Robbie Kellman Baxter — Creating Highly Personalized Membership Experiences — S7E3
This episode was also recorded in video format. To watch the conversation, tune in below:
Mary Drumond: We are back with one more episode of voices of customer experience. We’re on season seven and today I am joined by Robbie Kellman Baxter, who is author of this book, the forever transaction. And I’m really happy to have Robbie on the show. Um, Robbie has consulted with several amazing companies out there and I’m not going to do the talking.
I’m going to let Robbie speak for herself. Hey Robbie, can you introduce yourself? Talk a little bit about who you are, what you do, what you’re passionate about.
Robbie Kellman Baxter: Sure. Um, Thank you for the nice welcome Mary. I’m Uh, Robbie Kellman Baxter. Uh, I am uh, obsessed with membership and subscription models. Um, And I’ve been interested in that space for the last 20 years starting with some work I did as a consultant at Netflix, where I fell in love with the business model. I loved the power of subscriptions and recurring revenue, but I also loved all the other parts that went with the subscription pricing. I loved their focus on the long-term well-being of their customers, their willingness to continue to iterate and innovate around their product offering, and do one thing really, really well, which is provide professionally created video content delivered with cost certainty in the most efficient way possible and continue to provide that in better and better ways over time. And since those days, um, I’ve really focused my career on learning about that, that model.
And understanding what makes it work across different industries and organizations of different sizes and different structures. And as you mentioned, I wrote two books on this topic, the membership economy, which came out five years ago, where the purpose was to explain to people that this was a massive transformation and they could be part of it.
And then five years later, um, just a few months ago, I released the forever transaction. People today you don’t have to tell them that subscriptions are powerful, but A a lot of organizations really struggle with the nitty gritty of how to build out those models. So that’s the world I live in and, uh, and what I love.
MD: Well, I mean, I imagine that when you wrote the membership economy five years ago, it wasn’t as widely accepted as it is today. And there was still some evangelizing that had to be done in the space.
RKB: Yeah, absolutely. It was a one-pound evangelical work. It was, memberships are amazing. They build loyalty and engagement and recurring revenue. And you might not understand, but recurring revenue is better than new revenue in a lot of ways, because it’s more, it’s more profitable and it’s more predictable and here’s how you do it.
It can work for your organization. Here’s how to think about it. No matter what industry you’re in. I really was trying to help people see what I was seeing with my clients. Um, and today I don’t have to explain it to anybody. Everybody, you know, from burger King to Caterpillar is trying to do subscriptions right now.
MD: Right. Well, it is very favorable, especially when you’re trying to raise investment or, um, capitalize or anything, because you’re able to make really clear projections with hard numbers. Um, and when you get that annual recurring revenues, startups love the model and companies of all sizes are realizing that that’s totally the way to go.
Um, but I imagine that even though it’s really, really common nowadays to see subscription models, You probably see some that even for you, you’re like, Hmm, I don’t know about that. Like, that’s kind of a stretch.
RKB: Yeah. Oh, totally. Well, you know, we’re all suffering right now from subscription fatigue, right?
Especially in this COVID time. Right. It’s like, everything’s a subscription, you know, can’t I just buy it outright? Um, can’t I just buy what I need? Can’t I just use, you know, pay for what I use? Um, and I think that that’s all coming from poorly designed subscription offerings where there’s no product market fit.
Like. Hey, I have a bunch of products. I’m just going to bundle them together and call it a subscription and get me some of that recurring revenue that everybody’s talking about. Instead of saying, what’s a promise I can make to somebody that is compelling on an ongoing basis? And how can I deliver on that promise through a product that I sell as a subscription?
MD: What is the weirdest subscription you’ve seen?
RKB: Oh gosh,
MD: I’m still stuck on toilet paper. Like for me, toilet paper. Yeah, I need a subscription for toilet paper. Come on like that for me-
RKB: Since we’re going there, you started this. There is a feminine hygiene subscription.
MD: Yeah. Oh, i, I, I, I do subscribe to that.
RKB: Yeah. And, and, you know, here’s why, right. It’s not necessarily something that you want to buy in the store. They haven’t had a lot of real advances in the last 20 years. Somebody focused in on it and said, that is definitely an ongoing problem that you have. It’s not going away anytime soon. And we can optimize the whole thing for, you know, all the different parts that are gonna make you feel better about the world, about yourself, your own health, but also the environment.
So that’s kind of a weird one. Um, you know, there’s a lot that are really niche-y. I mean, there’s good weird and bad weird. Um, you know, you brought up the toilet paper one, I will say in defense of toilet paper subscriptions, it is a forever problem. Right. We’re going to need toilet paper for the rest of our lives.
Um, we don’t want to run out of it. Some of us ran out of it, you know, at the beginning of COVID and it was a very, very scary thing. So to have it delivered on a recurring basis, um, as a continuity model, meaning, you know, you never run out. As a convenience model, you know, it’s the most unwieldy thing in your shopping cart.
And if you walk to the grocery store, it’s hard to carry at home. Um, And from cost savings perspective, if you commit to a single brand, they might give you a 10% discount, which over your lifetime is actually significant. So to be rewarded for loyalty is, is meaningful. So there are subscriptions that are great just for those kind of the big three benefits, convenience, cost savings, um, convenience, cost savings, and, you know, never running out of it.
Um, But then there’s a whole bunch of, like, I think what you’re alluding to is there’s a lot of other value you can layer in, right? If it’s about being healthy or having my bathroom be environmentally friendly or, you know, some other reason, and then you can layer in a lot more value expertise, other products, other services.
And I think that, you know, the toilet paper subscription by itself is, you know, pretty much a commodity
MD: it’s, lots of times I find it interesting when I see. Uh, really commoditized products, not necessarily getting into the subscription model with that, let’s say, O G product, but gradually finding some way to fit it in there.
You know, like one thing that’s, you know, since we’re on the toilet paper topic, we might as well go straight down this path. Um, You have, uh, you know, that, uh, the Bidet uh, Tushy I think it’s called and it’s just basically a bidet seat that you hook on to your toilet. And, you know, it was great during the pandemic when nobody could find toilet paper, it was like, why don’t you just wash?
Um, so they came out with that product and that was their first line of business. And I recently got an email from that, telling that, telling me that they are now selling a subscription to, um, paper towels that you hook onto like your toilet bowl somehow, and then you always have something to dab yourself dry. You know, like, I mean, I can say in my personal life, I subscribe to a lot of things that nowadays I wouldn’t even consider buying um, in the supermarket or going to a brick and mortar, like uh contact lenses for me, I’m I have, I can wear glasses for a while, but then I have to wear contact lenses and I’m allergic to solution.
So I have to use dailies and I was buying like Acuvue which is really expensive and my insurance wasn’t covering everything. So I opted to actually not use my, my, my insurance at all and subscribe to Hubble contact lenses. And I’ve been doing that for like four years now.
RKB: Yeah, it’s great. Yeah. And they’ve, they’ve, you know, the big thing that they do too, is they, you know, disintermediate the middleman and sell directly to you.
So you get a better price and you get more convenience. Cause there wasn’t a lot of value in the buying process before. Um, so there’s a lot of innovation that’s happening with physical products. Um, with them without subscription. I mean, uh, another really interesting example is, uh, impossible foods. Um, you know, that make, you know, the, you know, veggie based meat.
Now they’re just launching veggie based milk. Their forever promise is about, um, helping meat eaters or, you know, animal product consumers, consume a little bit less. Mm, to be a little softer on the environment, a little easier on the environment. And so they’re thinking about how to make it a habit for you, how to make it as easy as possible, because it’s all about forming new habits.
Um, and then once, as you said, once you have the habit, you’re like, why would I ever go back? This solves my problem better than going to the grocery store and figuring it out every time.
MD: Yeah. I mean, I have the same thing with, um, You know, when it comes to being environmentally conscious and, and, and even with eating habits, um, I’ve, I’ve recently started buying, um, my protein in general, um, from a local farm that sends it directly to my house.
And that way I feel like I’m supporting my local farmers. I’m purchasing grass fed, really well- cared for animals. And I feel like I’m doing our part. Um, but is there a moment, is, is there an industry or a vertical that you see out there that you say should not be doing subscription models? Because there’s so many, like if we talk about it, we go from, from, um, you know, beauty products to, you know, bathroom issues, food, medication, because now you can subscribe to medication. Is there a market that should be excluded from the subscription model?
RKB: Yeah, it’s a really good question. So. First of all subscriptions are everywhere. We’ve been talking about physical products. Um, subscriptions of course are also huge in digital content.
Um, you know, everything from, you know, video to news, to audio, to what we’re doing right now with, with podcasts, audio and video, um, And also software as a subscription. And services as a subscription. So, you know, there’s a huge range of subscriptions. And you know, when I think about what doesn’t lend itself to subscription, it’s, you know, a couple of things, one of them is, uh, if you have a regulatory advantage, a geography advantage, a patent advantage, right?
You’re the last gas for a hundred miles. You’re the only one that has a cure for a rare disease. You don’t have to be very nice to your customers. You can treat them however you want, because they have no choice. If your customers have choice. And if you want to have an ongoing relationship with them, you want to see them more than one time.
If I’m last gas for a hundred miles, you know, you may never see me again. You may never pass through this way, but if I’m the gas station in your town, you know, maybe we do, we do have a relationship. So maybe I want to think about subscription. Um, so those. Organizations often don’t feel the urgency to invest in building a relationship and having subscription pricing.
And then the other place that I’d say is if you’re offering, if you haven’t thought about like, when shouldn’t you do it, like one is they don’t need to and so they don’t want to. Um, but you shouldn’t have a subscription if you don’t have a forever promise. If you, if your customer has a very finite need.
Um, or you have a very finite solution to their need. Um, you probably can’t justify subscription. And if you try to, you’re going to make the customer mad. So if I only have one book, I have two books, right. Uh, if you buy them both out, you can buy them both outright for less than $60, right? Probably less than $50.
If I make you subscribe to them, if that, if that’s the only way you can access them and you can only look at them and it’s $10 a month. That doesn’t feel fair. Right? I don’t have enough content. I don’t have enough benefits to justify that kind of relationship. You don’t need to subscribe to one book, maybe subscribe to a library of books, maybe subscribe to a library of my content, layered in with some expert advice layered in with a mastermind group, but the subscription offering has to justify the subscription pricing.
So if you don’t have that. Don’t do it.
MD: That’s interesting. Now one thing that you talk about in the book is about, instead of selling a product or a service selling a promise, right? Which is something that you just brought up. Can you dig into that a little bit more?
RKB: Yeah, absolutely. Um, so any product that you think of that you like, just think of the last product you bought? Right. What was the last product you bought, or service?
RKB: So you didn’t necessarily buy that coffee cause you wanted, I’m going to make an assumption, that you wanted coffee. You might’ve wanted a little pick me up. You might’ve wanted a little treat. You might’ve been like me and wanted something warm to hold all morning, you know, your own little hand warmer, my husband’s like, are you ever going to drink that?
Um, and it’s probably a habit. It’s probably something that you do every morning for one of those reasons, or maybe a combination of those reasons. So if someone can tap into those reasons that you get coffee, they can probably come up with a subscription that delivers on the promise. If you say, you know, every morning, I want to start my day with a little treat, right.
Burger King you know, has a coffee subscription. It’s five bucks a month. It’s unlimited coffee. So does Panera bread? Yeah, Panera and also I’m on Shea. They all, now they followed, imagine that burger King is the leader and they’re following in burger King’s footsteps, but it’s a way of saying, you know what, I’m going to make it really easy for you to get your daily coffee.
If one of those is next door to your office, right? You can just stop in every day. It adds a level of convenience and maybe they can even pop in a treat every now and then since it’s your morning treat for yourself. So it’s about taking a step back and seeing where do I fit into my customer’s life? Why did they come here in the first place?
It’s part of her morning routine. She buys the coffee with her bagel, whatever the reason is, how can we make it easier for her to solve her full objective? Right. And so they can start to expand. They can say, I can give it to her every day so that she doesn’t have to always pay for it. I can give her other things to go with it. I can deliver it to her house or her office.
So that’s the kind of thinking that you need is what is the bigger promise? I bought this blouse because it looks good on video, right? I didn’t buy the blouse to have the blouse. I don’t want to talk about the blouse. I’m not that interested in clothes, but you know, if the company that sold me the blouse knew that, they could say, Oh, she needs things that work well on video, we can give her other things.
And frankly, she’d like to have them just be in her closet. She doesn’t even want to shop. She wants us to just send it to her. You know, her video, video clothing package, because that’s the promise. That’s what I did it for. That was my big goal. So instead of focusing on the product itself, it’s focusing on the customer’s goal and saying, what else can I offer?
And can I structure it as an ongoing relationship instead of a one-time transaction that has to be repeated.
MD: I’m hearing a lot of customer centricity in everything about this model. Is that, is that the core, truly?
RKB: Absolutely. And I was listening to your interview. I don’t know if it was last week when you did it, but the one with, um, Thales Teixeira.
MD: Brilliant man.
RKB: Yeah. Fantastic. Um, you know, but these ideas about how your business, you know, your whole business culture, the corporation, the organization changes when you go from being product centric to customer centric. Most, most companies, I think say they’re customer centric because it’s kind of like motherhood and Apple pie.
Like, what are you gonna say? I don’t care about, I’m not customer centric. All I care about is money. All I care about is my product. I hate my customers. Nobody says that, but you can see it in an organization when you walk in and all the hero shots around the office are of the product, not of the customer.
When they talk badly about their customer, like they say, Oh, we’re going to just shove in this extra fee and our customers, they never notice anything they’re so loyal. You know, would you be comfortable if your customer were sitting in the room and heard you, the way you talk about them? Um, thinking about those kinds of things that customer centricity really changes everything about how the organization works.
MD: And you know, when I think of, you know, just in my mind, when I go back to the different subscription boxes that I have, for instance, and I try to understand which ones worked and didn’t work, it really has to do with how much I feel that company, um, Understands me as a consumer. And if I want a forever promise, if I want that sort of marriage to a brand, I want to make sure that it’s a brand that truly gets me and not a brand that’s just slapping anything in there that they got in a good deal with some collaboration they’re doing with another organization.
So I think that that’s a really crucial element, isn’t it?
RKB: Yeah, absolutely. And it’s, I love that you used marriage as a metaphor because it is, it’s like. Are you going to spend all your corporate energy on the dating phase or on the marriage phase? Right? The marriage is much more powerful if they’re committed to you, they have a higher expectation, but there’s a very long runway.
So you want those customers that are willing to commit to you, even if their demand is a little high. Like when you say, you know, Hey, if there’s something in the box that makes no sense, right. I have a dog subscription and there’s a cat toy in there. It’s like, They probably got it for free, but I don’t have a cat.
That’s weird. Right. Um, that sends a message. But you know, if they’re, if it’s a dog box and you have a puppy, there’s a good chance that you could stay for 12 or 15 years, um, if they continue to deliver. And if they understand the journey you’re on with your pet, um, there’s a lot of room for them to layer in more value. First as it’s a puppy, and then as it’s a mature dog, and then, you know, we just, you know, lost our dog. Right. And we were kind of at the other end of that cycle, and there’s a whole bunch of other things we, we need to understand. Products we needed, services we needed. There’s a range, if you understand, you know, along that marriage, a range of services you can provide.
MD: Right. And once you’re able to establish that identification with the customer, the customer will increase their sales, their share of wallet with you too, because there’s so much upselling and cross-selling, and I don’t know what, you can do when you actually establish that relationship. You know, like I think.
Okay. I do have, I have two dogs and, um, I subscribed to chewy, um, for my dog food. Um, and then when chewy started selling dog medication, I signed up for that as well. When they started selling dog toys in the box, I signed up for that as well, because I, I know that I can rely on them. And I know that as a customer, like I have that feeling that Chewy has my back.
Yeah. So I want to extend that to other parts of my experience as well, you know, that, that consistency, that predictability and that relationship that I have with the brand. So when companies are able to do that, right, I’m pretty sure that if nowadays Netflix came out with a car, people would buy it.
That’s how strongly people identify.
RKB: Their trust is so high. Yeah. Yeah-
MD: Go ahead before I change the subject.
RKB: Yeah. I was just going to say, you know, with the chewy example, they know that you have two dogs. Um, they probably have a sense of how old those dogs are. And so they can layer in things, say she probably needs medication. She probably needs this. Maybe she hasn’t thought about that. When you’re a new pet parent, you have certain needs and then over time the needs change. Um, so that’s really, that’s really a powerful thing to understand that customer’s journey and anticipate it for them where you’re like. Oh, how did they know that my dog’s getting arthritis?
And I’m like, well, we know that you have a lab and your lab is seven years old. So it’s, you know, they know that even if you don’t and so they can anticipate your needs, which builds greater trust, or you’re like, wow, they really know me. And they’re like, now we’ve just seen, we’ve seen a lot of labs. We know.
MD: Yeah. Well, how about, like, I mean, nowadays, like a couple of years ago, there were very few players in this space. Now everybody is jumping into subscription models and you have options, right? So. How is it that brands actually are able to position themselves in a way that the keep that customer loyalty, or even when it comes down to customers signing a new subscription, how do they get chosen by customers?
Like. You know, a personal example when I had to choose between Spotify or Apple music, um, to, to get my music. The reason I went with Apple was because when I signed up, the very first thing I did was I went through this whole little thing where I told Apple exactly what kind of music I liked. And there was even a thing where there are these bubbles, and I got to, to shape my musical experience with the size of the bubble. So if I wanted to listen to more rock music, then I put a big bubble and folk was a medium bubble. Whereas I, you know, EDM was a little bubble cause I only wanted a little bit of it. So I told them what I wanted initially. And that made me a lot more trustworthy of the options that Apple was going to give me in my music subscription.
Not that Spotify is bad at all, but the fact that Apple took the time to listen to my wants and my needs, and my desires, made a difference for me.
RKB: Yeah, it’s really interesting, the example of Apple versus Spotify. And there’s a, there’s a couple of important things. One of them is once you’ve done the heavy lifting of setting up your habits, it’s hard to switch, right?
Because you’re like, well, now they know me. Like I just, I don’t know exactly what happened. You know, the bubbles were a great start and it just keeps getting better and better. And I, I like every, like I only want to listen to my own soundtrack at this point. Right. And so would you leave and start over and figure that out with Spotify?
Probably not, number one. Number two, cause there’s switching costs, but number two, it’s solving your problem. You, you want music, you turn it on, you get music. So why would you look for something else? So you’re not out shopping for other alternatives. Um, and so those two things are really important.
Another thing that I just want to add about Apple, big advantage that they have over Spotify is that when you get your phone, it’s already there. Right. Um, they give you, you know, like right now. Sneaky like that. Like when I bought my, I’m trying to remember if it was when I bought my phone or when I bought my new Mac book air, they gave me, they gave me, um, it was included a year’s, a year subscription to Apple plus plus, right. It would introduce me to their new products. And if I, if I go through the effort of making that a habit, hooking it up to my smart TV, hooking it up to all the different places where I enjoy watching video content, um, When they start charging me, I might just stick with it because we’ll all be using it.
Plus I have three kids. So if they’re all using it, then even if I’m not using it, it’s very hard to cancel.
MD: So that leads me to an interesting question. Does, is that initial effort part of what creates that loyalty?
RKB: Yeah, it is. The friction. It’s, so it does a couple of things. Number one, there’s a little bit of a, you know, in some products that onboarding phase of the, of the customer experience, it’s really, really important.
And I think people give it short shrift. They don’t pay enough attention to it. The first thing that you want to do is you want to remove friction to get them to their value. What was the reason they came in the first place? And then you want to reinforce the wisdom of their decision. Like, wow, welcome.
You’ve now got access to all the world’s songs at the best price available, where you’re in an elite community or whatever it is. And then they want to show you how they get the most value for what you’re already spending. Like, Hey, our best customers spend two or three minutes setting things up and then we can get smarter and smarter about you over time.
So all of that is really important. Um, Some organizations deliberately put friction into the onboarding process. Um, and I’ll give you two quick examples of that. One of them is CrossFit, the fitness studio, right? Um, you can’t join without attending a class first. Um, it’s quite expensive. Um, And when you go to the classes, um, you have to do what everybody else is doing.
You can’t kind of say I’m going to just do my own routine over here on the corner. Cause I feel like doing sit-ups, even though you guys are doing pushups and by the way, I finished my workout. So I’m going to head out and go hit the showers. Even though Robbie you’re really slow. And you still haven’t finished your 20, you know, your three mile jog.
Um, you’re not allowed to do that. Everybody stays till everyone’s done and everyone does the same workout. Um, and that’s not for everybody. So a lot of people have that first experience and they’re like, I don’t like this. It feels like a cult. It’s too demanding. Right? It’s not for me. That’s okay with them because the people who go through that friction who say that is for me, it’s worth it. They stick around.
The other example on the software as a service side, B2B, uh, I worked with this company, uh, and we were trying to figure out the difference between our best customers and our worst customers or our not, we were calling them are not best customers because they were still paying us, but they weren’t expanding.
They weren’t going deeper and broader with us. And what we noticed, we brought the whole leadership team together and we put up a list of best customers, the ones that were expanding and spending more over time. And then the ones that had canceled after a year, or that had never grown or, you know, didn’t return our calls.
And when we put up the list, the person in charge of customer success said, Oh my God, that’s the list of all the difficult customers. And that was the good customers, the best customers. Surprisingly. What we found out was that. The, the reason they were being so difficult in the onboarding process, this is kind of going the other way.
They were calling her every five minutes. Like, Hey, this feature doesn’t seem to work, or we really want it to do this. Or I was trying this thing and I’m trying to connect it to that thing and it’s not working. And they were calling her all weekend at her house nonstop. These customers were the most annoying for her.
And the reason was, they were serious. They were trying to make this a habit. They were like, we want this, this needs to work for our company. So I’m going to ask you every hard question because we’re actually using the product. Yeah. And so, and so, you know, If we hadn’t figured that out, she sort of thought that they were bad customers cause they were difficult, but that was actually the hallmark, an early signal of a valuable customer was they were asking hard questions in the onboarding process.
And if a customer wasn’t asking hard questions in the onboarding process, it was probably because the person doing the onboarding was like, I wasn’t part of the buying process for this. I’m not going to use this product even though my boss bought it. Um, I am hoping that this goes away in a year. Yeah.
MD: I see a lot of that. Yeah, for sure. I want to change the subject really quick and go back to something that we addressed earlier on, which is the idea that, that forever promise and that subscription is similar to marriage. How important is it to make an eventual divorce as smooth and effortless as possible.
RKB: Just like real life.
Right. Um, if things aren’t going well in the relationship. You want to make it easy for someone to take a break before forcing them to say, I want to divorce you, I never- you know, if you’re having a disagreement with your, with your significant other, you know, you don’t want to go right to contentious divorce with lawyers, right.
Is there a way to ease out of it? You know, what’s the nicest way, you may be able to salvage the marriage. Right. And if not, you don’t want your ex spouse, you know, trying to get every penny bad, mouthing you to your friends and, um, to, you know, other potential people that you might want to have a relationship with, or your children, right?
You want to keep things civil. So it’s really important that you let people, you know, that you, you let, when, when you get to the point where the relationship has to sever that you make it as, as easy and civil and fair as possible. And you focus your retention efforts not at the moment of the divorce, but like at the moment of the first crack.
Right. When you see the first cracks in the relationship, which, which in the, in terms of most businesses is, you know, the subscribers not using the product. That’s usually what you see , you know, they stopped coming to the gym. Uh, they stopped logging in, uh, you know, they stopped coming by your, your store. Um, they stopped ordering as frequently. That’s when you intervene. That’s when you say, what’s going on here? And then the second thing to keep in mind is that sometimes it’s actually the right thing. If I, um, if I move away, if I move a thousand miles away from my gym, uh, it’s probably okay for me to cancel.
They should probably make it really easy for me to cancel. Cause it’s almost impossible for me to get value. Right. If I stopped going to the gym, because I’m like, you know, the last time I went to the gym, it was really crowded. And I didn’t know how to ask people if I could work in. So I sort of stood around and I didn’t get a good workout.
Um, if I tell you as the gym owner, that that’s why I’ve stopped coming, you can probably fix that. Right. So you want to check in with me, say Robbie, you used to come three times a week and we haven’t seen you in three weeks. What’s going on? Are you hurt? Or did we do something? And then if I say, well, actually it’s gotten really hard to get a good workout in.
You can say, Oh, thank you for telling me, let me fix that.
MD: Right. Yeah. That’s what I was going to ask you. How do you recommend that companies actually get that feedback and realize that something may potentially be wrong before it’s beyond salvation.
RKB: Yeah. So, so there’s sort of two ways of doing it.
There’s the, you know, the, the, the low tech way and the high tech way. And I recommend both if you can. Um, but the low tech way is fine, which is ask them. Ask them, observe them, those are sort of the two things you can do. And you can ask and observe like with your eyeballs and with your mouth, and you can ask and observe with the most sophisticated data systems.
But that’s what you want to do. So you want to ask them, how do you feel, why did you do this? You know, what’s going on? And then you can also observe, Oh, they used to come three times a week. They haven’t come in three weeks. They’ve been here for three months. They’ve only used one feature, right? You’ve been subscribing to Netflix for a year and all you watch are comedies.
Did you know that we have documentaries? Did you know that we have, you know, TV programming? Um, That’s that’s the observing part. So, you know, you don’t have to have, you know, a complicated technology footprint to do this. You could do it at your, you know, if you run a nail salon, you’re like, well you used to come every week and now you haven’t come in a while. What’s going on. Um, you know, you always come and you always get pale Polish and you never get any of the other treatments. Did you know, we offer all these other things? Did you know, you can get your eyebrows done? Did you know, you can get your toes done? Let me offer you a free trial so you can experience it. Get a taste of what else we have here. That’s the onboarding experience. That’s the customer success mindset. And you can do that in the lowest tech of ways.
MD: Yeah, it’s interesting what you’re saying that because I’m sitting here realizing that there are so many high tech digital applications that I haven’t been using, and it’s just been deducting from my credit card every month or every pay cycle.
And eventually, as soon as I realized that I’m paying for something that I’m not using, I’m going to cancel. And I feel like those companies have the technology and they have the expertise to reach out and try to either readjust my plan or suggest alternatives or something of the sort. So the feeling that I’m getting is that companies are maybe leaving money on the table by not checking in with their customers.
I mean, it’s easy in my gym where I, where I walk by the front door desk and people see me and I interact with the staff, et cetera, but on a digital platform, they should be able to see my usage. They should have some triggers set up in their system. That alerts some one that something is off. Right?
RKB: Right. Exactly. And the thing that’s really interesting that you, that you point out is that there’s a lag time between the time that you stopped getting value and the time that you actually cancel. And that’s when you want to intervene. Right? Because like, you know, maybe today after this conversation, you’re going to go look at your credit card statement or go talk to your accountant at your company and say, You know, what are all these things we’re paying for? Let’s cancel those. Right?
And then if you call to cancel, they’re going to try to keep you, and you’re going to be like, you know, I haven’t used this for three months and the world hasn’t fallen apart. I don’t think I need this anymore. Sorry, it’s too late.
MD: Because you’re used to not having them, right?
RKB: But a lot of companies actually value what they call sleeping dog revenue, which is, you know, we’re not going to touch the sleeping dog cause the sleeping dog already put her credit card number in. So let’s not remind her. Let’s hope that she forgot that she’s paying us and we can get a few more months of revenue out of her.
MD: Yeah but that makes me salty. That makes me salty. Like, I get upset at that.
RKB: Yeah. And then you tell your friends about it. You’re like, Oh my God. I was subscribing to this thing for 14 months and I just forgot. Um, and Netflix just announced, um, in the past few months that they are no longer taking sleeping dog revenue. They said if you’ve been subscribing for a year or more, which is granted a pretty long time, without logging in, they’re automatically canceling your subscription.
MD: Well that’s, I think that that really, like as a customer, that would make me trust the brand more, personally. Again, I, I, I can’t really say if, if you know, Netflix is maybe in a position where they can be turning down cash, maybe not everybody has that option, but I do think it pays off in the long run. You know, there is an application that I used to pay for and it was really expensive and it was for a dieting and nutrition.
And I was not using it. I actually didn’t use it at all. I logged in for a free trial. They got me at the free trial and it was deducting by pay cycle. And the pay cycle was every 15 days, like-
RKB: Oh my gosh.
MD: Savage. It was savage. And when I realized it, I was so upset. Um, Because part of the value prop of the company is that you’ll have a personal coach.
And then they said, Oh, if you want to cancel, you have to go talk to your personal coach. And I’m like, personal coach never reached out to me to say, Hey, you haven’t been using us. And you’re paying X amount every 15 days.
RKB: Oh my gosh. I can’t. I’m so mad right now on your behalf.
MD: It was a lot of money. When I count back how much money I lost on that application, maybe some people will go and call and ask for money back. And it’s possible that the company would return it to try to avoid any sort of potential issues. But I’m not that kind of person. I just, I’m just angry and bitter and never in my life will I go back. Whereas, that maybe wouldn’t have been the case if I hadn’t thrown so much money down the drain with them.
RKB: Yeah. I mean, your, your point, you know, you were saying that, you know, Netflix, maybe they have the luxury of being so successful that they can leave cash on the table.
And then you said, I think the, the key point, which was, and it pays off in the long run. So it’s not really about. Like, I don’t think it’s about, Oh, Netflix. They don’t care. They leave money everywhere because they make so much money. It’s they understand that if they don’t take, grab the money today, it will lead to more money in the future, in terms of better relationships, better brand equity, and a greater likelihood that if you pause your subscription or cancel your subscription, that you’ll come back at another time in the future.
MD: Yeah. And that reminds me of something that I read in your book, which was talking about the importance of having leadership, that’s got that long-term, um, the long-term vision and not just this quarterly results that you have to keep pushing for. The, the, the early adopters of this model, would you say that most of the leaders of these organizations were founders and they had that spirit of long-term value as opposed to short term?
RKB: Yeah, it’s, it’s a really good question. I think a lot of them, especially the Silicon Valley, you know, the kind of early group of, of subscription entrepreneurs, um, definitely had that. They had, uh, they had that mission. Um, they had, uh, the vision of that longterm. And they also had um, deep pocketed investors with a long-term time horizon, right? You invest in venture and you don’t expect to get your money out for five, six, seven years. So that gives the company time to invest in building those long-term relationships. They don’t have, you know, it’s not like you get your venture money and you have to have, you know, a payoff by the next quarter. You have that time. And I think that’s something that really helped accelerate the rise of subscription-based businesses was that all these businesses had that latitude to invest for that longer time horizon. Whereas, you know, sometimes now when I come into a large, you know, fortune 50 company and they haven’t had subscription before and they add it, that new unit, that subscription team, is being held to the same standards as the rest of the organization, which is like, you have to have a return on the investment in 12 to 18 months or whatever.
Right. And that’s almost impossible, right? That’s very hard in a subscription world. So, yeah, absolutely. The entrepreneurs tend to have that longer time horizon. And they’re the ones that have seen, you know, these huge multiples and these huge payoffs.
MD: You know, that reminds me, I don’t know why, when you were talking and it reminded me of my door dash subscription.
Now this may come as a shock to some, but door dash does have a subscription, which is the door dash pass. And interestingly. during shelter in place, a lot of us were ordering food in, and door dash was doing was every time I placed an order, um, they calculated how much I was spending on delivery. And they started saying, you could have saved this amount if you had door dash pass. And they did that enough. It was just a little bar right at the bottom of my screen saying, you could have saved this, you could’ve saved this. Eventually it worked and I do subscribe and you know what that means. It means that I only use door dash now. Because I paid a pass, I pay a fixed rate for my delivery fee, so I don’t use Postmates. I don’t use Uber eats. I don’t use grub hub. I only use door dash because I subscribed to them as a brand.
RKB: Yeah. That, that new, it’s kind of a newish concept. What I think of as a premium loyalty program. The door dash one you described, but also that’s what Costco does with their membership. That’s what Amazon prime does.
If you’re committing upfront to wanting to shop there exclusively, or as your first choice, they give you a bundle of benefits that you’re like, Oh, if I use, if I make this my choice, I’m going to get this bundle of benefits. And it’s a way for retailers and episodic or transactional businesses to build that recurring relationship.
A lot of retailers, a lot of hospitality providers. I mean, there’s a couple of hotel companies that are doing this now, even a couple of airlines where they’re, you know, allowing you to buy a membership, which gives you those benefits instead of having to earn it through. Earn it through points.
MD: Right. That’s an interesting concept because it might be a way for these more Jurassic companies or business models to get a piece of the pie, right? It’s kind of a way for them to get into the subscription thing and have that recurring revenue that they can show. It might make it more of a solid investment and may make future projections easier. I mean, I see a lot of benefits in it.
RKB: Yeah. Yeah, absolutely.
MD: Awesome. Robbie, it’s been amazing. It’s been wonderful discussing this with you. Thank you for coming on and sharing your expertise. I’m going to give you a chance to tell our listeners a little bit about how to find you, how to buy your book, how to learn more from you.
RKB: Yeah. Oh, that’s so great. Thank you for the opportunity. It’s been, the time just flew honestly. Mary you’re so fun to talk to and so knowledgeable. Um, you know, I have, um, a lot of assets at Robbie Kellman baxter.com. That’s my website, Robbie Kellman baxter.com. My name. Um, if you go to slash audience, Robbie Kellman baxter.com/audience. I have some goodies for your audience. Um, chapter eight of my book, a membership manifesto, and some process visual slides to help you visualize some of the concepts we talked about. Um, and I’d love for them to link in. You know, on LinkedIn. Uh, and, uh, and also, can I just plug my new podcast, following in your footsteps: subscription stories, true tales from the trenches.
Uh, so if you’re a subscription wonk like I am, and you want to get into the nitty-gritty of subscriptions, um, I encourage you to check it out.
MD: Awesome. That’s great, wonderful. Thank you so much, Robbie. And to our audience, we’ll see you next week. Thank you so much.
About Robbie Kellman Baxter
Robbie Kellman Baxter is a consultant, author and speaker. She is also the author of The Membership Economy and The Forever Transaction, and hosts the podcast Subscription Stories. Robbie has more than 20 years of experience providing strategic business advice to major
organizations, including Netflix, Fitbit, Microsoft and Consumer Reports. She has been focused on subscription and growth strategies for the past decade. Baxter has been featured in the Wall Street Journal and on CNN. She earned her MBA from the Stanford GSB, and graduated with honors from Harvard College.
You can find more about Robbie on her website https://robbiekellmanbaxter.com/
Check out Robbie’s special audience site with all kinds of goodies.
Read a free excerpt of her book, The Forever Transaction
The Voices of CX Podcast is a podcast that covers all things business strategies, customer decision insight, empathetic leadership practices, and tips for sustainable profitability. With a little bit of geeking out on behavioral science, A.I. and other innovation sprinkled in here and there. The guests span multiple industries, but all of them have years of experience to bring to the table.