Using Subscriptions To Catapult Your Customer’s Average Lifetime Value With Ben Fisher

Andy Splichal 0:00

Welcome to the Make Each Click Count Podcast is your host, Andy Splichal. We are happy to welcome this week's guest to discuss this topic, which is using subscriptions to catapult your customers average lifetime value. Today's guest runs Rodeo, a platform for eight figured DTC brands that utilize subscription based models. The Rodeo platform offers personalization features to tailor the customer experience and maximize customer retention, and lifetime value. A big welcome to Ben Fisher. Hi, Ben.

Ben Fisher 0:31

Hey, Andy. Thanks. Thanks for having me on.

Andy Splichal 0:33

We're excited to have you. So why subscriptions? What is the reason you believe so strongly that ecommerce brands needed to utilize the subscription model?

Ben Fisher 0:45

Yeah, so I mean, subscriptions are sort of like one tool in the toolbox, so to speak, I think. And I can go into a little bit into like my contrarian point of view of subscriptions. But I'll start with just saying like I've been building tools for direct to consumer ecommerce brands for like the last eight years. Prior to Rodeo, I co founded a company called Cart Hook. And we enabled post purchase upsells on Shopify. And so in working with those brands, I just saw firsthand sort of the power as well as the challenges that like these brands were having with, like with subscriptions, and how subscriptions are a very powerful way to deliver a great consumer experience. But also like there's some trade offs that that brands encounter around just managing their subscription program and making sure that it really is a way to provide a great experience.

Andy Splichal 1:39

Yeah, I mean, subscription they have for retailers the benefit of being able to produce reliable and predictable revenue every month. But before we go into some different methods and tactics, you know, I'm curious that you've seen you said your time before, and then the super subscriptions you offer now, but what is the most unique type of product you've ever seen the was turned into a subscription.

Ben Fisher 2:03

Ah, it is gotta be, there's a an apocalypse preparation box that you can subscribe to where we basically get supplies every month preparing for an apocalypse. I think that's probably the most outrageous one I've seen. I've also seen one that actually for, for taking care of chickens. So I grew up on a tree farm. So I actually do know, I guess owning chickens is not that outrageous, but it does seem like a pretty surprising market to go after.

Andy Splichal 2:37

And Apocalypse box, though. Hmm. I wonder do they can you get invoice for that, like 60 days out?

Ben Fisher 2:44

Good question. Yeah, that makes sense.

Andy Splichal 2:48

So what kind of numbers do you have that supports why a company should consider offering subscriptions?

Ben Fisher 2:58

Well, um, you know, the, in terms of the primary reason, if you talk to brands that offer subscriptions is, you know, the exact numbers will vary. But typically, the LTV of a subscriber is anywhere from three times to substantially more of higher than one time purchasers. So that's, I mean, that's generally the excitement and rationale around a subscription program. And as you said, like this idea, everyone wants Predictable Revenue, right? From a brand and business perspective, it, it makes forecasting a lot easier. And so it's, yeah, I think as human beings we, and business owners, we you want, you don't, it's easier to have renewing subscriptions, rather than having to go out and resell one time products over and over and over again. It also is a way to, like make high price point products more palatable. I remember when I was younger buying Adobe Photoshop, so it's like digital products. You know, it's like $800, to buy it. And then every time they released a new version, but then if you buy it in the cloud, it's called 30 bucks a month. So just as a way to be able to, people are going to will spend just as much if not more, but it's a way to kind of, I guess, you can expand your market because there's more people who can afford it. And so the same applies ecommerce.

Andy Splichal 4:24

Photoshop is a great example. You know, they don't even sell it anymore. Like all you can buy is a subscription. So that's interesting, although we're talking eCom. Now, what makes for a successful subscription? What does somebody need to think about when putting together the effort to have a subscription program?

Ben Fisher 4:48

Well, I think you know, one of the things to think about in general is does your product makes sense to be a subscription in the first place? There are certain products and I would say that one of the challenges in having a subscription program is, unless you're selling a club medicine or a vitamin, where there's an exact amount or exact unit of the product that you need to take over X number of days, your consumption habit, or your consumption will vary, right. So if you're subscribing to coffee or food or drink, it really quickly becomes a bit of a challenge to predict how often you need to receive more product, which often will lead will result in people canceling. You know, so it's actually it's not great for the consumer necessarily, it's not great for that for the brand. So a lot of effort goes into trying to find a way to predict when someone is going to be ready for more. How do you do that? Well, so, you know, I mean, part of it would be talking to your customers, right? With Rodeo, one of the things that we do is we have reminders that at the base level, check in with a customer, and ask if they're if they're prompt them to see if they're ready for more. But you could also do that as a brand on your own through like your onboarding, email, and just when you're first onboarding, so whenever the first like 30 days or so get a sense of what's their consumption speed, right. And if maybe they will need to get their first renewal sooner, or they need to later because ultimately, you're not going to trick people into continue selling to renew that, ultimately, is why people cancel. And that's the number one reason when people cancel subscription is too much product. And so it's yeah, it's a blessing. And a challenge of the subscription model is that brands really want to push subscription. And by and large, there are a lot of for a lot of consumers, myself included subscriptions, when they work, they work awesome. But there's, you know, the specifically the whether or not you're ready for more, is one of the primary challenges that any brand is going to deal with. So anything you can do, to be able to get a sense of how frequently an individual customer will need more, that will save you as a meta... that will probably keep the customer around longer, and it will keep them happier, then, you know, sort of treating every single customer the same and just offering one or two plans. Is that makes sense?

Andy Splichal 7:17

That makes sense. That makes sense. So let's talk about how you get that customer to originally purchase subscription over opposed to buying a one off product one time purchase. What are some ways I mean, you got price but you know, I mean, that's that's a no brainer. What are some more creative ways you've seen to entice customers into signing up for a subscription?

Ben Fisher 7:42

Well, you know, the tough thing about that, too, right is so if someone's subscribing they've never bought your product before, the question need to ask is why are they subscribing in the first place? Right? If they haven't actually seen whether or not they like your product. That's why when I talk to brands, I often will talk about their numbers. And one of the things will often I'll ask them is, what's your basically what's your churn between the first order and your first renewal? And really understanding? Do they have like, what are the what is the retention look like before the first renewal and after the first renewal? You know, because I think getting someone to subscribe without using your product, they're not a subscriber, yet, they're not even a customer yet, they actually haven't enjoyed your product yet. At that point, they're just speculative. And presumably, they might maybe you've been doing it just for the simply for the discount. Maybe they don't intend to subscribe in the first place. I think the ways that I've seen most effective to get someone onto a subscription that was providing value outside of just the convenience of a recurring order. And so if you can provide something, whether that is curation, or a supplemental digital product or something that accentuates or enhances the experience of being a customer of your business, that's one of the one of the ways that I've seen brands make their subscription program really attractive, even if the person hasn't purchased before. Interesting. Now, it looks more like a membership than

Andy Splichal 9:16

Right, do you think adding value works better? Not quite as well or the same is decreasing price?

Ben Fisher 9:28

To value all day long? Because ultimately, that's what's going to if you can provide more value than anyone else, then I mean, in my mind that that should always be your as an entrepreneur, whether it's in subscription, ecommerce, or b2b SaaS, that should be the your sort of my net money. Your focus?

Andy Splichal 9:50

Yeah, yeah, totally agree.

Ben Fisher 9:51

You know, I mean, because yeah, price can make things more palatable, but it's not going to keep someone around and then and I think you're probably alluding to, like, if you're competing on price, you don't don't have a competitive advantage you don't, you know, you're not gonna be around for too long.

Andy Splichal: 10:06

So on the flip side, what are some mistakes that businesses make when creating subscriptions that they cause them to be unsuccessful right out of the gate?

Ben Fisher: 10:16

I think one thing is, well, creating subscriptions around products where there is not a that aren't necessarily a good product to subscribe to. And I think when you're designing a subscription program, recognizing and understanding how natural of a subscription, the product you're selling, is, because let's say that your product isn't a natural subscription, like it has burying very variable consumption patterns, then you're gonna have a lot of issues from people canceling and churn issues. And so in that case, more than price we really need to focus on is how can I enhance the experience of being a subscriber or member and maybe even positioning it more as a membership rather than a subscription? Because I think that's ultimately what will make or kill your program. Because once someone cancels his subscription, like the last stat I'd seen was, you only tend to get 5% of canceled subscribers to buy again, right? Like that's a very general stat. Yes, I mean, it's a very, very broad stat. But those are the numbers I last seen. And so part of the challenges is, once someone cancels, reactivating them is going to be really difficult, because they've already made that sort of psychological decision for whatever the reason is, to move on.

Andy Splichal: 11:48

That's interesting. That's like the dark side of subscriptions that you don't hear.

Ben Fisher: 11:52

Yeah, and again, and I think what's kind of crazy is when going back to what I was talking about, of, you know, the number one reason people cancel subscriptions, receiving too much product is not because they don't like your product, it's because they've gotten too much of it. And that leads to a lot of like, we'll call it like negative feelings, or negative psychology where you feel possibly that you've been taken advantage of by the company, or you've wasted money. And so, you know, as convenient as the idea of like setting and forgetting a subscription is having negative, having a negative subscription experience. can end your relationship with the customer as well.

Andy Splichal: 12:31

Now, what are some actionable steps you can recommend for companies that are thinking to launch in a subscription business? Or maybe they have a subscription service already, but they don't have very many sales isn't really just thinking about whether it makes sense to be a subscription? Or can you go beyond that?

Ben Fisher: 12:46

Yeah, I'll be the first to say that I'm not necessarily the expert of like the super early stage of first designing your strategy. I've worked with a lot of subscription brands, the ones that we work with, they already have product market fit, and we're helping them with scaling. And a lot of it's around like the user experience the consumer experience mechanics around subscription intervals, and helping them to anticipate customers who are likely to churn and then finding ways to retain them. So I by no means would claim to be an expert at like, the super early stage of subscription. But I've certainly, I have anecdotal evidence, and from my experience of just being in the space and talking to a lot of people, I think, at that super early stage, the biggest risk is that you don't yet have a business. Right? I saw that. Even with my previous company cart hook, where we did post purchase upsells, one of the challenges would be that we've we found a lot of early stage, ecommerce brands of installer, our app, they were installing it because they were hoping for sort of like one more, they were just kind of hoping that it would solve their sales problems. But in reality, a lot of they were hoping they would come in business.

Andy Splichal: 13:57

Right. So they were hoping they would create the business, same thing, because the tools nothing

Ben Fisher: 14:01

Yeah, yeah, it's not going to solve, it's not going to solve your your sales problems, right. It's a great, effective tool. It's a great business model. But it's important to sort of separate the two. And that's not to say you shouldn't start with a subscription program from day one. But it's important to keep that in mind that it's not going to solve your problems. And so I think being really crystal crystal clear on, you know, where you are with the business, your clarity and to like, call it product market fit. And then just Yeah, leveraging subscriptions as they make sense for you. And again, I'd be remiss to say that you shouldn't start with a subscription program from day one. But you know, it's important just to know where you are.

Andy Splichal: 14:46

Well, so one of my favorite questions I always like to ask is for predictions. So if you had a crystal ball, where do you see the next year going for E commerce

Ben Fisher: 14:58

I mean, it's fun. wanting to see if so much has changed, especially in E commerce and subscription ecommerce. In the last like three years, like pre COVID, there was like this, like, obviously this huge rise that changed all the math. So I can't say from a macro perspective, what the next year holds and how consumer spending is going to going to change with people being concerned about the economy. I do think though that, you know, the subscriptions as a percentage of E commerce, like if you look at any sort of prediction, it's going to continue to to, to grow and to outpace ecommerce gross growth itself. Like that's what all the all the stats are that I've seen, I think what you will see though, is, and what I'm hoping is seeing more creative ways of getting people to buy again, than just a, we'll call it like a vanilla subscription. So doing a lot more around what's How do you layer in more value around a membership, for example? I think that, yeah, just coming up with more creative ways for people to be able to, to be able to buy or enter, engage with your brand. That's not so much a prediction, as it is a hope, I guess. I'd be curious to hear what like, what are some of your predictions or thoughts?

Andy Splichal: 16:25

You know, it's hard, because you see that E commerce grew so much because of COVID. Yeah, and it's really accelerated the growth by probably experts say anywhere from three to 10 years as far as the percentage and and I don't see it going back. And I see it growing, I just don't know it, what what kind of pace because I think that people still, even though they like the convenience of E commerce, they still want the experience and they want the interaction. So I think that companies that are able to provide that are really going to grow and we might we might see others not but you know, all the all the times I asked that question, you're the first person who's asked me it back. So I liked that.

Ben Fisher: 16:25

I think that's a really good point. I think what you're seeing now, too, with a lot of DTC brands is it used to be retailers, it was, you know, I'd say like, the big disruption was retailers going into direct to consumer, right. And what we saw around the power of direct to consumers, that was actually a really inexpensive way for a brand to test its product, right? So rather than having to start on the retail side, brands were able to just be like, invented overnight, through direct to consumer channel. But now what you're seeing is, and I think it's pretty accepted now where it's like, you need to be in all the channels or a lot of channels. And so if you start off in D to C, you can't just stay in D to C. So you're seeing a lot of brands doing wholesale and getting into like big box retailers. And we're having like an Amazon strategy, like all of these things, like DTC isn't, this isn't a place where you're going to end. And it can be the place where you start. But yeah, we're gonna continue to see more and more people or more and more brands expanding into into other categories, or other channels rather.

Andy Splichal: 18:25

Now, you've had quite a career already as an entrepreneur, with Rodeo and with some of your other previous forays. Along the way, have there been any business books out there that you could attribute to your success as an entrepreneur?

Ben Fisher: 18:42

Oh, yeah, I think one that stands out is the Mom Test, which is a great book. And if you read that

Andy Splichal: 18:53

I haven't read that one. No

Ben Fisher: 18:58

No, that's a great one. It's basically run, how to test this how to test and really business idea. Early in my career, the lean startup was really was really effective. It was I read it probably at the right time in my life. I think I just graduated college, and I was experimenting with business ideas. And I what I was really interested in was, how can I more methodically approach building companies rather than just making the same mistakes over and over again, like, how can I get better at this? And so the lean startup was the first book and then framework around just a way to think about thinking about your business and thinking about business problems as experiments, and you're running experiments to test them into test solutions, and to test the level of pain that that prospective customer has around the problem.

Andy Splichal: 19:48

Now, you know, I think a lot of the business books, it has to be the right time in your life. And it's interesting, like I've been rereading some books and where they might not have been as beneficial a few years ago, they are even more so now. So that's a great point you made. Now, you know, let's switch focus and talk about your software, Rodeo. How does Rodeo help companies manage their subscription program? How does it work?

Ben Fisher: 20:12

Yeah. So I think I was joking earlier that like, we're like the anti subscription subscription platform where part of what I've seen is ad subscriptions as as a business model have become extremely successful. More and more brands are offering subscriptions. And part of that's actually cannibalized itself, where I think the last stat I saw was around 80% of direct consumer brands now offer a subscription or some sort of subscription.

Andy Splichal: 20:37

Wow.

Ben Fisher: 20:37

And so in with that, just as I know, I've had like bad subscription experiences actually had an absurd one where I received a family size of paper towels a couple of weeks ago, and I already had paper towels, I didn't need more paper towels, and I had nowhere to put these like this huge family size shipment. So now they're my freezer. And then the first thing I did was cancel the subscription. And so that specifically is the type of experience that we that we try to avoid, and provide a platform that avoid situations like that. And so the way that Rodeo works is that there's a certain segment of customers that a subscription is really the most convenient and best way to experience your product. But there's there's a certain segment of customers who have had been burned by subscription, like in that example I just gave, and they just won't subscribe to your product, regardless of the price or regardless of how much you push it. And you can't just ignore that segment of your customers or of those prospects, because that's a large segment of the market. And as more and more people have negative experiences with subscriptions, I think you're going to see that people are increasingly reluctant to subscribe, and so was with Rodeo, what we focused on focused on is how to provide a flexible subscription experience where it's not always a automatically renewing subscription, we have a concept called an on demand subscription, where it effectively sends a reminder to the customer saying, are you ready for more that they can snooze, or, you know, click the link to go and immediately reorder what they purchased before. That was actually where we first started off with a product was I was setting calendar reminders for myself, remind me to buy but I didn't want it to automatically. I didn't necessarily want to subscribe because I wasn't sure if I actually would need more in 30 days. So instead, every 25 days, they would ask I get a reminder asking if I needed more. And so providing that flexibility where rather than only offering the binaries subscription where the person either cancels and doesn't buy from you again, or they subscribe and have to like, monitor their subscription. We have this in between mode that, you know is effectively a way to retain a customer who's who's on the on the way of or ready to likely to turn. Does that make sense? Yeah, no?

Andy Splichal: 22:57

Reminders? Yeah, no. And it's a great idea. I guess my mind has been a little bit wondering why you put your paper towels in the freezer, though.

Ben Fisher: 23:09

Oh, I didn't have any shelf space. I didn't have I didn't have anywhere else to store them. Yeah, I live in New York City. And I've really

Andy Splichal: 23:18

got it okay. Okay, I thought there was

Ben Fisher: 23:20

a lead with that. I

Andy Splichal: 23:20

was like, Man, are they fresher? If you put them in the freezer? I have never been I thought I was...

Ben Fisher: 23:25

We'll see how that works out. Um,

Andy Splichal: 23:27

So what are what are some of the challenges that you struggle with and getting results for your clients?

Ben Fisher: 23:32

Well, I think it's like with any tool, it oftentimes comes down to how its implemented. And I'll say, part of what's important for us and why we have so we focused on like, we'll call it the mid to upper mid market of the space. And a big reason is that is both my partner and I have a long history, both on the like called the vendor SaaS side, as well as my co founder, Joel, he was if he's been the CTO of a number of subscription ecommerce brands. And so we both come from both building a lot of tools for E commerce brands, but also working inside the brands themselves. And so we take a much more consultative approach with these brands, where we can really dig into what are your biggest challenges. And so, you know, the bottom line is that, you know, if a brand doesn't know their customer, well, then there's nothing that we can do or no tool that would that will enable them to be successful. That's not to say that that's a problem with any of our customers. I'm just saying that as, as a vendor that's always going the challenges you're going to have. And so for us, part of the way that we've found works is really, it's cliche, probably at this point to say but like behaving more like a partner. And because our deep expertise is on the technology side, a lot of what we can do is talk to these brands who are typically non technical. They they're really great at marketing integrated supply chain, but for them, they have a lot of ideas. What they don't necessarily understand or have is like a gut check around. What would it take for me to do that thing? And, and so with the flexibility of our platform, a lot of what we do is this consultative part up front to really understand like, what are their biggest challenges? How do they think they could solve them? Then understanding what functionality that we already have out of the box will address that? Because the truth is that for most script, not just descriptions, but like, a lot of these products have like a million features. You don't need all those features. And what what strap one strategy that works for one brand might not won't likely work for years. And so it's really about personalizing and tailoring the implementation of a feature to match what your business needs. And that's, again, different with every single business. So I'd say that's probably one of the bigger challenges is that it's also an opportunity. Does that make sense?

Andy Splichal: 25:45

Yes, it does. Now, Rodeo it integrates with Shopify? Yep. Does it work with any other platforms?

Ben Fisher: 25:54

Yeah, so I mean, we designed from day one, the product to be platform agnostic from like, so that's the way it's architected. But we're starting with Shopify first, because that's a market that I know really well. And it's also where there's a lot of subscription ecommerce brands. And and frankly, Shopify has made it really easy for you to as a, as a developer to effectively be compatible. And have your your product work out of the box with most stores on the platform. I remember before Shopify did a fair amount of Magento work. And one of the challenges with Magento is that every single brand has a different setup. Yeah. And like the amount of debugging and just like fashioning, it makes it so that it's really difficult to onboard a customer. And so that is one of the benefits. And one of the reasons why I think a lot of a lot of developers have gravitated towards the Shopify app place and app market. And I think their app marketplace has been really successful for, you know, just in terms of a distribution channel. Again, yeah.

Andy Splichal: 27:03

So you said you started with Shopify. Is it available for the other ones right now? Or is it something that has

Ben Fisher: 27:08

Been focused on Shopify. Yeah, so right, so architecturally it's Yeah, architecturally can support other ones, but we're focused on Shopify.

Andy Splichal: 27:16

Got it. Now, how does the pricing work for your clients?

Ben Fisher: 27:20

Yeah, so our pricing right now is 599 a month. And then there's a percentage of subscription revenue. So it's typically 1% and 20 cents per order. So it's variable, depending on the size of your brand.

Andy Splichal: 27:38

And who is the perfect client for Rodeo, if they're out there, they should be checking out after this episode.

Ben Fisher: 27:46

I would say it's subscription ecommerce brands, like the ones who really are focused on a great consumer experience. And I think, you know, if the ones we do the best with they already are at least one and a half to $2 million a year in recurring revenue, annual recurring revenue,

Andy Splichal: 28:05

do they do they have a subscription in place already? Or they look and

Ben Fisher: 28:10

They likely do. They likely do. We've worked with a couple brands who they already had a large that in establishing and large one time offering and then they want introduce subscriptions, we can be helpful there too. But our primary market is if you currently have a subscription program, and you've been successful with it, we can we can help you accelerate your growth through subscriptions. And again, not necessarily and through like personalized subscriptions, where it's not just the same exact mechanic for every single consumer.

Andy Splichal: 28:40

And how can an interested listener learn more about working with you?

Ben Fisher: 28:45

Yeah, so you can connect with me on LinkedIn or on Twitter. My username is skinny and bald because I'm kind of skinny kind of bald. You of course, can go to our website, hey.rodeo. Hey, isn't he why period rodeo. Or you can email me ben@hey.rodeo.

Andy Splichal: 29:04

Well, this has been great. Ben, is there anything else you'd like to add before we wrap it up today?

Ben Fisher: 29:08

No, that's it. I mean, I guess the one thing I would add just add is if anyone has any questions or wants to talk about subscription ecommerce or ecommerce strategy, I'm happy to happy to help if I can. This is stuff that least for me, like intellectually, just really interesting and something that I and solving problems is something that I love to do. And we'd love to do. So happy to help if we can.

Andy Splichal: 29:31

This was great. Well, thank you again for joining us today.

Ben Fisher: 29:34

Awesome. Thanks so much for having me.

Andy Splichal: 29:36

For 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 on Rodeo or connecting with Ben, you will find the links in the show notes below. In addition, if you're looking for more information on 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 and included each of their contact information in case you would like more information on any of the services I have discussed. us during previous episodes Well that's it for today remember to stay safe keep healthy and happy marketing and I will talk to you in the next episode.