What subscribers really want (and won’t tolerate)

Hello, everyone, and welcome to the latest virtual session from Recurly.

My name is Mary Rosberg. I've been in subscriptions for about fifteen years now. My passion is in helping customers to grow their subscription business. It is also my passion to bring really interesting people together for great conversations around best practices and really just getting to know people. I'm very much a networker.

So I'm very thrilled to have this session with Matt and Robbie.

Matt is the cofounder of House of Kaizen. He has twenty five years experience working with subscription products in every category around the globe.

He embraces a subscriber centric experimentation that deepens engagement and improves customer lifetime value. And, of course, Robbie Kellman Baxter, thrilled to have you on this conversation as well.

Robbie comes with more than twenty years experience providing strategic business advice to over a hundred subscription organizations. This includes people you may have heard of like Netflix, Microsoft, Wall Street Journal, and the like. She is also the author of two best selling books, The Membership Economy and The Forever Transaction.

And if you want more Robbie, she also hosts a podcast series I highly recommend called subscription stories.

With that, we're we have a great topic today. So the topic is around what subscribers want. So if you look at the economy today and even the world today, it's built on recurring relationships.

So knowing what subscribers want is absolutely critical. We're gonna leverage a little bit from Recurly's latest report on that very topic, but mostly, it's gonna be about this conversation.

So today's session is around acquisition.

What's really working in twenty twenty five and what isn't? Because it certainly has been changing over the years. So in the Recurly report, we're still showing price as being a big driver for sign up. But with that said, they also want flexibility. They also want ease, and there's really things right behind it. What would you say has changed the most in how brands are approaching getting new subscribers?

Yeah. I mean, price always matters because it's you know, you can't tell if you have value unless you know what you're paying for what you're getting.

But increasingly, an a clean user experience, and flexibility around payment are becoming table stakes.

And I think as consumers are getting increasingly sophisticated, increasingly comfortable with subscriptions, Their expectations are going up around, not just what the price should be, but also, how they should be able to interact, things like, being able to pause, being able to bundle, being able to have a personalized experience. Those are all, increasingly becoming, the starting line, not the finish line for, for subscription businesses.

Yeah. I I I completely agree, and I'll echo price always has to be a part of the framing of value. I think oftentimes, organizations just see price as their biggest lever in driving acquisitions.

But what's changing certainly is the value of acquisitions, and organizations recognizing that the benefit of a subscription product, the benefit of a subscription relationship is not the volume of acquisitions, but it's the duration is the accumulated value of that relationship between the product and the person. And so at the end of the day, using price as that lever, not just to acquire numbers of people, but perhaps to push it in the other direction and to create more value and to invest more in that relationship in some ways, even if it means a higher price, but a better overall relationship can change the quality of the acquisition and shift it from just purely about quantity, which I think is a really good trend we're seeing these days.

The the very first subscription business that I worked with, as you mentioned, was Netflix. And one of the things that really impressed me about Netflix is that they only have one price.

And they said, you know what? We're not gonna offer promotions. We're not gonna use pricing as a lever.

We want a really clean model. We want people who come and sign up because they see value in what we're offering, and we're gonna keep our pricing constant. And not only does it attract the right people, which, you know, creates a a more valuable lifetime, relationship, but it also cleans the model so that you can actually see what's going on, and see the the impact of other variables, which is which is really important and and honestly is one of the greatest value is of subscription relationships is that ability to track a relationship over time and understand what's what's really going on there.

Yeah. I didn't even think about that. A clean and simple pricing solution, one price keep it steady, does give you clarity into all the other levers that you're playing with. Love that. Love that.

We talked a little bit about this just now, but acquiring at all costs.

So, of course, companies still buy buy leads. Right? And sometimes that doesn't really pay off. So how how are brands trying to avoid the the bad leads, if you will, the subscribers who are actually not likely to stick around?

Yeah. It's a good question in terms of how they're trying to avoid it from the get go. You know, I think quite often what we see is that there's a change in perspective required in the marketing strategy to recognize that historical efforts around, acquisition at all costs as you describe it ultimately leads to higher rates of churn. You know, it's a pretty pretty understandable, intuitive, and well proven path these days.

But, again, there's always that temptation, and there's always that sense that if we need to grow a business, if we're feeling pressure to perform, whether it's for the market, for the shareholders, or whomever it may be, acquisition is always the easiest thing, and the number of customers to acquire is always the easiest thing to affect right now.

And, sadly, there's a default. I think a gravitational pull towards that that requires a really strong point of view and a really strong understanding that, again, the key benefit of a subscription model is not to act like a regular retail model. The benefit of a subscription model is to act in such a way that we build value over time, and we invest in the quality of customers that are gonna stick around. And so those organizations today that have that point of view and who can push back against that gravitational pull towards the immediate satisfaction of new customers at any cost, those are the companies that are actually sustaining these turbulent times right now. Those are the companies that are actually proving to be able to grow, with a bit more predictability, and they're less volatile given the way the markets are changing. So, you know, I think that to answer your question in terms of how you avoid it, I really do believe it's much more of a mindset.

But based upon the understanding of what lifetime value really means and how that's tied to the reason for having a subscription model in the first place Rami.

Once you understand, yeah, once once you understand customer lifetime value, you realize that not all customers are created equal.

And it becomes really obvious, I think, to to thoughtful, operators that they they need to be choosy about who they even let in the front door, because those those bad customers are gonna cost you. And so I think a really important element is starts with educating your constituents and particularly your investors, your owners, educating them on the value of retention and teaching them that this is the number that we want you to look at. Right. You know, when you're when you're judging how well we're doing, running running the business. And that can be a hard thing to to teach.

So I'm seeing it now as well just, like, in terms of digital entertainment and streaming that that ebb and flow.

So, like, we see a lot of startups that are very, very focused on acquisition. And, again, it's because of the constituents. The early investors of that startup are saying acquire new customers. Prove that you have a marketplace by acquiring.

So that's their number that they're staring at. But when I look now at digital media, which is, you know, the cable cutters, it's all actually a more mature company now. All of them are. And they have had that ebb and flow, that big spike of acquiring customers and then suddenly quarterly earning statements about losing subscribers.

And you know all the company names. I don't even have to go into them. Do you see them, as you said, educating more, in a in a public facing way around the fact that lifetime value is what matters, that customer engagement and customer loyalty is what matters, that not all subscribers are created equal, like you said.

Yeah. Absolutely. I yeah. The challenge here, it's a bit of a catch twenty two, and you're right to point out the difference between, early stage companies and more mature companies.

And And there being a key difference between those two because the catch twenty two occurs when there is this recurring emphasis on acquisition, which never allows the company to mature to the point of understanding the true value of those customers over time. They're just constantly cycling through shorter term relationships, and they maybe haven't actually tested the market in terms of the value of their relationship over a longer period of time because that patience hasn't been a part of their perspective or their DNA to get them to that point in time. So with patients and with some maturity, you then have the viewpoint on what your product is actually worth in the market and what that that market fit actually is.

You know, the funny thing is many organizations think about customer lifetime value in terms of what the customer's worth. Right? And the reality, the pivot and point of view that opens the door for so many is that customer lifetime value is actually what your product is worth to your customer.

If you embrace that idea that your customer is willing to pay that amount of money for your product for however long it may be and you serve that as your purpose rather than just simply a number that represents the average user, you can change the way you think about the time it takes to realize that value and the things that you need to do to maintain that relationship and to build a product experience that allows you to, again, to realize that value. So there's a there's a bit of a threshold that needs to be crossed to really understand how to get to that that place.

Let's talk about impulsiveness. In other words, let's talk about people like my eighteen year old son.

Younger people are more likely to sign up impulsively, but they're also more likely to cancel faster.

So do you see acquisition differing in terms of demographics?

Yeah. So I I would say it's not it the the younger generation grew up with subscriptions.

And so they're they're much more savvy on how subscriptions work, and they're a little more cynical. So I would say it's not just about different demographics. It's about a trend, towards increased sophistication around, subscriptions. And, you know, I I talk a lot about how, membership is is a forever transaction.

That when you build a subscription, it's because you believe that you are solving an ongoing problem or achieving an ongoing goal or helping achieve an ongoing goal for a particular subscriber or member. And there's a there's a promise there. Yeah. Increasingly, I'm seeing especially with with media and, and streaming, streaming content, there's not really a fervor promise.

It's not really that you can go to any one of the media providers and get all the news you need to understand the world around you or all of the content to, fill up your your free time in ways that are meaningful to you. And so since we as subscription operators aren't meeting that promise, consumers are also becoming more, more choosy and more flighty, about how they go back and forth. And it's created the rise of the pause button for sure for sure. But it's also, you know, created a lot of issues with the the FTC and, you know, is it as easy to get out of a subscription as it is to get into a subscription?

And do we and should we want subscribers who don't wanna be with us anymore, but can't find the door?

Yeah. I completely agree with Robbie. I generally don't like to think of things in terms of demographics.

You know, typically, the way we think of demographics is they're essentially just a proxy measure for for behaviors. And we now have the ability to understand behaviors better than we ever have before. But what's interesting in this particular discussion is that, I think when you when you look at the millennial generation and younger generations, they were the first to really move into the growth of this, you know, this subscription economy. But really what that meant was less about owning things and more about using things when you need them. Right? I mean Right.

Like Uber.

Renting a wardrobe, for example, as opposed to buying clothes. And now, whether by choice or because of other factors, renting their home rather than owning a home. There's a greater comfort level in many ways with not having ownership across lots of things.

No longer owning movies, just simply streaming them when you need to is another great example. So that is in fact that, you know, a a a habit and a behavior and expectation of younger generations. And I think the the key here is that, particularly in the subscription world, subscribers as consumers, we set our expectations for what that subscription experience should be like based upon our interactions with certain subscription product brands. We just expect all of them to kind of operate in the same way. And I and I would say that, again, it's not about the demography. It's more just about the expectations when you've consumed so much on this model across so many different categories, what you would expect to get from the next subscription product you buy.

I will say it's been a pleasure talking to you about acquisition.

I think what I'm really hearing are themes around customer lifetime value, around attracting the right subscriber, not acquisition at all costs.

I think your comment on demographics is super interesting. Again, something I wish we had more time to unpack. I think about cohorts just being a thing of a past and it's more like the the indicators.

With AI, we can read so much input and so much activity a lot faster, so it's less about a defined classic cohort than it is about really listening skills at this point.

Alright. Well, I hope you've all learned a lot about our acquisition strategies. Thank you so much.

Welcome to another Recurly virtual session. The topic here is loyalty is not a vibe, it's a strategy.

So I'm very thrilled to have this session with Matt and Robbie.

Matt is the cofounder of House of Kaizen. He has twenty five years experience working with subscription products in every category around the globe.

He embraces a subscriber centric experimentation that deepens engagement and improves customer lifetime value. And, of course, Robbie Kellman Baxter, thrilled to have you on this conversation as well.

Robbie comes with more than twenty years experience providing strategic business advice to over a hundred subscription organizations. This includes people you may have heard of like Netflix, Microsoft, Wall Street Journal, and the like. She is also the author of two best selling books, The Membership Economy and The Forever Transaction.

And if you you want more Robbie, she also hosts a podcast series I highly recommend called subscription stories.

So our data is showing about seventy two percent of subscribers, really expect personalized recommendations.

So when you think about loyalty has to be a strategy, not just a good feeling.

What's the cost of missing the mark on personalization?

So when I think about personalization, it's more about nudging someone along on the good path that's going to lead to the outcomes that they want, the value that they sought that brought them to your offering in the first place.

So it's not about what font you choose or, you know, the layout or saying, hi, Robbie, to make it feel more personalized. It's really about getting people to the specific value they want. Don't show me everything you have. Show me what I what I'm want and what I need at the right moment to Yeah. Deepen my engagement and increase the value that I'm that I'm getting from you. I think a lot of times, you know, I've worked with a lot of organizations that have people canceling who say there's not enough value there, when the when the problem is not that there's not enough value, but that that individual couldn't find it, or didn't know it was there. So when I think about personalization, it's really about getting people to value as quickly as possible and reducing the noise for them in increasingly large and complex offerings.

Yeah. Couldn't agree more. You know, I think oftentimes the the pitfall many organizations fall into with the promise of personalization is it it requires it has historically required a significant investment in technology to deploy whatever somebody might define as a personalized experience.

When in reality, just taking a couple steps back and segmenting the, audience or the the customer groups into something as few as two, three, four, five groups could provide a level of personalization or at least the the relevancy to their job to be done that's far better than wherever they may be now. So to Robbie's point, you don't have to leave all the way to personalization to get incremental value and to create a stronger bond and relationship. We we really try to encourage folks to think about this sort of baby stepping approach and unlocking that value rather than trying to achieve what others have deemed to be valuable, which is personalization. And I, you know, I think I think, honestly, in many cases, the promise just far exceeds the the value as we currently sit. AI will change that to a certain degree, but where we currently sit, there's so much more ground to be gained with, I would say, just more simple straightforward ways of delivering value.

I love that. I wish all subscriber companies would listen to you both on that.

Being a subscriber myself, I can think of countless subscriptions that I have, where they are not doing a great job of reminding me of value or actually keeping up with my journey and presenting the new value at different points in that journey.

So Yeah.

I'd love to just underscore that point because I think that's so critical, and I completely appreciate this perspective. I mean, we think about with the value proposition that might have acquired us in a particular product or a particular business. The idea that that would be the reason we stick with them months or years later is kinda silly. You know, everything the world has totally moved on and things have changed and the relationship has evolved. And organizations who don't adapt the value proposition throughout that timeline are going to lose customers. But if they if they evolve, what the level of, you know, support they may provide or the product that they provide or the newness of whatever it may be to the consumer, they're gonna keep that consumer. They're gonna maintain that relationship.

I I think that's such an overlooked part of, again, what makes a subscription product unique and special, but there's so much value in there.

For sure. I mean, think about Robbie's first customer, Netflix, and her point around, like, what you came to Netflix for millions of years ago versus what keeps you there now are super different. You know, I'm not looking in the mailbox for my now my Netflix CDs anymore. It's a totally different thing.

Let's talk about loyalty versus engagement in subscriptions.

There there is a difference there, and it may be subtle for some, but really obvious for experts like yourselves. Matt, do you wanna take us in on that topic?

Sure. Absolutely. You know, loyalty is, I think, something we all aspire to.

By definition by definition, it's essentially the idea that though there may be alternatives in the market, consumers stay with us and maybe even at a premium. There's an opportunity to to have a higher, value relationship through that loyalty.

The trouble is when managing a business is that loyalty is essentially a lagging indicator. You don't know that we have it until we get there. And so the question is, how do you build loyalty in your subscriber base? What are the things that you can do now that you can get a feedback loop going on that demonstrates you're building to a place of loyalty in the future?

And that's where engagement comes into play. So when we think about things in terms of that real time feedback loop and engagement, we really wanna be thinking about how frequently people are using the product, thinking about how deep and broad they're using their product, and how many ways in which they're engaging with it, the surfaces that they're interacting with it on. All of these things that can be used to provide more value when when you're building products for consumers, building things that people wanna pay for. These are all things that can provide you more resources to understand the kinds of engagement that will ultimately produce loyalty over time.

But we just can't wait to say, I want people to become loyal without actually acting on the things that build loyalty through greater and more valuable engagement.

Yeah. Recency frequency, depth, and breadth of usage are the the metrics of engagement are the leading indicators, for the health of your subscription.

And these are the ones you know, we talked earlier, I think yesterday, about what what met there's so many metrics to track. Yeah. The engagement metrics actually tell you how your business is doing. Those are the operating metrics. And then I think that the lagging metrics, which is, you know, your your acquisition numbers and your retention numbers and your customer lifetime value numbers, and your your loyalty index, that's how you can tell how the company has been doing. But, you know, I would encourage everybody listening to really dig in on engagement metrics and particularly the very early and I'm interested, Matt, if you agree with me, but the early indicators of engagement. So what do they do in the seconds, minutes, days after they're onboarded, after they join?

And then is there a steady drumbeat of of engagement? Are they making a habit out of the subscription?

And if they're doing those things in the early periods, there's a there's a much, much higher chance that they're gonna be doing it in the out periods as well and that it's gonna have a positive impact on those investor metrics, which determine the value of a company.

Yeah. You're absolutely right, Robbie. We so when we try to build experiments and optimize the experiences of subscribers throughout the subscribers throughout the various stages of a subscription journey, doing it in the onboarding phase almost always has the highest correlation to lifetime value. So a more successful onboarding will keep someone around for a lot longer and have them spend a lot more money or demonstrate the value of your product to you much more so than people who are not onboarded properly or done so incompletely.

And just beyond that in the engagement phase, which is where you want people to live for the majority of the time that you have them as a subscriber. You want them being fulfilled by your product and engaged by your product for as long as possible.

It's very often an overlooked part of the experience when it comes to experimentation. Again, there's a gravitational pull towards acquisition because of the immediacy of growing the business with new customers or around retention and saves because there's a sense of wanting to plug the leaky holes in the bucket. But what's interesting is when we prioritize experimentation at in at the point of engagement, what we also do is we improve the profile and the experience of the product such that it has a halo effect on those two other areas. People talk to each other about the experience.

They share their experiences. They engage around the product. And so, when we optimize for engagement, we see lifts in acquisition of around ten to thirty percent and lifts in retention of around thirty plus percent. It's really fascinating because the problems you solve to grow a net growth business aren't always directly tied to the area where you have a problem.

Meaning, if you wanna fix your churn problem, it doesn't mean you have to improve your saves all the time. It may mean you have to focus on engagement.

It's really fascinating.

I I could not agree more. I mean, when we look at the stats of people canceling their subscriptions most likely in that first six months, I truly hope that companies are now much more focused on what could potentially be that honeymoon phase, really bringing you into the fold in the right way, providing value along the way, encouraging conversations amongst the community of your customers.

Super exciting. Let's talk a little bit about, I call subscribers, like, they're they just wanna flex. They're in control. Right?

They've ever since Oh, gosh.

Even before Twitter, they're in control. They they have their demands. They have their wants. They have ways that they want subscription companies to behave. And so that perception of control is super important when it comes down to things like pause, like skipping, or downgrading.

They tend to stay longer. So the question I have for you is how do companies balance this wanting to give subscribers that feeling of control and the predictability of their own revenue stream?

I've thought about this a lot. And when I when I started my work with subscriptions and membership models, I was very much in love with subscription pricing, overall other pricing methods. And and over time, I think I've changed my tune to be really focused on what is the right pricing for outcome, how do you best align it, and sometimes subscription is a rough tool. So for example, if I have very, very long hair and I have a subscription to a shampoo, and I'm getting the right amount every month for my hair, and then I cut my hair short, I'm gonna need a different quantity.

If I join a gym and then break my leg, I may not be able to use it or if I'm traveling a lot for work. And so there is this feeling that I'm that I'm paying and I'm not getting the value that I need. There's not an alignment.

So I think there are many reasons for other ways of pricing beyond a pure fixed subscription or, you know, what we talked about yesterday around, you know, Netflix having one price for everybody.

On on the other side, though, I think a lot of the value of subscriptions is that there is a sort of set it and forget it mentality. And, you know, Mary, you brought up the impact for the for the company. You know, I need recurring revenues so that I can manage my business, manage my cash flow, and so on. But there's also a real value to the to the consumer, to the customer, which is the problem is solved for a fixed price. And since I know what I'm paying, I don't have to I don't have to keep my wits about me and keep making that buying decision over and over again. The more complicated that you make your pricing structure, the more options people have, the more they have to keep their wits about them to pay the right amount.

And the less the less they can relax into the relationship. So I I think it's also really important to say we have a subscription that's so valuable that whether you're using it a little bit more than the price or a lot more than the price, you you see the value. It's like, you know, when you when you go to an all you can eat buffet, some of us are getting more value than others, but the fact that there's one price creates a much simpler, easy to engage with model.

Matt Matt, how about your thoughts on how to balance that subscribers who wanna feel in control versus a company's desire for predictable revenue? And great point, Robbie, on, like, the flip side of companies and predictable revenue is customers with predictable set it and forget it. It's been paid for. I don't have to worry about that anymore.

Yeah. I, you know, I tend to look at the subscription model as a as a consumer engagement model. And to Robbie's point, it doesn't have to be the only way.

You know, I I think, honestly, as a business, we should be happier with maintaining the relationship with the consumer even if it means it's not necessarily on a subscription basis. So the predictability of the consumer ship is more important in some ways than the the revenue model necessarily.

So what I mean by that is take, for example, something like Dollar Shave Club, who evolved from offering greater diversity through which they can engage their consumers, through which they can deliver the value to the consumers. And those become options. There's through which they can deliver the value to their consumers. And those become options. There's different ways as the consumers needs evolve for them to adapt to the way they engage with that brand.

But, again, they retain the relationship, not just the revenue model. And so I think that that's a big part of it is recognizing that when you have a diversity of ways in which to sell and the subscription is perhaps a foundational aspect of that model, but not necessarily the thing that you are you you live or die by, Mhmm. Then you have the opportunity to be more adaptable and focus on the relationship.

I appreciate both your perspective on this topic that we could clearly talk a lot longer on.

Loyalty is definitely the new black. I'm a big fan. Thank you so much.

Welcome to another Recurly virtual session. The topic here is loyalty is not a vibe, it's a strategy.

So I'm very thrilled to have this session with Matt and Robbie.

Matt is the cofounder of House of Kaizen. He has twenty five years experience working with subscription products in every category around the globe.

He embraces a subscriber centric experimentation that deepens engagement and improves customer lifetime value. And, of course, Robbie Kellman Baxter, thrilled to have you on this conversation as well.

Robbie comes with more than twenty years experience providing strategic business advice to over a hundred subscription organizations. This includes people you may have heard of like Netflix, Microsoft, Wall Street Journal, and the like. She is also the author of two best selling books, The Membership Economy and The Forever Transaction.

And if you you want more Robbie, she also hosts a podcast series I highly recommend called subscription stories.

So our data is showing about seventy two percent of subscribers, really expect personalized recommendations.

So when you think about loyalty has to be a strategy, not just a good feeling.

What's the cost of missing the mark on personalization?

So when I think about personalization, it's more about nudging someone along on the good path that's going to lead to the outcomes that they want, the value that they sought that brought them to your offering in the first place.

So it's not about what font you choose or, you know, the layout or saying, hi, Robbie, to make it feel more personalized. It's really about getting people to the specific value they want. Don't show me everything you have. Show me what I what I'm want and what I need at the right moment to Yeah. Deepen my engagement and increase the value that I'm that I'm getting from you. I think a lot of times, you know, I've worked with a lot of organizations that have people canceling who say there's not enough value there, when the when the problem is not that there's not enough value, but that that individual couldn't find it, or didn't know it was there. So when I think about personalization, it's really about getting people to value as quickly as possible and reducing the noise for them in increasingly large and complex offerings.

Yeah. Couldn't agree more. You know, I think oftentimes the the pitfall many organizations fall into with the promise of personalization is it it requires it has historically required a significant investment in technology to deploy whatever somebody might define as a personalized experience.

When in reality, just taking a couple steps back and segmenting the, audience or the the customer groups into something as few as two, three, four, five groups could provide a level of personalization or at least the the relevancy to their job to be done that's far better than wherever they may be now. So to Robbie's point, you don't have to leave all the way to personalization to get incremental value and to create a stronger bond and relationship. We we really try to encourage folks to think about this sort of baby stepping approach and unlocking that value rather than trying to achieve what others have deemed to be valuable, which is personalization. And I, you know, I think I think, honestly, in many cases, the promise just far exceeds the the value as we currently sit. AI will change that to a certain degree, but where we currently sit, there's so much more ground to be gained with, I would say, just more simple straightforward ways of delivering value.

I love that. I wish all subscriber companies would listen to you both on that.

Being a subscriber myself, I can think of countless subscriptions that I have, where they are not doing a great job of reminding me of value or actually keeping up with my journey and presenting the new value at different points in that journey.

So Yeah.

I'd love to just underscore that point because I think that's so critical, and I completely appreciate this perspective. I mean, we think about with the value proposition that might have acquired us in a particular product or a particular business. The idea that that would be the reason we stick with them months or years later is kinda silly. You know, everything the world has totally moved on and things have changed and the relationship has evolved. And organizations who don't adapt the value proposition throughout that timeline are going to lose customers. But if they if they evolve, what the level of, you know, support they may provide or the product that they provide or the newness of whatever it may be to the consumer, they're gonna keep that consumer. They're gonna maintain that relationship.

I I think that's such an overlooked part of, again, what makes a subscription product unique and special, but there's so much value in there.

For sure. I mean, think about Robbie's first customer, Netflix, and her point around, like, what you came to Netflix for millions of years ago versus what keeps you there now are super different. You know, I'm not looking in the mailbox for my now my Netflix CDs anymore. It's a totally different thing.

Let's talk about loyalty versus engagement in subscriptions.

There there is a difference there, and it may be subtle for some, but really obvious for experts like yourselves. Matt, do you wanna take us in on that topic?

Sure. Absolutely. You know, loyalty is, I think, something we all aspire to.

By definition by definition, it's essentially the idea that though there may be alternatives in the market, consumers stay with us and maybe even at a premium. There's an opportunity to to have a higher, value relationship through that loyalty.

The trouble is when managing a business is that loyalty is essentially a lagging indicator. You don't know that we have it until we get there. And so the question is, how do you build loyalty in your subscriber base? What are the things that you can do now that you can get a feedback loop going on that demonstrates you're building to a place of loyalty in the future?

And that's where engagement comes into play. So when we think about things in terms of that real time feedback loop and engagement, we really wanna be thinking about how frequently people are using the product, thinking about how deep and broad they're using their product, and how many ways in which they're engaging with it, the surfaces that they're interacting with it on. All of these things that can be used to provide more value when when you're building products for consumers, building things that people wanna pay for. These are all things that can provide you more resources to understand the kinds of engagement that will ultimately produce loyalty over time.

But we just can't wait to say, I want people to become loyal without actually acting on the things that build loyalty through greater and more valuable engagement.

Yeah. Recency frequency, depth, and breadth of usage are the the metrics of engagement are the leading indicators, for the health of your subscription.

And these are the ones you know, we talked earlier, I think yesterday, about what what met there's so many metrics to track. Yeah. The engagement metrics actually tell you how your business is doing. Those are the operating metrics. And then I think that the lagging metrics, which is, you know, your your acquisition numbers and your retention numbers and your customer lifetime value numbers, and your your loyalty index, that's how you can tell how the company has been doing. But, you know, I would encourage everybody listening to really dig in on engagement metrics and particularly the very early and I'm interested, Matt, if you agree with me, but the early indicators of engagement. So what do they do in the seconds, minutes, days after they're onboarded, after they join?

And then is there a steady drumbeat of of engagement? Are they making a habit out of the subscription?

And if they're doing those things in the early periods, there's a there's a much, much higher chance that they're gonna be doing it in the out periods as well and that it's gonna have a positive impact on those investor metrics, which determine the value of a company.

Yeah. You're absolutely right, Robbie. We so when we try to build experiments and optimize the experiences of subscribers throughout the subscribers throughout the various stages of a subscription journey, doing it in the onboarding phase almost always has the highest correlation to lifetime value. So a more successful onboarding will keep someone around for a lot longer and have them spend a lot more money or demonstrate the value of your product to you much more so than people who are not onboarded properly or done so incompletely.

And just beyond that in the engagement phase, which is where you want people to live for the majority of the time that you have them as a subscriber. You want them being fulfilled by your product and engaged by your product for as long as possible.

It's very often an overlooked part of the experience when it comes to experimentation. Again, there's a gravitational pull towards acquisition because of the immediacy of growing the business with new customers or around retention and saves because there's a sense of wanting to plug the leaky holes in the bucket. But what's interesting is when we prioritize experimentation at in at the point of engagement, what we also do is we improve the profile and the experience of the product such that it has a halo effect on those two other areas. People talk to each other about the experience.

They share their experiences. They engage around the product. And so, when we optimize for engagement, we see lifts in acquisition of around ten to thirty percent and lifts in retention of around thirty plus percent. It's really fascinating because the problems you solve to grow a net growth business aren't always directly tied to the area where you have a problem.

Meaning, if you wanna fix your churn problem, it doesn't mean you have to improve your saves all the time. It may mean you have to focus on engagement.

It's really fascinating.

I I could not agree more. I mean, when we look at the stats of people canceling their subscriptions most likely in that first six months, I truly hope that companies are now much more focused on what could potentially be that honeymoon phase, really bringing you into the fold in the right way, providing value along the way, encouraging conversations amongst the community of your customers.

Super exciting. Let's talk a little bit about, I call subscribers, like, they're they just wanna flex. They're in control. Right?

They've ever since Oh, gosh.

Even before Twitter, they're in control. They they have their demands. They have their wants. They have ways that they want subscription companies to behave. And so that perception of control is super important when it comes down to things like pause, like skipping, or downgrading.

They tend to stay longer. So the question I have for you is how do companies balance this wanting to give subscribers that feeling of control and the predictability of their own revenue stream?

I've thought about this a lot. And when I when I started my work with subscriptions and membership models, I was very much in love with subscription pricing, overall other pricing methods. And and over time, I think I've changed my tune to be really focused on what is the right pricing for outcome, how do you best align it, and sometimes subscription is a rough tool. So for example, if I have very, very long hair and I have a subscription to a shampoo, and I'm getting the right amount every month for my hair, and then I cut my hair short, I'm gonna need a different quantity.

If I join a gym and then break my leg, I may not be able to use it or if I'm traveling a lot for work. And so there is this feeling that I'm that I'm paying and I'm not getting the value that I need. There's not an alignment.

So I think there are many reasons for other ways of pricing beyond a pure fixed subscription or, you know, what we talked about yesterday around, you know, Netflix having one price for everybody.

On on the other side, though, I think a lot of the value of subscriptions is that there is a sort of set it and forget it mentality. And, you know, Mary, you brought up the impact for the for the company. You know, I need recurring revenues so that I can manage my business, manage my cash flow, and so on. But there's also a real value to the to the consumer, to the customer, which is the problem is solved for a fixed price. And since I know what I'm paying, I don't have to I don't have to keep my wits about me and keep making that buying decision over and over again. The more complicated that you make your pricing structure, the more options people have, the more they have to keep their wits about them to pay the right amount.

And the less the less they can relax into the relationship. So I I think it's also really important to say we have a subscription that's so valuable that whether you're using it a little bit more than the price or a lot more than the price, you you see the value. It's like, you know, when you when you go to an all you can eat buffet, some of us are getting more value than others, but the fact that there's one price creates a much simpler, easy to engage with model.

Matt Matt, how about your thoughts on how to balance that subscribers who wanna feel in control versus a company's desire for predictable revenue? And great point, Robbie, on, like, the flip side of companies and predictable revenue is customers with predictable set it and forget it. It's been paid for. I don't have to worry about that anymore.

Yeah. I, you know, I tend to look at the subscription model as a as a consumer engagement model. And to Robbie's point, it doesn't have to be the only way.

You know, I I think, honestly, as a business, we should be happier with maintaining the relationship with the consumer even if it means it's not necessarily on a subscription basis. So the predictability of the consumer ship is more important in some ways than the the revenue model necessarily.

So what I mean by that is take, for example, something like Dollar Shave Club, who evolved from offering greater diversity through which they can engage their consumers, through which they can deliver the value to the consumers. And those become options. There's through which they can deliver the value to their consumers. And those become options. There's different ways as the consumers needs evolve for them to adapt to the way they engage with that brand.

But, again, they retain the relationship, not just the revenue model. And so I think that that's a big part of it is recognizing that when you have a diversity of ways in which to sell and the subscription is perhaps a foundational aspect of that model, but not necessarily the thing that you are you you live or die by, Mhmm. Then you have the opportunity to be more adaptable and focus on the relationship.

I appreciate both your perspective on this topic that we could clearly talk a lot longer on.

Loyalty is definitely the new black. I'm a big fan. Thank you so much.