# Robbie Kellman Baxter, Peninsula Strategies - Generating Recurring Revenue and Predictable Cash Flow

Channel: Sub Club by RevenueCat
Video: https://www.youtube.com/watch?v=Pwe2V891fL8
Duration: 53 min
Language: English
Words: 10809
Transcript page: https://viewrankai.com/tools/youtube-transcript/Pwe2V891fL8

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[0:01] [Music] hey you're listening to the sub club podcast a show dedicated to the best practices for building and growing subscription app businesses we'll share insider secrets from the top subscription apps on the app stores let's get into the show hello i'm your host david bernard and with me as almost always remedy cat ceo jacob biden our guest today is robbie kellman baxter consultant keynote speaker and author she's advised many of the world's leading subscription-based companies including serving on the advisory board of strava her most recent book the forever transaction is a deep dive into everything consumer subscription and a must read for anyone in the space on the

[0:44] podcast we talked with robbie about finding your super users the real reasons for subscription fatigue and why pricing isn't as important as you might think especially early on hey robbie welcome to the podcast oh thanks for having me i'm excited to chat with you both yeah so i was introduced to your work by somebody recommending your book the membership economy and it really struck me and i was so excited that you agreed to be on the podcast because here's a book written in 2015 and we'll talk about your other book that was written more recently but written in 2015 and i'm i'm looking through the scanning

[1:21] the chapters and and uh bought the book and scanning the book it's like this is everything we're talking about now thinking it's also novel with subscription apps but really consumer subscriptions have been around for decades um and you've been working this space you know way longer than any of us and so that'd be really fun to have you on the podcast to talk more broadly about these principles of consumer subscriptions that apply equally to d2c subscriptions as well as the app space that we work in so um that's where i wanted to kind of kick things off so how did you get your start in consumer

[1:55] subscriptions so a couple of threads came together one of them was that i was in product marketing for sas what is now called sas for five years um right before i hung out my own shingle and started consulting um so i had that background as a product manager you know working with with software products that were being sold as subscriptions and then i became an independent consultant and my fifth client was netflix and i fell in love with their business model and i was wondering why isn't everybody else falling in love with their business model too this is amazing recurring revenue predictable cash flow the amount of data they were

[2:35] collecting on their customer the fact that they're offering was just a much better way of delivering on a promise that many of us wanted delivery for which is you know professionally created catalog of video content delivered in the most efficient way possible which meant not having to you know put a raincoat over your jammies to go you know pick up a movie with cost certainty no late fees and i started i was consulting with netflix he's already a customer and a few people started calling and saying hey we heard you worked with netflix we want to be the netflix of our space um whether that was news or music or

[3:15] bicycles or dental pain management products or clothes there was a lot of interest in what it was that netflix was doing and i started trying to develop a consultant trying to create frameworks trying to say what are they doing and which parts are applicable to other businesses and which parts are just unique to that group of people solving that particular problem and that's really where i i got started and turns out to be big enough and deep enough that it's kept me really busy for you know it's been 20 years 20 years of subscriptions yeah what an amazing fifth client to uh to land as a

[3:57] consultant that's a really great and so you were with them before they even introduced the the uh video on demand on the internet right you started with yeah and it was dvds in the mail i'm your kind of traditional d2c subscription service but but even then was satisfying a lot of those almost all of those conditions right i didn't have to go outside just to my mailbox not too bad price certainty i didn't have late fees um and then like you know an insanely large catalog right um you know it was it was it wasn't we had to wait for the technology to get there right and then then we had vaude

[4:32] being uh accessible and they were already thinking i mean it was amazing to me is so i was there you know the time that i worked most actively with them 2001 to 2003. um even during that time which was all dvds all three dvds out at a time they were already thinking about streaming versus you know should they let you download it and then have it explode after you know you know some duration what was the best way to to deliver it should they come through your you know for a while remember i think it came through your playstation or your your weed that was my first that was my first like

[5:06] set top box experience with netflix would have been on nintendo yeah yeah i mean so they it they were already thinking about it and i think that's a really important part of any you know subscription is even if your subscription works great today and it's good enough to get people to sign up the product team has to be thinking how are we going to continue to evolve it in particular for engagement right how do we continue to stay relevant to these people while also having those new and improved features that bring new people in and i think a lot of organizations have been taught to over index on

[5:42] acquisition benefits and not thinking as much about those those sticky engagement benefits that often are really hard to talk about credibly right if i say to you you know sign up for my subscription my my video subscription because it's the most it's the easiest to find the next piece of content and you're gonna love our algorithm right people aren't going to believe you you don't have credibility there so all they're going to say is oh you have hamilton i'll sign up for that and then i'll cancel and then it's still up to you you know if you're disney plus to get them from hamilton to princess movies national geographic

[6:21] titles espn all the other great stuff that they have star wars i'm watching out with my son right now yeah that's great and then i do want to kind of step back and you're kind of dove right into the weeds with some really actionable advice but i want to i want to step back a little bit and talk more broadly so after working with a few um companies in the subscription space and netflix so early eventually wrote this book the membership economy which i love that phrase and wanted to ask actually did you did you coin that phrase and then how did you at the time and how do you

[6:53] still kind of define this membership economy that you wrote about yeah well first of all i'd love to say that like i just came up with it and it was so natural and obvious but you know i i was thinking i was like is it is it about subscription pricing is it about premium services is it about recurring revenue should i call it the recurring round like i was trying to think what is it and where i came out was it's not about the subscription pricing which i think is a tactic um it's a tactic that you earn the right to do by having a relationship that is

[7:23] trusted with your customer the customer trusts you so much they're like fine you can charge me every month or you can charge me every year and i will just keep paying you and not look for alternatives and for me that was based on a certain kind of human relationship and that's where i came up with this concept of membership that you belong that it's you're committing upfront to a long-term relationship as a vendor and then you earn the right to have subscriptions so that was kind of where i came up with it i worked with netflix i also worked with at that time intuit um i worked with a

[7:55] surveymonkey and their predecessor zoomerang and i worked with oracle on the b2b side and those were some of the companies that helped me sort of connect the dots and figure out the framework of you know here's some ways to think about what happens when you treat your customers like membership members here's what you need to track here's how you need to think about it and here's what it what it can do for you honestly the first book all i was trying to do is say this is a good idea you might want to consider it for a bunch of reasons i i think of it in opposition i think

[8:28] it's is it the uh the zora founders book subscription economy yeah yeah but yeah but you're right in the sense that subscription kind of implies like one particular tactic for monetization that does go really well with this concept but when i think of membership as opposed to just subscription like membership implies also community to me right it implies like building this this this ecosystem this community that which which then engenders trust which then allows you to monetize right and build this predictability and this great business model but thinking about it in those terms um i think is a really nice way to put it as opposed to like let's take

[9:07] something you know let's take something that that we were monetizing another way and just slap it or renewal on it which is something we see a lot in the in the app world uh this transition from paid up front or micro transactions driven apps to subscriptions some have made it and some have not and i think the ones that have made it are the ones who look at it in that light in the membership light in the earning their business repeatedly through content or through community so i yeah that framing i think is really accurate your point about you know so many companies just slap a subscription

[9:40] price onto whatever they already had you know okay we have a usage-based model let's see what happens if we do a subscription-based model for the same product or let's see what happens if we take you know a model where you have ownership where i download the app and it's mine and i can use it forever even if it's really really obsolete if it solves my problem who cares um to one where you're being forced to pay every month you know ostensibly to get upgrades and maybe access to your peers and some kind of community functionality it really is a different product you need a different product for

[10:11] subscription than for you know a purchase or a usage based model and you know i love teen's book subscribed is a great book i recommend it you know to people it's very well it has a lot of interesting ideas but i didn't go with that you know subscription economy model just because i really want people to focus more on the culture and the relationship and not jump straight to let's get some of that subscription pricing stuff so that you can get a good valuation you know yeah i think you made me think of this one experience i had just as an anecdote was xbox in two sort of like three or four

[10:47] years ago released an xbox subscription and i thought that's not a really cool one because like i could defer i buy another xbox every three or four or five years so it's like oh i'll just spread that cost out i didn't have a lot of cash at the time i was like this is great 40 bucks a month i get a new xbox everybody's happy and so i went in to do this at the ag at the microsoft store what it really was was they were giving me like a cash advance like they were giving me like basically i had to get a credit check to get a subscription and i

[11:11] was like this is not what i would have had in mind exactly right like i thought i was joining the xbox club and i was going to just get an explain they were going to place my xbox for me right perfect example of that case of just like slapping subscription pricing on what was essentially alone uh now now my credit score i have uh a loan for a 19 2016 ford edge and uh an xbox those are my two like credit items i've ever had so that's really weird and they've come a long way i mean microsoft has come a long way with their subscription strategies you know not

[11:42] just on the gaming side but you know with with office uh 365 and you know they've done a lot of thinking about subscription but it really is super complicated so imagine especially with hardware right like with software zero marginal costs whatever you can just yeah yeah it makes a lot of sense i will say i will say on to give microsoft some credit back in the gaming world their xbox game pass pro product which i also subscribe to has been amazing i bought a new xbox game in forever because i don't really care about title individuality i just i pay whatever it is 10 a month or 15 a month

[12:15] and i get access to like 50 different games that rotates and it's plenty it's plenty for me and i will probably never unsubscribe from that right but it feels like a community because it's software driven i'm in there there's like there's changing and there's events stuff that comes in and out they make it a big thing they've built it up into this into this yeah this kind of feels like a membership um as opposed to yeah just slapping in a firm loan on an xbox purchase basically i do want to step back to your to your book the membership economy and um i love the this subtitle

[12:44] find your super users master the forever transaction and build recurring revenue finding super users is something we've actually talked a lot about here on the podcast of looking for those cohorts one of our recent podcast guests eric crowley talked about locals versus tourists um seth miller another recent podcast guest talked about how you know figuring out these cohorts was just a huge unlock for their business um so what's your process how do you recommend clients find these super users and how do you think about these these super users you mentioned all the way back in 2015 before any of us were thinking about these things yeah well so for me what i think about

[13:27] with super use so i think about you know first anybody does subscriptions knows segmentation is like rule like the most important thing you have to know who your customer is not just at the moment of acquisition what they look like you know when you're like that's the person i want but how are they going to behave once they join the moment of transaction becomes the starting line for understanding your customer not the finish line well like oh we knew them well enough to get them to buy it's we need them well enough to get them to buy and then to get them to make this a

[13:54] habit and then to get them to go deeper and to stay for a long time and maybe even bring their friends so you know the first thing i always do with my clients i say let's focus on who you're who you're making the promise to what is the promise you're making who are you making it to and that's kind of part one and then we map out the journey what is it what is the goal that they have that is ongoing or the problem that they have that is ongoing and what are the moments on their journey where you might be able to intervene and help them right so in the

[14:23] beginning it might be just one or two places right i'm i'm quickbooks i help you at tax time but then it might be oh and i'm going to help you with some other key moments in your process of adulting financially right you know one of the things is you move out of your parents house you pay your own taxes another is you might take out a loan for that awesome you know ford whatever car you said you know you're gonna get get a car and you need a loan and you know they can help you and so you're layering in those different benefits on a journey

[14:51] because you want them to stay you want to keep providing value um and then once you know what that person looks like then you go tell your marketing team to go get lookalikes get more people like that super users goes one step beyond that which is not only are they great customers you know high customer lifetime value easy to serve whatever they also are putting their own money and effort their own resources into strengthening your model so these are people that bring in these are evangelists who bring in other members these are people who give you feedback um on your products and services which sometimes doesn't feel

[15:27] like a gift but always is a gift and it's people who are willing to help on board new members right so the ones that you know explain in the user group you know that you know this is this is how you use that product or this is this is my work around or this is you know what was hard for me and how i fixed it so those people you know that make referrals that that speak out on your behalf that gather you know others they're so valuable and i got really into this idea actually with crossfit uh my sister is a big crossfitter and watching her

[16:00] in addition to all the money she was spending to to be a member of this crossfit box the amount of time and effort she was spending to onboard new members to invite them over when the when the box was closed she and her husband would put out their equipment on their live on a cul-de-sac they'd put it all out on the street and invite the whole box to come over and get their workout done there because they love the community so much right their own time and money to support the community are there kind of specific ways especially digitally like uh with with analytics or customer service what are

[16:34] the tools that you see people be successful in finding those kinds of users and understanding those patterns and who they are and what they look like and those sorts of things so the starting point i think is always lifetime customer value so you you look at the group of customers who stay the longest and spend the most right and the ones that people say we wish we could make more of these you know and then you look you develop hypotheses what does this group share and it can be as simple as writing the names of your first 10 customers on a board these are the 10 customers we had these

[17:11] five have been awesome these five you know didn't stick around long cancelled uh complain a lot you know whatever the reason is and then you try to come up with what is what did this group share that this group doesn't share that's the simplest way in a data world where you have the data you're doing the same thing but digitally how did they onboard what was the source of the lead um what time of year like which cohort are they in did they join you know people like for example with quickbooks people that join in tax season might be behave very differently than people who join as a new year's

[17:43] resolution or who join in august right what kind of person starts thinking really hard about managing their money in august right you know so so looking for those things developing hypotheses looking at the data trying to say what's the difference between our most valuable customers and our not most valuable customers which is not your worst customers because your worst customers are often outliers but just the ones where you're like they're just not that good they came for two months they left they binged they used up you know they were using us really heavily for six weeks and then they left what's different about them than the

[18:12] ones who continue to use this gradually for five months and i think that's where the hypotheses come out and then tactically what you do after you know is you look at the difference in onboarding those different groups and you optimize your onboarding experience to build those habits and then you mark it this is often requires a tremendous amount of discipline you market to only attract the high value people and not to attract the others so if i walk into mcdonald's with a gown on with my husband and i say it's our 20th anniversary show us to your finest table give us the best you've got and we'd

[18:50] like a nice bottle of champagne right customers not always right at mcdonald's right they're not gonna say oh man robbie needs champagne somebody scurry down to the 7-eleven and you know get a bottle of prosecco and you know we'll try to pass it off for her they say that's not really what we do here dummy they might not say dummy but they might be thinking that's not what we do here depends on the mcdonald's right we're here you know we're cheap we're fast it tastes good your kids love it you can drive through and eat it but we don't do we don't do special occasion stuff and so they know who they

[19:22] are right and they're okay with me not coming in right they're even okay with me saying by the way don't go to mcdonald's it's a terrible place to celebrate your anniversary right they're kind of fine the lighting's just all off right the lighting is terrible it makes your skin look awful but it's you know the point is that if they took care of me right what am i going to do i'm going to tell you you know what just go there for your anniversary just tell them it's your anniversary they'll run out and get all the stuff you need right and then they have all these people that are

[19:48] expensive to serve right it's the same thing digitally right if you bring in the wrong people who are going to binge on your content in the first month or the people who are going to push you to create features that nobody needs except them right it's just going to throw your whole business off in the wrong direction so having that discipline up front to know what you do and you don't do well and to say no to some prospect it's really hard to say no to prospects right if they have money and they're like just add this feature and i'll pay you you know netflix in the early days a lot

[20:18] of people wanted them to have video games right video games were also on disks seems easy right as an outsider as an expert right i'm like ah video games same thing video games work in a totally different way and what netflix said is we don't really understand how people would rent games we don't understand how they'd use them we don't understand how many we need we don't understand how they value that we don't understand how to negotiate terms with gaming companies like that's a whole different thing we're gonna we have plenty of runway here just focusing on video content yeah it's it's really interesting that that that feeling as a

[20:55] founder especially true in sas when you have literally 10 customers and like you will do anything for your 11th um it's a little bit true in consumer sas too in the early days like you you're just kind of like how do i get the funnel bigger how do i how do you i think you are a little bit myopic on um the top of the funnel and not thinking about this long-term thing partially because we don't have a lot of data you launch your app six months later you're trying to make decisions on customer lifetime value and you don't really have a good sense because you don't know who's

[21:23] sticking around you probably don't have a ton of data but one thing you said that that really got my gears turning was that process of putting them on a board and just looking at them looking at the 10 customers or whatever it is 100 even in consumer sas where you have hundreds of customers and not 10's it's not that many you can grab you'll be surprised at how many things i've in in my old days in consumer class of like just clicking into a customer and just watching how they use the app like an individual right it doesn't it's not data but it gives you hints and you can

[21:52] start there and then and then i would say the next scariest thing is yeah hypotheses and then you actually talk to those people if you can like get them on the phone yes you'll be surprised what they tell you one of our our guests um from matthew from photo room a few weeks ago talked about they would take their app to mcdonald's and just show it to people uh to keep the mcdonald's references going um and get in-person feedback and that helped them learn you know they they were they were an app that thought they were for everybody and found out later that they're actually like kind of like a

[22:20] prosumer app for shopify people um people with shopify stores and people with with e-comm and that like kind of exploded their business for this exact case you're talking about where they found out okay yeah we're not for this entire like long tail of low intent users we're for this really core set but that can be really scary if that set's kind of small right it's always scary to niche down but it's almost always a good strategy and i wanted to tag on to something else that you said jacob which i think is really important people often say how can i make any decisions about you know based on you know who has the

[22:54] highest customer lifetime value when you know we've only been around for three months or six months we have to wait until they leave hopefully not for three years or five years but what i've found and you know i wonder if you've seen the same thing is that most people who leave leave in the first two months so what you really want to do is optimize for onboarding you know are they adopting habits that look like people who are steady users getting value and you can often tell that in the first month by how many people drop off by who stays and by you know are they binging or are

[23:32] they using it in kind of a normal way and so you don't have to wait for 18 18 months or however many periods a lot of it you get your answer right away do they cancel at the end of the first period yeah it's good to think about your product in terms of not just like sign ups and getting through the end of onboarding like that day one experience but think about what your activation hooks are like what are the things that people are actually investing continuously i always think that that's that's a um you know you think about this long-term relationship giving users places in your product to invest and to

[24:03] give back and to connect like putting in more information about themselves like there's passive usage consumption netflix is a good job like you can save lists and stuff but they do a lot of this just impassively right like you consume content and they learn about you and then they have a profile but i think some of the best apps like let users put in and and that's gonna also not only probably make them stickier users but also gives you early indications and some things to hook on and be like okay i mean dropbox this was a big thing in dropbox the story was um they they could get people to like

[24:36] understand the concept but were had massive product issues getting people to put a file in the thing right like files are not necessarily the most user-friendly thing like some sort of app that runs in the background whatever they what they did they pulled users in they watched them do it and totally fail and then they fix their product right um and and that's that's you know core product problem but it relates to this this story of getting somebody to membership right like getting them activated um and focusing on that one of the things that you talked about in your most recent book that i think is so

[25:06] important to understanding the activation is is this concept of a forever promise and so so your most recent book the forever transaction will link to in the show notes and whatnot but in order to activate in order to even just build a business and especially a subscription business you need to start with what's this promise that you're going to make to customers and then especially to again like you said earlier to justify recurring payments like so tell me how you think about uh forever promise and how how any app any business that wants to set up recurring payments should be thinking about this forever promise yeah it's

[25:48] it's really simple you take a step back and you say when my customers come to me what is the ongoing problem they're trying to solve or what is the ongoing goal they're trying to achieve and how can i best align my product and my messaging with that goal that ongoing goal or that ongoing problem so what can i promise them about it so with a netflix it's about you know entertainment you know i'm gonna provide you with the biggest selection of professionally created video content delivered in the most efficient way right with cost certainty um you're never gonna have to pay extra fees and you know there's a lot of a lot of

[26:28] apps that are around you know helping you with some part of your business process getting a certain kind of work done or tracking your finances or creating beautiful images for you know personal use for your hobbies what have you gaming apps for fun and i think first getting really clear on what your promise is and who you're making it to and then you design the features and benefits to support them forever on their journey and you see as long as you continue paying me regularly i am going to continue improving the way i deliver on my promise to you right if i'm a gym i'm going to have new

[27:07] equipment i'm going to have new classes i might offer you stuff online if i'm a news source i'm going to offer it maybe through an app maybe i'm going to give you access to the journalists maybe i'm going to give you access to conferences or webinars on top of news because my promise is i'm going to help you understand the world around you so you can make better decisions and i don't have like if you even think about that promise there's nothing about that promise that makes you say it needs to be a newspaper right it could be a conference it could be classes it could be a community of

[27:39] like-minded people sharing their learnings and their observations so why not layer all of that in overtime so that you get closer and closer to guaranteeing that they're going to get the impact that they hoped for on an ongoing basis it's interesting it in some ways relates to like what a company mission can be but for a different audience right you say you know revenue cat has a mission and that's one thing that i won't change right that's kind of what we do and that's part of joining the company and whatever um but but i do think there's value in communicating that as well this is like the customer

[28:14] facing version of that like what's our exactly what's our charter like why are we here and what can i guarantee that's not going to change right especially when you think in those terms of not the like person who's coming to do a very quick transactional thing as in i'm going to binge as you put it or maybe i just i'm trying this out or you have this like one limited life or limited pain like a limited time pain like what's a like forever engagement that we're gonna do um it's really interesting right when i read the that whole framing of just the forever transaction forever promise it's really

[28:44] exciting because we have the infrastructure for the first time in human history to really make this efficient at scale that like computers can do these sort of like patronage relationships for us yeah yeah and rethinking how we frame commerce and and relationship with customers i think yeah i mean some of the work you were a bit ahead of us on yeah well i mean you know i've i've been here a lot like i got here first because i was here for a long time but you know it's kind of a dubious distinction but you know i think you're right like you step back and you say what are the

[29:16] problems what's the ongoing problem the ongoing problem is i'm constantly running out of laundry detergent right the ongoing problem is i look in my closet and i have nothing to wear for this occasion whatever this occasion might be right um you know something i think is really interesting to think about you know amazon talks about removing all friction from all buying decisions right they started with just books right and you still had to wait two weeks to get the book right when you ordered it but they had this vision all the different friction in all the different buying decisions we're just gonna you know layer by layer we're

[29:51] gonna remove all of those things and you know at some point you know i think they want to get to the point where i think to myself those are really cool headphones that jacob's wearing i wish i had those and before i even say it they're on my ears and then i'm like oh these are uncomfortable and they make my hair look bad they're gone right that it's almost magical that's what they're moving to no friction i don't even have to say a word it just happens um you know i think having that kind of guidance of like that's what we're trying to do there's so many times when

[30:22] i've gone shopping and i've needed something whether it's like buying a new house or buying a white blouse for an event and thinking this shouldn't be that hard i have enough money to pay for this i know exactly what i need it for and i've already spent four hours or four months or in the case of buying a house four years trying to find you know the needle in the haystack it should not be this when when you say it should not be this hard that's probably a good opportunity good opportunity yeah yeah no i i mean i'm just sitting here thinking about revenue cats are you know

[30:54] shameless plug time to talk about my company but uh uh i think about our forever promise and we our mission is like we help developers make more money that's our goal um but i almost think that's like kind of like a short pithy way of like phrasing it really it's about like how do we remove what you put as barriers like how do we remove all the barriers for a developer to make money how do we remove all the barriers for a developer to create value with software for other people um and often like people see a lot of these you know subscription infrastructure problems data problems

[31:25] all these all these things are not why somebody got into it right when they started netflix it wasn't like i just can't wait to do like data cohort analysis right and like all these things like no we want to deliver entertainment to people the easiest way possible and so you know for us like that's i think in some ways our particular problem that we we've committed and and going to the forever thing too you know our product is a it's a subscript it's a it's a subscription essentially um but it's a long-term commitment by the nature of it it's very infrastructure related so like i've always talked had

[32:00] to you know especially in the early days had to give a lot of assurances to folks like yeah we're sticking around like yeah this is yeah this is the long-term goal for us but i think i think that comes down to consumers too like the best companies i've seen in our space doing consumer software apps subscription apps essentially have like a really deep connection to the mission and the problem i think of calm i think of again i'll reference photo room this app we work with that you know they've been in vision computer vision and and they've worked for gopro and like they've just this is in their

[32:33] dna to work on these problems of image manipulation and then and then on the other spectrum of that you think of like companies are just stamping out and then i don't know blow anybody the company's stamping out utility apps or like whatever it is and then slapping a subscription thing on it yeah it works you're gonna get marginally more ltv than they were you know before but it's it's not gonna that's not i think advancing the level of like computer or like problem solving for consumers that we were than we were doing before i think you have to be really passionate about the customer needs and the customer's journey rather than

[33:09] on your product and this is this is always a really rough conversation because a lot of businesses really really really hold their products in high regard whether it's you know automobiles or you know software i mean software you know most companies around here in silicon valley like the software team they run everything like that's that's the talent and everything you know they can build what they want and you know i i used to joke that you know when you work in like the car world right sometimes it's just about the cup holders right it's not about it's not about the big engine right which is what

[33:45] a lot of the people a lot of people go into the world of cars of automotive because they love cool cars but a lot of people who buy cars don't buy cool cars they buy practical cars that solve certain problems for them and you have to be passionate about the problems you're solving for the customer service so i did a lot of work early on in my sort of subscription life in the um high-end bicycle industry i was working with the bicycle product suppliers association really really interesting space but one thing about it is that most people who own bike stores and work in bike stores and sell bikes and

[34:21] manufacture bikes are bike racers and off-road you know risk-taking bike enthusiasts that have nine bikes at home but there's a whole huge untapped market of people who just need a bike to get to school or a bike to get to work or a bike for for saturdays to go to the farmer's market and they ask really annoying questions at the bike store like does this come in pink or can i get a basket for this or is this going to get um you know grease on my on my work pants and at some point even you know like there's always this tension because the people who create

[34:57] the products sometimes they're like those aren't problems i want to work on right or you know i worked in the hospital you know kind of in the in the health industry and i talked to a lot of surgeons and they're like yeah you guys can do whatever you want around customer this customer that treating customers like patients whatever but i want to see my patient unconscious on a table and i'll cut them open and i'll fix them and make them better and i don't want to do all that other stuff right it's hard because they're the talent you know i think this is a big issue with

[35:23] subscriptions because those marquee elements aren't always the thing that's going to drive engagement retention it's falling in love with your own product right it's falling in love with the um yeah the solution and not the problem you know uh yeah yeah exactly i mean i've been in the when you know in the past i was in the weeds like you start to really over i think analytics can actually like be this is where yeah going back to the discussion of like just throw 10 users on the board and maybe don't like get the finest like tooth comb to like go through your data first is like

[35:56] when you have like super high fidelity data on everything you can start to get really data oriented but if your product is the thing collecting the data you sort of inherently bias the data collection you're doing based on the product you have and you miss a lot of opportunities because you're not just thinking about the problem space you know i worked on this app called elevate which was brain training and i can remember so many so many like heated product discussions about uh this flow should we do this or x and y and z and not as many as we should have had about like why are

[36:26] people actually coming to this app and like addressing those questions from like head on um and thinking about ways that we can improve the product with that as like the the beginning and i even seen at revenue cat 2 like we have a lot of products which are really deep and rich and people use and they're in love with um and we can you know you can spend a lot of brain power and a lot of focus thinking about the next iteration of that thing the re yeah like you say the the bike shop owner who's really into bikes or like really into some some particular

[36:55] technology and lose touch with yeah these bigger things this like forever promise it's like what are we actually building like what does revenue cap mean in a decade when the problems we're solving now actually maybe aren't that relevant that's probably the case i mean we've talked a lot about media companies and i i i almost snuck in a metaverse joke and now i'll just refer to almost sneaking in a metaverse joke headphones but like we think about this as like the modes of consumption are going to be changing and that's where these like missions customer mission or forever promises kind of come in it's like making sure

[37:28] that regardless of netflix is delivered on a dvd or on a streaming set top box or into some sort of like brain implant like the the subscribers will transfer right um so yeah and this is one of my like now i'm now i'm ranting but i think is one of the reasons i'm still really excited about all of these pieces coming together um is because it does just feel like we've reached some stage in our economy where we can align a lot more incentives this way than maybe we have been able to in the past which i think is just exciting but as we align those incentives and people

[38:03] get more and more subscriptions nice little transition there thank you jacob that was great david you're getting this podcast like really tuning in there is a a growing um chorus of but subscription fatigue people are tiring of all these subscriptions and no matter how much you can align incentives and everything else people are just not going to want to pay subscriptions so having having seen the the growth in subscription uh consumer subscription starting way back at netflix in the early 2000s and now we are layering on more and more and more what what's your perspective on this this concept of subscription fatigue are consumers really tiring of paying in

[38:48] this way yeah so the upside of you know this explosion in subscriptions is that consumers and actually businesses alike are much more receptive to subscription offerings they understand them they understand the value they can provide if they're done right and they're easier than ever before for any kind of company you know from the the smallest mom and pop up to the you know the biggest multinationals to offer subscription pricing the downside is there's this glut of subscriptions every company has them and not all of them are well designed as we've been discussing um and that leads to subscription fatigue and there's sort of three things that i think contribute

[39:25] to that one of them is where this the product does not justify subscription pricing right this is a product i'm gonna need once and you're requiring me to subscribe to it that feels unfair um you know or i'm never i'm hardly ever gonna use this and you're making me subscribe even though you know my use case doesn't justify that investment second problem is kind of the flip side of that which i think of the subscription overwhelm or subscription guilt which is this great value actually your product is fantastic but i can't use all the value because of my own issues and that makes me feel bad about myself

[39:59] like this is when you you know you have the new yorker magazine piling up on your bedside table right and you just because you just want to netflix and chill because you're tired but like your thought at the beginning of the day is i'm gonna get so smart i'm gonna read all these great articles that makes you feel bad about yourself you can't you know what i would suggest for example that a new yorker does is to educate consumers that you only have to read one or two articles to get the full value of your subscription it's all you care to consume not consume all of it or you're

[40:27] lazy um but i think that overwhelm or you know same thing with blue apron where the meal kits are in your fridge and you're not using them no one even talks about blue apron fatigue it's a rough subject yeah because you feel bad like the meals are calling to you you're like don't go out with your friends there's a yeah in the fridge it's like oh it's time to go home and fight with my spouse about cooking because we have this giant meal kit to do uh but it's great i love the time yeah so then and then and then i think the last one i mean but it's it's great

[40:56] because it's not the fault the meal is great it's just yeah the products i don't feel like eating it today or someone invited me over for like the crazy one is when someone invites you to dinner and so then it's not even a question of finances you're like well either way i'm not going to have to spend any more money and i'm going to get a delicious dinner do i want to make the blue apron dinner or go to my friend's house who just invited me well i can't go to my friend's house because i feel bad throwing the booze it's going gonna the lettuce is gonna be

[41:20] wilted by next by tomorrow yeah it's the last day i can cook and then the last issue so there's there's you know bad product market fit there's this subscription overwhelm or subscription guilt and then the last one is hiding the cancel button and i'm really interested in what you guys think about that one because a lot of subscriptions um make it really hard for you to get out of this cancel anytime relationship even though that's what they pitch join and cancel anytime if you can find the cancel button which we've hidden behind 27 clicks with a call us on tuesday you know extra hurdle yeah i think it's well my

[41:56] take is it's terrible and anybody that does it should really reevaluate what they're doing in software because like i think it violates that trust right like welcome we're gonna ask for this thing where you're gonna you're gonna let us charge we're just gonna suck money out of your bank account every month because you've decided to like enter this relationship with us and then we're gonna go ahead and betray that trust right we could turn around and betray that trust and not make it bi-directional but yeah i hadn't i hadn't thought of fatigue in so many channels like that or so many aspects but like the the overwhelming aspect is

[42:25] interesting and i resonate i feel that like i feel like with with the dinner boxes for sure but even in software too there's certain pieces of software like i feel like i can't cancel because i have these intents and things like that and that's not really what you wanna those aren't the relationships you wanna focus on right like but on the flip side there i think like i i use this example a ton but um vsco i'm not a daily user i'm not even necessarily a monthly user but when there's a photo of my kids or just a photo i took that i i really cherish

[42:56] i import it into visco and vsco makes it better and that to me is so valuable that i don't even care like i mean 20 bucks a year i think is too cheap for their product i would pay a lot more even though i maybe only use it quarterly sometimes or maybe once a month or you know when i'm on vacation maybe i use it every day for a week but it's interesting that that product doesn't create that sense of oh i'm not getting enough value out of it because i get so much value when i do that might be a pricing thing yeah maybe yeah maybe if it were 60 a

[43:29] year it would be too much but i mean i just i just would never consider canceling because i it's just when i have a photo i care about i take it to visco and it's better and it like that's their forever promise and it just resonates so well with me that i don't i don't get that guilt you know i get more than twenty dollars a year of value out of it personally yeah i think i mean it's interesting i think one of the things about this you know sort of dealing with subscription overwhelm is you know is it framed like whatever the customer is anchoring their pricing to

[44:01] where they say it's valuable enough so for example i worked with a one of these produce box companies and one of their challenges was that most of their customers said that most weeks they ended up throwing something away right because it's never the exact right amount of produce right so you end up at the end of the week with like soggy kale or you know turnips and then you go on vacation and you come back like what i'm going to do with these turnips but one of the things that we did is we set expectations that it's okay to throw out a little bit of produce that you're

[44:29] still getting a better price than you would at the store and you're still supporting farmers local farmers so sometimes it's as simple as just reframing what the expectation is like saying for vsco you know if you if you use you know if you use this for two or three you know memory pictures a year you know doesn't that pay for itself and 20 bucks worth you know three great shots of your life you know the three best moments of 2021 um a lot of it is about is about i think expectation setting and understanding your customer what the value is like i don't know how much i pay for amazon

[45:04] prime i don't care yeah i use it almost every day before a decade ago and haven't thought about really right right but i use it every day like i i don't care what it cost i mean if they started charging three thousand dollars i would care but like if it's a hundred dollars a year or eighty five dollars a year or a hundred and fifteen dollars like i don't care and that's a really important point about pricing is that at least i've found with many of the subscription companies i've worked with and a lot of you know software products when they don't sell well when their

[45:32] business isn't growing they immediately jump to the price must be too expensive we'll have to lower our price but in so many cases it's not about the price it's about the value i'm not using it if i'm not using it it doesn't matter if it's a dollar or a hundred dollars um and so thinking about why aren't they using it before you jump right to well i guess i'll take 10 off the top yeah let let's talk pricing real quick because you do have several uh strategies that you get through in the book and in what you were what you were just explaining was one of the things i

[46:07] really took away from your book is that you say in the book that it's more important to understand product market fit and willingness to pay than finding the exact right price and so you you were you kind of backed into explaining that but let's elaborate a little bit in in essentially what you were just describing was that a product that doesn't have product market fit it doesn't matter what you price it yeah what are what do you what else what are your thoughts on on that yeah i i just think i mean in so many things in life you're kind of on a continuum like you know i remember when many years ago

[46:44] i started doing weightlifting and you know i told people that i was doing it to be more fit and you know stronger and now it's very common but at the time a woman doing weightlifting um you know use working out with weights and people would say to me i don't want to get huge muscles and i was like oh honey you are so far from that being a problem like we're at the other end of the continuum like there are certainly people women who work out and get too muscly and that's not what they want men to or like that you know intervenes with my ability to do my sport

[47:14] but for most people it doesn't just happen and i think in the world of apps i think most people kind of over index on pricing and think that that's going to be the key thing to figuring this out when a lot of times there's actually a pretty big gap between you know kind of where you can make money and where your customers willing to pay there's lots of room lots of different prices and as long as you launch somewhere in there you're going to make some money and over time there's lots of ways to become more sophisticated and get to a better and better price point but a lot of people

[47:48] assume that it's that they have a highly elastic product meaning that for every dollar you increase your pricing your number of customers drops by a predictable percentage and i think in many cases it's a lot of products that are inelastic if i use it i'll pay anywhere between five and ten dollars a month and if i don't use it i will pay nothing and so if you notice that people aren't are canceling and they're the same people who aren't using the product it's probably not a pricing problem it's probably a product problem right i mean if you're talking about product market fit in a forever relationship like yeah

[48:22] that i'm gonna pay infinite money in terms of my lifetime right like i'm gonna pay money until i die right right and it's and the thing is that people assume like so what i would say is if you if you're trying to figure out your first price i'd say don't worry about it too much if you need to do a land grab like a spotify price low and you can raise your price later although that's hard but just do it because you you want people to adopt your solution if you're worried about you know hurting your core business and so you know then start by pricing really high and you can

[48:54] lower it as you have increased confidence and understanding of use case but there's a lot of room in there and you know that's really my advice is be somewhere in that range and if people aren't buying it or aren't staying look for the other signs of what might be driving it besides pricing like is it that they you know failure to launch they never onboarded they never activated they never used the you know best features um is it that they were using it for a while and then their usage trickled off maybe they used it up right either they binged or you know they've watched everything they've seen

[49:28] maybe their job changed so these features are no longer relevant to their work but really try to be a detective about where the problem is like i sometimes say it's like you have a party in a bar you're not making money from the party in the bar like before you lower the price at the front door see like are people walking by and not recognizing that you have a party so you have nobody in there because that's an awareness problem or is it that people come in the front door and can't find their way to the food and drink and music and so they think it's a

[49:56] lame party and so they leave and they never come back you know that's an onboarding problem is it that they've been eating all the food and dancing to all the music and they're like i'm tired of these songs i'm tired of this food which is a different kind of product problem product assortment problem or is it i went downstairs to the food and there was no food and the music you know the speakers weren't working and that's an operational issue right so fix the problems before you drop the price that's such great advice i mean i think about it the the sorry i'm going to extend our practice one

[50:25] minute but just to concur with the the product if you have product market fit you're gonna go this way and i'm just gesticulating on a podcast never good up into the right right all the price is gonna do is maybe define that inflection on that curve whatever but exponential curves like the slope doesn't matter often all that much in the long term right you can optimize it eventually but it's really getting that that product market fit and then it kind of just takes care of itself so sorry i will let us end the podcast now well that is a a great bit of advice to wrap up on and um

[50:57] your book forever transaction was fantastic and reading it was so fun just to think about you know we we put our kind of blinders on with this podcast and in the space we work in with apps but realizing that so many of the ideas that we think about so many of the problems we work on are things that are across the entire industry across all consumer subscriptions even even a lot of overlapping in b2b sas um so it was just so fun reading your book and and then getting to ask you questions here i had like 30 more questions that i wanted to ask you we could go another hour or two

[51:32] um but i'll put links to to your linkedin to your to your website to your twitter uh in the in the show notes um but is there anything else you want to share with our audience as we wrap up no i think we we we covered a lot i mean if there's one thing that i want to leave people with it's this idea that if you start with the promise you're making to your customers helping them with an ongoing problem or or achieving an ongoing goal that's important to them and then you optimize your offering around that your chances of both acquiring and retaining your customers

[52:05] is going to go way up such great advice great place to end thank you so much robbie for being on the podcast and again in the show notes in um you mentioned that there's some extra goodies if you follow the link in the in the show notes they can get your book and and some extra goodies along with that so uh thank you again so much for being on the podcast yeah real pleasure to make sure you never miss an episode subscribe to the show and your favorite podcast player thanks so much for listening until next time

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