the value proposition, get your customer to sign a contract. And then it was tucked in the drawer and you're off to the next sale. Whereas, the inherent appeal of subscriptions in my opinion, is that there's a balance. There is an onus placed on the publisher or the seller, if you will, to make sure that they continually resell and reignite the value proposition, so that that perception of value, it always exceeds the incremental costs. And it's created this nice alignment that unlocks basically value-based pricing.

Dan Burkhart:

I mean, value-based pricing is a business school, rather academic concept that for many years was really difficult for so many different kinds of businesses to achieve. And the subscription model taking that vertical transaction that typically would force a company to go deeply negative with an upfront payment by basically tilting that on its side and saying, "All right, we're going to basically partner with you and ensure the growth of your business. And we're going to truly commit to being a customer driven company." That's our values and the way that we run our business, because we know that for our customers to run successful businesses, they have to have a similar mindset with their customers.

Paul Chambers:

A lot of these subscription companies are looking at so many different layers of complexity to their subscription, the different things that they can do from personalization and customization. How customizable can somebody get within the Recurly platform? Are there APIs and SDKs available to allow them to mix and match things that they're doing?

Dan Burkhart:

There are, yes. And we started out being very API driven from day one. My co-founder Isaac Hall is a developer and he had kind of cut his teeth building e-commerce shopping cart backends and billing systems for telcos and things in college. So he knew about not only the complexities, but also the pitfalls and also understood payment processing. So we started out being self-serve and developer oriented. And then as we grew over time, it became more of a function. As we built a sales team and started doing more marketing and account exploration, we were selling it into different personas, which is a different beginning of the conversation. But ultimately when we sell, there is an understanding of the requirements. How do you bill your customers today? How do you want to bill your customers? How's it working?

Dan Burkhart:

And that conversation is typically, I like to approach it in a yes, no, maybe format, which is, "Yes, we do that. Let me show you exactly how we do it. I'll give you a demo." No, is also managing expectations for the extremities, meaning billing has a lot of surface area. Depending on who you talk to and the size of the company, you might get all kinds of crazy requirements. And so being intellectually honest about what we do and what we don't do right upfront is a super important tenant for me, in terms of getting good alignment of expectations with our customers. And I think that ends up paying out in spades to just be that direct and honest and having a willingness to say, "No, actually we don't do that" is really one of the most endearing parts about, I think, an honest sales process so that you can build trust and really, truly establish that you're going to be a trusted partner over time and you can be trusted.

Dan Burkhart:

And the maybe is the part in the middle, which is maybe it's not turnkey. And maybe you want to build an affiliate program, or maybe you want to have a win-back program for voluntary churn. And that's when we will either solution out various end points that are available that could be constructed together, like a set of Legos. And it, depending on the developer chops and expertise of the company that we're talking to, they all either have an inclination to do that, or we can bring partners to bear to help do that. And some of these partnerships are out of the box, turnkey, third parties, partnerships that can be unlocked from our platform that are already pre-integrated and they might have an additional expense for say an affiliate functionality or a voluntary churn, win-back and things like that. But this is all part of that customization to get up and running. Subscriptions were far simpler 12 years ago.

Dan Burkhart:

And it sounds like I'm dating myself now, but I think today, the entry-level conversation is actually starting from a much more sophisticated position, where in the beginning of our time, it was much more like, "Okay, what's a payment gateway? How do we get up and running? How do we establish the check? How do we get integrated? How do we get going? Where do I begin?" And now it's much more about, "Here are my requirements. We have competitors that we have our eye on. We've done an assessment. We have a firm strong understanding of what we want to do, but here's our thesis. And here's how we would like to price it. And here's how we would like to merchandise a post-sale. And these are the kinds of opportunities we'd like to unlock." Sometimes there's gamification, sometimes there's ramp pricing, which is very common in the publishing sector. And so there's different accommodations that we make and that we continue to develop so that we can effectively allow for our customers to tailor and cater those pricing experiences. And then the post-sale call it merchandising experiences, and that can be catalog driven or bundles.

Paul Chambers:

And it's amazing because, when you look at how simplistic subscriptions like you talk about 12 years ago, you'd subscribed and that was it. And now today using AI and using machine learning to make those adjustments and changes and recommendations, we see some of the biggest companies in the world betting the future of their business on subscription. What are some of your biggest predictions for the future of subscriptions? Where do you see people leaning into? Is it the customization and the nuances and the ad-ons in there, or is there even something bigger beyond that, that you're seeing out there?

Dan Burkhart:

If you go back in time, the big rage 10 years ago, it was freemium. Everything was the freemium model because the companies wanted to use subscriptions as a means to get around what became terribly inefficient for customer acquisition, to go buy keywords or to buy banner ads or display ads and go through traditional channels. And so freemium was a nice way to get adoption without paying a lot of front. And then you would work on the conversion rate and work on the testing and all the offers that would allow you to set the hook effectively. And in the streaming industry, they call it roll to pay, rolling into a paid subscription. And today I think what's changed is that rather than starting with a freebie, the give away the razor, sell the blades kind of model, we're seeing that companies are getting much more sophisticated, as you said, experimenting with price points and entry-level price points and bundles, so different entry level bundles.

Dan Burkhart:

And what you'll find is that when you track different users that come through different entry-level points at different price points, they're downstream, lifetime value is vastly different. And so there are typically different trigger moments that occur in any given business that will sort of... You can think of it as setting the hook, but basically guarantee that there's a future committed, engaged buyer that loves your product, whatever that might be and is going to continue to expand as long as you provide the right paving merchandising experience to say, "Sample this, if you want to commit to it after a week, here you go. And it unlocks another open add on or expansion bundle." These conversations are less based in guesswork, and they're actually very data-driven now.

Dan Burkhart:

And each company has their own puzzle to go sleuth out, which is, "What are our trigger points? How do we unlock those endorphins? And what are the inflection points that really," and again, I don't mean this in a bad way but, "set the hook?", and meaning, you get committed to the product app service and how do you unlock that moment of commitment? And that's where all of this becomes really fascinating because, in the world of subscriptions, what we're talking about is a confluence of, of course, payment processing and billing, but then more importantly, there's a user experience and you have to start with the user and understand what do those branches look like. Some of them, of course, churn out very quickly. You have to understand why and what did they do or not do that led them to be a quick churn.

Dan Burkhart:

But then, for those that really are committed for years and years on end and become your greatest influencers, and they're your most committed customers... Where do they come from? What do they look like? And asking all of these questions to create that iterative loop, to understand how you can continually improve your offering, to route the stream of more subscribers in that direction to have that kind of experience and outcome is why this is so fascinating. And it's a team sport, it involves everyone in the company. It involves a value system in the company that supports that idea of a longterm commitment to customer success, rather than just a one-off high-five, "We signed up a customer" and move on to the next.

Paul Chambers:

Yeah, yeah. What an interesting idea there, and that it accessing those trigger points. Somebody who's just getting started in subscription. And it's funny, we look at it today we're like, "Gosh, who's not in subscription?" And in our world we live, we're like, "Everybody's in subscription now", but there's still a lot of companies that aren't. Small or large, what advice would you give somebody who's just getting started in subscription today?

Dan Burkhart:

Everyone pays lip service to being customer-focused and customer-oriented. There has to be a holistic continuity that really starts at the top, from a philosophy and a values perspective that really truly embraces the fact that we are all in this together centered around the experience of the customer. And we need to be really, truly committed to understanding both positive and negative experiences. Meaning when someone churns out we better go find out why and see if they can articulate to us why. And if we start seeing that repeatedly, we better go address it quickly.

Dan Burkhart:

In the world of media streaming, a lot of these companies that have catalogs of content used to bill through their cable operators and when cutting the cord happened, and all of these companies decided, "Hey, there's an opportunity for us to go direct.", there were many aspects of the customer experience that they had no experience with, billing, chargebacks, customer support, uptime, availability, ad insertion, all of these operational mechanics were brand new. Working with many of these kinds of companies and seeing how frankly, some companies are able to identify that unifying embrace that's required across every function in the company to get it right.

Dan Burkhart:

And then some companies don't make the transition as well. So I think that's something that I would offer for everyone that, you really do have to begin the day by putting the customer at the center of the table and not just paying lip service to it. It's not just something on the back of your business card, but something that people truly refer to when they're challenged to figure out what the right thing to do is in any given circumstance.

Paul Chambers:

We did a subscription review of HBO Max, and one of the things when we got to the end, Chris and I went to cancel and we're able to cancel, there's no retention in place. There's nothing. And just like you just mentioned these companies had traditionally relied on Comcast to save the customer for them, "Oh, don't cancel. Let me give you HBO for another month for $4 for six months" or whatever it may be. They move into this direct-to-consumer space where they don't have the cable provider, the middleman and retention isn't the first thing on their mind. They're thinking about growing the platform, growing subscribers, adding, adding, adding, and we often preach, retention, retention, retention, because of how much more it costs to acquire a new customer versus keeping existing. So fantastic advice.

Dan Burkhart:

But to your point, allowing customers, giving them a nice, well lit pathway to pause their subscriptions. And then if they do want to cancel you better make it just as easy to cancel as it was to sign up. And I think we all have a responsibility in the industry broadly, irrespective of who's running billing, to make sure that we are all doing the best we can to do right by the end customer. Back, 12 years ago, when we founded the company, the ASCA Compliance was a big deal. If you have recourse and you can go push pause, or cancel, that everything's good. And it allows you to vote with your feet. If you've had a negative experience, which is also another really important part of this whole fulcrum to keep in balanced, it's really the construct that allows for subscriptions to be a healthier relationship than a paid contract where you're locked in. And you might've locked into your Comcast cable bill, as you mentioned.

Paul Chambers:

Oh, you said my trigger word there, Dan, that was Comcast. And it's always fun to meet another good steward of the subscription industry because, like you, we firmly believe you shouldn't have to trick people or lock people into something that might change over time and you might try and get a couple extra bucks out of them because, like you've been sharing here today. If you do the right thing and you create a good relationship with your customer, they might pause, but they'll come back again later and there'll be a greater loyal customer for you long-term. You shared some fantastic advice with our audience here today. It was fun learning about when you set out, learning how to bill and when you want to bill and allows people to really shape their program with the way they want it to be.

Paul Chambers:

And then one of the other things, what you're seeing is, today's a lot less about freemium and more about allowing planning the price points. And I think that's really important to look at. And lastly, the one thing I absolutely loved was understanding those trigger points and unlocking those endorphins. Get them excited about it, get them excited to be part of your subscription, unlock those endorphins that make them feel good about what they're getting and what they're doing. Tremendous amount of wealth and knowledge, always love and appreciate talking to you. Wondering if people want to check out Recurly and get started with it and try it out. Where should we tell them to go?

Dan Burkhart:

Yes, please go to recurly.com. There’s a contact us form there, and you can schedule a demo. And we'd be more than happy to walk you through how our platform operates and have a chat about your requirements. And we love having these conversations. So thank you very much.

Paul Chambers:

Awesome. We truly appreciate it. I'm sure we're going to continue to chat more soon, but thank you so much for joining me here today and look forward to talking again soon.

Dan Burkhart:

Thank you, Paul. It's my pleasure.