Creating Subscriptions In Your Business With Matt Holman

Andy Splichal 0:00

Welcome to the Make Each Click Count Podcast. This is your host Andy Splichal. We are happy to welcome this week's guest to discuss today's topic, which is creating subscriptions in your business. Today's guest is the head of growth at QPilot, the most incredible software you've never heard of. A big welcome to Matt Holman. Hi, Matt.

Matthew Holman 0:19

Hey, Andy, how's it going?

Andy Splichal 0:21

I'm doing well. I'm doing well. I'm glad you could join us today.

Matthew Holman 0:23

Me too.

Andy Splichal 0:24

Now subscriptions, they have the benefit of being able to produce reliable and predictable revenue for E commerce companies. But before we go into different methods and tactics of creating them and promoting them. I'm curious what is the most unique type of product you've ever seen that was turned into a subscription?

Matthew Holman 0:44

Well, I think the funnest one I've seen was, and they won an award at sub Summit, this subscription conference last year was a a box a subscription box for guinea pig owners. Really? Yeah, they're different getting snacks and toys and things each month for guinea pigs.

Andy Splichal 1:03

That's that's a good hey, wow. Okay, that that fits the bill. Hey, but there, you blew my mind. There's a subscription conference. What what is that?

Matthew Holman 1:11

Oh, yeah. So the there's an organization called sub to and they put on a subscription conference every year called sub summit this year is is going to be in Dallas, I think in May. They bring together a lot of different boxes. And I think even Netflix might be showing up at this one, but lots of subscription talk. It's great.

Andy Splichal 1:27

And who are the attendees?

Matthew Holman 1:30

Yeah, a lot of them are going to be ecommerce owners, people that are either running subscription boxes, or they have subscriptions as a significant portion of their revenue. And then we get some people that attend like for digital subscriptions, and those types of things, too.

Andy Splichal 1:43

Well, I like numbers, you might be able to pull this from that conference. But do you have any numbers that supports why a company should consider turning their products into some sort of subscription?

Matthew Holman 1:57

Yeah, absolutely. I think, you know, within any e commerce business, really any business at all, the idea of the cost of acquisition versus the cost of retention, right. So some of the numbers are like for every $8 you spend to acquire a customer, it might only take cost you $1, for example, to keep a customer. So from a cost acquisition, profitability standpoint, subscriptions, if done well can really unlock a lot of growth there. I mean, I've seen brands that are doing 70 80% of their businesses, subscriptions and recurring revenue, but even just a healthy mix of 30, or 40% can be a lot of really predictable revenue, you can plan around. But I think the real beauty is that it just creates a greater engagement. So it gives you more opportunities to sell because you have a segmented audience that really likes your product and or your brand. And so they're easier to market to.

Andy Splichal 2:48

And we've been doing a lot of had a lot of guests, and we're doing a lot of work here in the new year on customer retention versus customer acquisition. And I never even really thought of subscriptions as customer retention, but I guess it really is.

Matthew Holman 3:06

Yeah, it's funny. I mean, I've heard a lot of people calling they're calling it the year of retention, you know, with with, you know, macro economic contraction and issues related to that. But it really is if you think it's a great retention tool. I think the main difference without getting too like nerding out on the psychology of it is the differences is when you're running retention campaigns with like email and SMS, you usually are good at testing like repeat purchase rates and how often and in you're trying to accelerate those or increase your ARV subscriptions give you almost like this predictive baseline, you can start testing again. So if I know I already have, you know, 10,000 subscribers, and I know that the average life cycle is six months now I have actually people are already agreeing to purchase from me. And can I make that work better now, instead of just trying the other way? So I think it's a little bit easier to work with in some ways.

Andy Splichal 4:01

Now, what makes successful subscriptions, I know that you know, I don't you know, test is always the word write test, test, test your stuff. But like you as an expert, what, where should somebody start? I mean, what do they need to put together to have a good base in a chance for success with a subscription?

Matthew Holman 4:19

Yeah, so I think so, coming out of like a, the best place to start if you're selling. If you're selling a subscription focused business, it's a little bit different in the sense of you kind of want to have a good idea of why people would want to buy if somebody's going to buy your product or subscribing period. So those two things are almost the same question. But if you're already selling one time, and you're thinking about adding a subscription option, you know, it's really good to just kind of do things from an MVP basis. So the idea is you don't make things too complicated. You put up you know, some basic email flows and but you're, you're really trying to create some additional value for people and buying your product. So whether that's just a discount which is a good place to start. But you know, whether you're talking free shipping or community or extra content, thinking of creative ways to incentivize people to subscribe is a great place to start. But ultimately, what really makes I think a great subscription program is understanding the why somebody buys it. And just as a quick anecdote of that, it's like, for example, say you're just selling protein powder. So you know, people buy your protein powder, because they need protein powder, they work out, it's great. Why would they subscribe? And that's usually the question where things start to get a little bit murky. A lot of people it's like, oh, well, they want the discount. Well, maybe there's other factors, maybe they want the convenience of never running out, maybe want, they want, you know, peace of mind, they don't have to think about it. Like there's other factors that start coming into why somebody subscribes. And when you start to unlock those extra reasons, it makes your marketing and your acquisition just really work really well.

Andy Splichal 5:55

So how do you unlock those?

Matthew Holman 5:57

A lot of those data collection, I mean, you know, post purchase surveys, as cheesy as they are a great place to start. If you're running subscriptions, you need to be running cancellation pop ups to collect reasons as well. But I'm a big proponent of community. So if you can, you know, get your customers into a Facebook group or into an app or something like that. It's another great opportunity, like looking at the conversations that they're having with other members. And you know, at the very least calling people and talking to them, understanding why what, what's the extra value? Is it just the price, and if it's just the price, that's fine, at least, you know, what you have to test with, right, is that that discount is an offer. But you really want to have these conversations with people and get into the real why of, of what they value from the subscription.

Andy Splichal 6:42

You know, an obvious one, you had mentioned the example protein powder. And, you know, I'm looking at a bottle of vitamins here on my desk that I joined their subscription program, I think it was a 10% discount. In reusable products like that make all the sense in the world. But what if you're not selling a reusable product that's gone in 30 days? What if you're selling the I don't know a t shirt? Say? Can you still do a subscription model?

Matthew Holman 7:17

I think you can if it's if it's something unique, right? So the idea with a T shirt, there could be two subscription options. Well, I'll use a slightly different example is like, would you subscribe to bedsheets? Like, most people, that's a good one. Most people don't. But if you thought, hey, you know what you should actually be trading your sheets out every year, regardless of what cycle they're in, like, you know, your flop swapping them out, but they start to get worn down, you should you should get them every year. So if you subscribe to an annual sheet subscription, then you don't have to think about repurchasing them. And they're gonna either send you the ones you like, or send you a new design. And so it's something related to like that convenience factor. And in a subscription like that you're selling the, you're kind of like almost guilting people into like, how often do you really change your sheets, like, you know, so you're leaning into that a little bit more. The other side is like, let's say it's, you know, the t shirt, it's a t shirt of the Month Club. If you have some fun designs, a subscription program like that needs to have exclusivity to it. So for example, I might be selling T shirts on my on my site, but you only get the designs that are like two months old, only my subscribers get my new releases, right, and they get the option to buy those or get those in their box, and then two months later the rest of the world and maybe you can get access to them. ,

Andy Splichal 8:43

You know, you hit on a few of these already, as far as my next question was, how do you entice customers into signing up for a subscription instead of up? Or individually, but price is one exclusivity community. Are there any other ways?

Matthew Holman 8:59

Yeah, I think, you know, thinking about like the, the especially like during COVID. Right, we have this issue of like supply chain issues. So I know some brands that are doing it, like a guarantee that they'll always reserve stock for their subscribers so they won't run out of you know, your favorite or most popular products for subscribers first. That's one it does come down to depending on the type of product you're selling. So like vitamins is a good example. You know, for me, my biggest thing with vitamins is is if I if I run out of the bottle, I might not ever buy them again. Yeah, because I literally won't think about it. Yeah, so and so for me, I'm not price shopping, I'm convenient shopping and so if I subscribe to something so for me I subscribe for my stuff through Amazon because I know I have total control this subscription programs not amazing, but whatever. It's it works. And I know I have an app that I can control all that. So understanding why somebody's buying like the protein powder. Is that a good example if if somebody's buying because they're just they're using it and they just want to get it at a discount, that's fine, but for some people, it's like, Hey, I'm using my my stuff, maybe there's more engagement, like I'm using a quiz to engage with people. So I understand more about their, their habits or their behaviors. And if I know you have a goal, so you want to add five pounds or 10 pounds, you know, you're subscribing because there's a repetition that goes into making sure that's happening. And then maybe my subscription program has more content in it, that has a community you can go into to talk to other people, but how it's going. So it's really about understanding more about what outcome somebody is looking for, and then trying to craft an experience that can that can deliver on that outcome, if that makes sense.

Andy Splichal: 10:36

So we talked on how to entice people to join your subscription service. But let's let's go to the dark side, let's let's talk about what are some of the mistakes that a company might make when creating a subscription service that is going to doom them to failure before they even begin?

Matthew Holman: 10:55

Yeah? Well, there's a couple of things I want to touch very briefly on a common tactic. And there's two sides kampsen, this is the notification whether you send them a notification or not. So I know some brands don't send customers a notification, letting them know their orders about the process. And some do. The ones that don't send it have better retention than the ones that do send it. Like in my mind, I will just say it's like a reminder to cancel. Yeah, yeah, I will say be careful, because states like California pass laws where this is illegal. So just just throwing that out there, you got to make your own choices

Andy Splichal: 11:28

Now, is it? You know, is it based on a certain size? Or is it anybody?

Matthew Holman: 11:34

it's anybody. But I mean, to be perfectly blunt, they're not going to go out, they're not going to go after somebody who's small, they're going to target companies with higher revenue, because they can get more out of them, right. So if you're small, it's not the biggest deal in the world, I'm not going to tell anybody that it won't California. But it's certainly something to think about. So I always say you have to engage in this as a psychology point. So you know, if you're looking at the Order Notification, as as a means that it reminds people to cancel, well, maybe it needs to be an opportunity to remind people why they subscribed, it needs to be an opportunity to upsell an opportunity to communicate and engage with the customer. So if you're building a subscription program that's built on, on engagement, then that can be an opportunity instead of necessarily a liability. And again, sometimes it's easier said and done. So that so that's that's one thing I just kind of wanted to throw out there, because that's some conversation I've had lately. But other big mistakes, I think, are throwing discounts too soon. In the sense of, if you're losing a lot of people in month three, and you start throwing discounts to try to get them to month four, month five, that can be a really slippery slope, because now they're just looking for that next best offer. Or they might just cancel and then sign up again, because they know they're going to get a better discount. The other thing would be crafting like overcomplicated subscription experiences. So I mentioned like the opportunity of like community or an app, if I was just launching a subscription program, I would not be building an app yet. I would maybe launch a Facebook group, because that's just a good practice to try to let people connect. But the mistake I sometimes see is they brands will invest in a lot of technology, when there's not necessarily a lot of data to support the value you're offering there, if that makes sense. So those are some of the biggest mistakes I see. Retention should be probably maybe answering a question your retention should always tie back into acquisition, understanding why people came in what they're looking for reinforcing that and adding additional value. You know, if you're selling that protein powder, I really hope that you're also selling like glutamine and other supplements that you can offer to that that customer you know, giving them a free gift of workout bands might not be as compelling as you know, some pre workout or something else like that.

Andy Splichal: 13:49

You know, you mentioned mistake a discount between months three and four. And that implies that you are recommending that you really keep track your funnel where you have the drop offs and such like that. How important do you find that in the success? Are you the measurement of what's happening every month?

Matthew Holman: 14:13

It's significant. So I would say like the methodology I employ is the first thing I look at as month one. So your drop off between the first purchase when people get that first product and they subscribe and then the first renewal. So looking at that drop off, if you're seeing like more than 10 or 15% drop off like that's, that's a big problem. That's a disconnect between your offer and your subscription what people are expecting from the subscription, you're getting a lot of people that maybe the wrong type of people into the program. If after that, like a common metrics people will look at is like your average life cycle, which I think is it's a misleading metric because it's just an average. The other thing was I always look at start targeting month to month. Where's the drop off point before things settle down? So like meaning? At what point do I stop worrying so much about what customers are thinking from month to month? And even if that's 50% retention, like if, if I get somebody down to six months, but once they hit six months, they're basically around for forever? Or, you know, maybe another year? How do I get somebody from month one to month six? That's then that's then the approach and understanding, where's the disconnect? Is it a product issue? Is it they're not using the product? Is it I'm acquiring the wrong type of customer? Like, there's a lot of things you start to uncover on that point is like, where's the safety zone? And where are my big drop off points? Because I want to start attacking those and discounts can be it discounts can work as an incentive, but only for people that are kind of like on the fence, right? Like, if otherwise, you're you're giving away money, right? You're giving away money for people that that's not going to keep them? Or maybe you keep them one more month, and then they're gone. So that's what makes it dangerous.

Andy Splichal: 15:59

So how important do you believe the subscriptions can be and should be, in terms of overall business growth,

Matthew Holman: 16:08

if it's in alignment with what you're selling, I think it needs to, like, you know, for example, the sheet business or you know, that's probably not that big of a deal for most mattress companies, it can be a nice revenue add, but it's not something you would focus on. But if you're selling a core product that can be used regularly like that, or you're even doing a subscription box it, it should, it should certainly be a focus. Because if you can, like any competitions, if you can figure out how to acquire the right customer, the one that's very profitable, and has great retention, that's where real scale comes in. Because now you have, you can start adding a core group of customers that are really, really profitable for you. And that money let you just drive the acquisition flywheel even stronger. So I think you've been really powerful. And then as you start to go like phase one subscriptions, like, like, to me, I don't, you don't get into upsell offers right away, because you want just people to figure out the product and what they like, but I know a lot of brands that they know that like month three on the subscriptions, like the best time to start upselling other other parts of their product line. So if they get somebody in a month three, they know they've got a lot of profit coming from that customer. And so that's where you start getting these next phases of like, now you have this segment, I mentioned have fans of your stuff that trust you and like you and that you can not only just sell into, but there can also be your audience for developing more product lines.

Andy Splichal: 17:28

Now, what are a few actionable steps that you would recommend for a company either thinking of launching a new subscription business or, or perhaps they have a subscription business, but have like zero or very few sales going on with it?

Matthew Holman: 17:44

Yeah, so if you're thinking about doing it, I would say one of the first things is just under one, hopefully, you have some customers that already asking for it. So at least you're starting to see a little bit of like, you know, pent up demand for it. But you can always look at your repurchase history to try to get an idea of that as well. You know, if your people are buying something every six months, you know, maybe a three month subscription or a six month subscription would make sense. But either way, it's it's thinking about the offer. So if I'm selling, if I'm selling protein powder one time, maybe I just start with a 10% off or 20% off, to Subscribe and Save just to see what happens to see what sticks. I want to start paying attention to data, like you know how many people are clicking on that offer, what my conversion rates look like for that offer, but then also putting into place like understanding why people are canceling. If you are kind of running a program, you're not seeing very much of it, I circle back to the same thing, it probably comes down to the offer, understanding messaging, and looking at what acquisition channels you have, right? So if you're if you're doing a google ad campaign, are you emphasizing the benefits of repeat usage in that ad, right? If you're running a Facebook ad, is it you know, I, I'm preparing this ad swipe file right now, good subscription examples. And it's like, you know, if you're looking at Harry's, or Dollar Shave Club, you know, they're emphasizing the convenience factor, the fact that you never have to worry about shopping anywhere in addition to the quality of the product. So framing a good offer, is really where I would I would look at and without getting too complex. And it's not just discount, but what other things can you do. And sometimes that means you change the pricing of the products or what else you get, like, you know, maybe your site's normally free shipping, but you want to emphasize subscription. So make everything else costs shipping and subscriptions are free on shipping. Like, you know, you can try things like that to try to see if you can incentivize people to give it a shot.

Andy Splichal: 19:38

You know, you had mentioned paid ads, Google ads and Facebook ads. Do you typically recommend having subscriptions on different page than the product one time purchases?

Matthew Holman: 19:49

No. Generally not unless there's a really compelling reason like the only instance I would see at work as if you were trying to test like a soul subscription option. Like I was driving to traffic to a page that only had subscriptions available, that would be the only time I would do it. Otherwise, that and again, it comes down to how sophisticated like your site is, and how many different pages you have running like, and how easy it is for you to spin that up. Otherwise, I would say you can optimize, it's funny you asked that because I've been getting asked that a lot lately, you can optimize a product page. That's more subtly sell subscriptions. And so for example, like the vitamins like, if you're talking about the benefits of regular vitamin usage, and how important it is to take them every day, then when you then add in, get a subscription, so you've never forget, right? That works with the copy and the copy that kind of copy on the repetition work for both one time and subscription. So you can optimize the page in a way that emphasizes that there's a few other things too, like you can try, you can test defaulting to the subscription option, you could make a bundle option that's really, really enticing on the subscription that's not available on one time. You know, like with the protein powder, you if you had pre workout and post workout, and you subscribe, you're gonna get 40% off or something like that. That kind of thing.

Andy Splichal: 21:13

Let me ask you, if you were to start a pure subscription business, and you could sell anything you wanted, what would it be? That is a good question. With the goal, let me rephrase that with a goal of making money.

Matthew Holman: 21:27

Yeah, CBD is pretty massive right now.

Andy Splichal: 21:31

Oh, but you can't advertise that.

Matthew Holman: 21:33

Yeah, I know. I know you can't use paid ads, but I can play the community angle. And there's a lot of affiliate marketing you can do for that. As well as in person, that would be an interesting one that would could be a pretty good moneymaker. Because there's good margins in it. The product. I've actually never been asked that question before. So that's a good one. Yeah, CBD is probably where I would go, because I think there's an untapped market for athletes and recovery. And then also sleep because I use it for sleep myself. So I would, that's one that I would get into probably pretty heavily.

Andy Splichal: 22:08

So let me let me also ask is far as your career? Have you had mentioned flywheel? So it makes me curious, but are there any business books out there that you could attribute to your journey as an entrepreneur?

Matthew Holman: 22:21

Yeah, The One Thing by last name is Williams, one of the guys that helped found Keller Williams real estate. It's a book that hit me at first very personally, but it's professionally it's about focus. So the idea is, in life, we often find ourselves trapped in this thought of like, if I was only more efficient, or if I was only better at task management, I could get more things done, right? If I wasn't so distracted. The one thing kind of turns that on its head, and it basically tells you it's actually not about being more efficient. It's about focus. So when you really get into what drives revenue for your business, so for example, within subscriptions, you could be running paid ad campaigns for both one time and subscription options. But if you get really good at the subscription option, it kind of kills two birds with one stone. So maybe that becomes your focus. And for me, like with what I've done, our focus is this over the last year has become content, research, education, helping people figure out subscriptions, and that's what's benefited our business the most.

Andy Splichal: 23:25

You know, those? That's a great book. I thought you were gonna say Jim Collins, because you had mentioned Flywheel. Right, right. But, hey, so let's switch focus and talk about the what is a greatest software you've never heard of? Is that what's in the in the bio QPilot? Yeah. So how does Q pilot help companies manage their subscription program?

Matthew Holman: 23:47

Yeah. So it's interesting, because, you know, the one reason we haven't heard is because we start on WooCommerce. So we were on WooCommerce for years, and just now launched on Shopify. So a lot of brands probably have never heard of us, but and there's a lot of subscription apps out there. So our biggest thing is we're very flexible. And from a logistics standpoint, there's a lot of complications that come up with trying to manage this repeat order thing that's happening, like what happens when somebody moves or they want to change their order. They want to add something, take something out. QPilot is very much a subscription platform that's designed to handle change in flexibility. And so and we're API driven, so we're easy to integrate with and implement. So that's kind of like us, in a nutshell, is what we do really, really well.

Andy Splichal: 24:31

Do you have a favorite success story of a client that you could share?

Matthew Holman: 24:36

Yeah, I do. And I do use this one a lot, because I think it really encapsulates a couple of really important principles with subscriptions. So one of our customers is I heart dogs and I heart dogs do some really fun stuff where they will donate a portion of sales to feed shelter pets, that's kind of one of their their mission. Right. And so they were running subscriptions with us for about two years, but they weren't investing in it. They were trying to figure out if and things within their business, right? It wasn't a priority, but they were collecting data. And one of the things that they found collecting that data was like most subscription businesses, their number one reason for churn was too much product. Well, and I recommend every brand to do this too much product. But why? And I heard dogs found out by talking to their customers, the reason people had too much product is because they didn't know how much to order for their pet because pets come in all different shapes and sizes. So I heard dog was hearing this so much from their subscription customers, they went back and redesign their product page. And if you go to iHeartdogs.com, right now, it's a great example. All their products are like this now, where it has you select the size of your dog, and then it recommends a different amount of to purchase based on that size on a different frequency, and on a subscription. And what they saw was like their conversion rate doubled. And their retention rate almost doubled as well. Because it was now easier to understand what the order. And the number one reason why people were canceling was was because they just didn't know how much to have they solved that. And then the program was just that much more profitable.

Andy Splichal: 26:07

Yeah, that's, that's a great example. What did it do for their subscription program? Did that double as well? Oh, yeah. Yeah. Now, you mentioned you guys support. What do you say, WooCommerce? And now Shopify. Are those the two? Are there others?

Matthew Holman: 26:25

We're adding Salesforce later this year, which is really exciting Salesforce commerce cloud, because it's a different type of customer. It's a little bit more complex.

Andy Splichal: 26:33

And there, I'm sure other stew in this? How are you different from them? And why should somebody look at using QPilot?

Matthew Holman: 26:46

Yeah, I think the biggest thing for us is we're we're not going to be a good fit for a static subscription or like a static subscription box. We're really geared for more dynamic programs where there's more products involved more upselling involved, there might be logistical concerns around shipping. We're we're the only subscription app I know of that can see live shipping updates on a subscription order. And so that's really kind of pretty cool. Yeah. So that's, that's kind of where we're seeing like the we think that the future of subscriptions is in is in more and more control for the end user. And if you just have like a recurring billing app, which, you know, some of them are, most of them are just great. They have a lot of great features. But you know, the idea of subscription start is just like a recurring charge on your credit card. Like that's going away, right? You want the ability to order more ordered last order differently, different frequency, different location, all those things.

Andy Splichal: 27:43

And how do you guys charge your users?

Matthew Holman: 27:48

Yeah, so most subscription apps charge like a percentage of the sale. We're kind of more like an email system, we like charging a usage fee. And that's it. So I mean, there's a SaaS fee to subscribe to. But we basically just charge a flat fee for the number of subscriptions that we are managing for you on our platform.

Andy Splichal: 28:06

And I think we we've talked about this, we know what programs you support in the WooCommerce in the in the Shopify, but who is the perfect client to if they're out there? Describe them that these people should absolutely check you out.

Matthew Holman: 28:23

Right now, if you're selling CBD on WooCommerce.

Andy Splichal: 28:25

No, no.

Matthew Holman: 28:30

You have to talk to us. Otherwise, yeah, you know, we do really well with supplement companies, pet food companies. One of the spaces that we think is really fun is like local delivery for fresh food that we do really, really well with as to so if you're doing delivery, anything with the delivery component that's a little bit more sophisticated than what Shopify is normally supporting. We're definitely worth to look.

Andy Splichal: 28:55

Bed sheets, you handle those?

Matthew Holman: 28:59

Bedsheets. I did try to get I had somebody in our did it. I did a demo for like a year ago, and almost, but we don't have any bedsheets.

Andy Splichal: 29:09

Cool. So how can an interested listener and learn more about working with you and QPilot?

Matthew Holman: 29:14

Yeah, well, first of all, I actually run a weekly newsletter called The subscription prescription where I drop like subscription tips and notes every week. So I'd love for anybody you know, you can connect with me on LinkedIn or, or look up subscription prescription. Otherwise, go to qpilot.com. And you can learn more about what we do

Andy Splichal: 29:31

subscription for scription. Try saying that five times.

Matthew Holman: 29:34

Exactly. Get your weekly dose, get your weekly fix.

Andy Splichal: 29:37

Well, this has been a lot of fun. Is there anything else you'd like to add before we wrap it up today?

Matthew Holman: 29:41

No, this has been great, Andy. I appreciate it. All right.

Andy Splichal: 29:44

Well, thank you once again for joining us, Matt. Great. listeners. Remember if you liked this episode, please go to Apple podcasts and leave us an honest review. And if you're looking for more information connecting with Matt or QPilot, you will find the links in the show notes below. In addition, if you're looking for more information and growing Your business check out our podcasts Resource Center available at podcast.makeeachclickcount.com we have compiled all of our different past guests by show topic. It included each of their contact information in case you would like more information on any of the services I have discussed during in previous episodes. That's it for today. Remember to stay safe, keep healthy and happy marketing and I will talk to you in the next episode.