Transcript of How to Tap Into the Subscription Economy
John Jantsch: This episode of the Duct Tape Marketing Podcast is sponsored by Podcast Bookers, podcastbookers.com. Podcasts are really hot, right, but you know what’s also really hot? Appearing as a guest on one of the many, many podcasts out there. Think about it. Much easier than writing a guest blog post. You get some high quality content. You get great back links. People want to share that content. Maybe you can even transcribe that content.
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Hello. Welcome to another episode of the Duct Tape Marketing Podcast. This is John Jantsch, and my guest today is Anne Janzer. She is an author and nonfiction writing coach. She has written books called The Writer’s Process about the inner game of writing creatively and productively, and The Workplace Writers’ Process, something that all these content marketers probably need to know a little bit about. And the book we’re going to talk about today, Subscription Marketing.
So Anne, thanks for joining.
Anne Janzer: Hey, thanks for having me, John.
John Jantsch: So you start the book, Subscription Marketing, off with the concept of the subscription economy, so I wonder if you could maybe sketch out what that is. I know I’ve subscribed for my Kansas City daily paper for years, but I think you’re talking about something much larger than that.
Anne Janzer: Indeed, indeed. So the subscription economy as a term is something that Tien Tzuo of Zuora, I think he’s coined the term, but I think pretty soon we’re just going to be calling it the economy, basically. It’s all the businesses that are shifting their relationships with their customers to be a ongoing relationship based on a subscription.
Now, it sounds esoteric. When I first started talking to people about this two years ago, they would all say, “Well, this sounds fine, Anne, but I’m not marketing a newspaper, so I really don’t need your book,” right? ‘Cause we think subscription, newspaper, magazine. But just look for a moment in your own life at how many things … how many passwords do you maintain? So okay, right there, those are all subscriptions.
And in fact, the subscription model is making inroads in all kinds of things. You can subscribe to cars, right? You can subscribe to industrial chemicals, you can subscribe to your razor blades. I mean, it’s not just consumer media, obviously, and it’s not just software. It’s actually all around us.
John Jantsch: You gave me some examples of the application. I certainly have a number of subscriptions with Amazon, for example, for things, but what are some of the applications for … I think it’s easy to look at companies like that, “Okay, sure, they sell detergent, they sell stuff that I’m going to consume, and they’re just making it.” I used to subscribe by going to Target or Walmart, but now I subscribe by having Amazon send it to me. So what’s it going to mean to marketers as a whole? ‘Cause I think it’s not just a business model; it’s maybe a mindset shift.
Anne Janzer: It is. I mean, that’s exactly it, John. It’s actually a psychological shift. And let’s take a moment and take off the marketing hat and think about you as a customer, because really, the shift we’re interested in is this shift that happens in our customers’ heads. When you just go buy something at the store, you just need to look at it and say, “Okay, this looks like it has enough value, it meets my needs,” and you walk off.
When you subscribe to something, you want to know something a little bit more. You need to trust the company that you’re subscribing to, right? And you need to then decide again and again with each renewal that it is still providing value to you, so that’s a different mindset on behalf of the customer. So as marketers, we have to look at this shift and say, “It’s not enough for me to do the same old thing I’ve been doing, push the sale, push the sale, push the transaction, I actually maybe have to earn some trust, and after the sale I have to continue to demonstrate the value of the service.”
John Jantsch: So in some ways, I mean, we’ve always had that. I mean, it’s always been a good business practice to create a customer experience, the likes of which would make somebody want to buy from you again and again and again and refer their friends. I mean, that’s always been a business model. So are we really just talking about a different approach to delivery of value?
Anne Janzer: Partly. I mean, it’s always been a good business practice, and yet it’s remarkable how often businesses are oriented in a way that does not support that business practice. How many marketing organizations are the people … and sales, are people incentivized simply on net new sales or the sheer number of lead generated and things like that and not on the long-term relationship?
So what’s happening, to me, what the subscription market changes is this, the subscription model changes, is that the longer you’re in business with the subscription business, the more of your revenues shift to those recurring revenues from your existing customers. So now, if I’m in marketing and I’m ignoring that, then basically I’m becoming less and less relevant to the business with each passing year, because I’m levering on a much smaller percentage of the overall revenues. Does that make sense?
John Jantsch: Absolutely. And so it might also change the formula for what a business should be willing to do to acquire a new customer? If our long-term goal is to turn somebody into a subscription, like a lot of magazines, they give the thing away or they give you six months free or they spend a whole lot of money to acquire you even though you’re only a $20 transaction, but if that $20 transaction is for 10 years, then that’s a different model.
Anne Janzer: Exactly. And yet, so the customer acquisition cost is a really important part of the equation, because if you’re giving it away but acquiring the wrong customers, then that’s like that old thing, “Oh, we’re losing money with every unit, but we’ll make it up on the volume.” It’s just not going to work long term.
John Jantsch: All right. So in terms of our product mix, because I think sometimes we talk about all this stuff being changes in marketing, but I think it’s really changes in buying behavior that are driving a lot of this, and so should we be … I’ll come back to the customer experience that keeps people coming back, but should we be thinking about product extensions, service extensions, line extensions, somehow that are purely a subscribe play to make that available, whether it’s a course or it’s an ongoing subscription of some form or ongoing way for somebody to pay for things over time? I mean, is that … in addition to a marketing mindset, do we have to also think about a whole product and service ladder mindset that’s different?
Anne Janzer: Yeah. I think that … People will call me and say, “I’ve got this model and I want to shift to a subscription, and what should I do?” And there is no one answer, because there’s no one model. There’s a lot of different ways. You don’t have to go fully in … you don’t have to switch everything fully into this model if that’s not what makes sense.
Now, I feel like the master class in subscription marketing, to which nearly all of us subscribe, is Amazon, right? But they are not fully a subscription service, right? They sell retail things, but Amazon Prime is their brilliant subscription service. And it’s actually a marketing vehicle for their one-off retail, their transactional retail, as well. So there’s a mixed model of how they’re doing this.
John Jantsch: Yeah. And I think that’s what I was getting at, is if you sell air conditioners and heating units, is there a subscription model in that? Well, maybe the service model or something, or maybe filters as a subscription would be an extension.
Anne Janzer: Yep, yep, exactly. Yes. So you are going to be the best judge of what you might offer and how it’s going to work in your business. There’s no one answer.
John Jantsch: But I think the thing that we have to hammer home is that this is how people want to buy. This is not just something Amazon thought up. Maybe they created a little bit of a hunger for it, but because of that, I think that there are certainly demographics that that’s the only way the will buy. They want to set it and forget it. They want to be able to go online and use their app and get it, and that’s how they want to do transactions.
Anne Janzer: Increasingly there’s a lot of people who would rather pay for access to stuff than stuff itself. That’s true in the consumer. I came from the B2B software industry. That’s where I worked my whole career, and software was very early or relatively early switching over with The Cloud to a subscription model, so this was big enterprises saying, “No, we don’t want to own the software, we don’t want to own the services, just give us the capability.” So that’s another place that that has taken hold.
John Jantsch: I think there’s a dual path with this. So if we talk about the mindset of creating subscription offerings or surrounding your products with subscription services, there also has to be, I think, a real intentional focus on the customer journey inside of all of that. It’s probably been 15 years ago, I coined a term called “The Marketing Hourglass,” which was the intentional … everybody talked about the funnel, which is the first part of Get the Sale, but it’s like, “What happens after the sale?” And to me, that’s the opening up of the hourglass, the second side, so it’s these behaviors of Know, Like, Trust, Try, Buy, Repeat and Refer. And I know my listeners have heard me say that a million times.
I do think that there could be a really powerful combination of not only having this a subscription, but also marrying it with a tremendous customer experience, because I don’t think it’s enough to just say, “Oh, look, we have a subscription model now.” It has to be a great experience, too.
Anne Janzer: Oh, absolutely. I mean, and that is I think the point. You obviously have been writing and thinking from this space all along. With the referral engine, this is exactly what you’re talking about. So obviously there has to be a great customer experience. In the book, Subscription Marketing, I coined a term “value nurturing” as a marketing activity, because we all think about, “Well, I’ve got lead nurturing, lead generation, lead nurturing, but then when the sale is done, I just wash my hands.” And I say, “No, now it’s the other half of the hourglass, essentially,” right? It’s, “Now you need to continue to help the customer.” You have to have a fabulous experience. So the first key is to help the customer find value by being successful, right? You really want those customers who are going to be successful.
You can also add value in other ways, making the company fun to do business with. That’s the relationship part of it. You can add value through content, through data, through communicate, things that marketers know how to do that don’t even have to actually be in the product or service itself but that actually enhance the experience.
John Jantsch: Yeah. And I think it’s pretty easy for people like you and me to talk about, “You have to create a great experience.” But I think a lot of people say, “We [inaudible 00:12:15],” but how do I do that? It’s intentional. It’s not hard. It’s intentional, is what I typically tell people. And it just starts with, I think, looking at all the touch points and saying, “Could we do that better?”
Anne Janzer: Yeah, yeah. Every interaction that you have with a customer in this sort of subscription-related world, it’s not just a transaction; it’s a relationship. And so every interaction, there’s an opportunity in those stupid transactional things, like, “We received your package.” I ordered a CD from CD Baby, I think it was, and they sent the most hilarious shipping notice about the party they were having in downtown Portland, as they lovingly sent my package off to the post office. I mean, that just made the experience more fun. It had nothing to do with the thing itself. It was an email. But it made the experience, that relationship I had with the company, a little bit different.
John Jantsch: So it’s easy for people to point to Amazon. Do you have in your research or in your talking to business owners out there, do you have any kind of unique examples of where you’ve seen somebody apply this?
Anne Janzer: There’s so many places that are doing different parts. And so here’s the key, John, that I think your listeners should think about, is don’t just look at what people in your industry are doing, because when it comes to having a subscription model, you can learn … basically everyone’s trying to solve the same set of problems that has to do with the relationship, so go ahead and look far and wide.
So one of the most interesting subscription businesses that I heard of was called Pley, P-L-E-Y, and although they branched out, when I first talked to them, their basic premise was subscription Lego kits. Now, if you’ve got kids, you immediately get this one, because your kids always want to buy the latest thing. They assemble the pirate ship and then they’re done, and then they need to buy the next pirate ship or whatever the thing is, right?
John Jantsch: Yep, yep.
Anne Janzer: Yeah. So you feel my pain. Really if you’ve stepped on them, they really have felt the pain of this problem, right? So this company started out basically saying, “Just subscribe to as many Lego kits as you want. We’ll ship them with spare parts, instructions. Send it back.” So there’s your basic model, and it was really pretty wonderful.
But then, they added value to it by creating a secondary site, which was called PleyWorld, where people could submit their own designs for Lego kits, and the user communicate would vote on them. So now they’ve added this communicate part, right? This is nothing they’ve added to it, but they’ve created this website. People submit their designs, they vote on them. When a design gets enough votes, then the company will turn and productize it, write up the instructions and add it to their kit.
So now they’ve added this value to the basic service, which is this community around it, and the chance for people to contribute and share something with other people and the members.So that’s a very creative thought. So what kind of community can you add to your service?
John Jantsch: Yeah, yeah, yeah. And of course, the brilliant thing about that is they’ve pre-sold a product before they made it.
Anne Janzer: Oh, yeah. Right. And they’re constantly refreshing their product line. They’re not now just dependent on Legos kits. They’ve got their own user commnuity of kits, which is really interesting.
John Jantsch: So I imagine when some people are first coming around to this idea and some marketer said, “We’ve got to do this” in an organization. I’m sure one of the first questions, particularly on some of this experience stuff, this is where you get pushed back. We all know in the end, it pays. But, in the beginning, I think when somebody’s trying to embrace it, it feels like it just costs. So how do you incrementally measure the value of value nurturing?
Anne Janzer: Well, there’s two issues. One is that the revenue model changes. It’s like investing for retirement, that with recurring revenues, the better job you do, you get this accruing benefit that’s going to build over time, so it takes a longer perspective, because investing for retirement is painful for me to give up that chunk of cash today for sometime down the road.
And the other problem, and small businesses don’t have this, large businesses do, which is that they have incentive structures around their own things. I can’t tell you how many marketers I’ve talked to that said, “This is great. I want to do it. But you know what? I’m incentivized on my lead generation, so I’m just going to keep focusing on generating as many leads as I can no matter whether they’re good or not, because that’s what’s paying me.”
So the first thing you have to do is align your incentive structures for what you want in the long term. And if you’re a small business, again, that long-term perspective. Here’s the incentive that I see for it. When you’re in business, most of us are businesses. Very few of us it’s a secret sauce, like nobody else can do the thing that we’re offering, right? We have competition, and it’s not that hard for other people to launch the same kind of general business that we do. But, they can replicate the thing that we’re selling. They can’t replicate the relationships that we have with people. So this is really building out your competitive differentiator.
John Jantsch: How do you … I’m starting to throw a whole bunch of stuff into one question here. What role does content play and social media play? Obviously marketers have seen a role that those play, but I think in the subscription thinking, they play a little different role, and even if it’s just being more intentional or strategic about it.
Anne Janzer: Yeah. So content, and social media, as well, but content is another place that you can continue to pour the perception of value into the solution after the customer has bought. If you think about the Dollar Shave Club, right, so that was a subscription razor blade company, and they just shipped razor blades, right, but they had hilarious videos when you signed up that were quite entertaining. So they had a certain attitude. And with the razor blades, every month came a little newsletter of bathroom reading that was hilarious. So this is content. It does not help you shave any better, right? I mean, it does not. But it added value to that relationship that the customer had. It added value to the experience of being a subscriber.
So content is an enormous lever for value for the customer’s experience of value. But you have to be … not content that’s just sell, sell, sell, but content that is fun or informative or entertaining or something that actually delivers value for that person.
John Jantsch: And I think that’s a part that not everybody can do. I mean, and I think that’s where a lot of businesses fall down is that they remain kind of that stodgy business objective meeting kind of company because they don’t go out and find that creative voice, and I think that that’s … If you were going to go out and hire somebody who can do incredible job with video or that can write that kind of funny content, because not everybody can.
Anne Janzer: Right. And you know what? Let’s say that your budget is just really slim. The first thing you just get in the head of your customer, just you have to get out of the trap about, “My God, I’ve got to write about our futures again,” right? Please, don’t do it. Just get in the head of your customer. What can you write that’s going to provide value to them, even if you can’t see a direct link to pitching your feature? What can you do to help the customer? So empathy, empathy, empathy, is the trick.
John Jantsch: And I think also, I’ve been doing this for a long time, and I was preaching that we want to see your personal side, 20 years ago, and boy business owners just recoiled at that idea, ’cause it’s like oh, God, nobody wants to hear about me or my struggles or my anything. They want to hear about our thing that we sell. And it’s kind of refreshing that that whole idea of your story is really baked in to most marketing experiences today, but I think people are still hungry for it.
Anne Janzer: Yes. And the other place that’s interesting, John, where you can really do something that has to do with your story is when you can align your marketing with your customers’ values. And this is sort of my favorite part of value nurturing, right, is through your actions, demonstrating that you share some of the same values that your customer has, whether that’s supporting people in crisis disaster situations or whatever it may be, just showing up and doing the right thing, as a consumer, I feel really good about subscribing or being a customer of the business that I feel does the right things.
John Jantsch: Yeah. And I guess I would go along with that and say you have to be willing to stand up for your right things. You have to be willing to offend some people, too. Not intentionally, but just to take a stand rather than to say, “We’ll take anybody.” And I think the companies that you see in communities that are very loyal, and not only is there value there, but there is a point of view that says, “This is what we believe in, and if you don’t believe that, that’s fine, but this isn’t the place for you.”
Anne Janzer: Yes. Yeah, you have to be willing to just say, “If you want to take this stance, this is where your most loyal customers are going to come from, the ones who are going to refer you or the ones who feel this alignment with you.”
John Jantsch: There’s a lot of value in polarization, like it or not.
Anne Janzer: You’re not taking a stand against something; you’re taking a stand for something. Let’s be clear here.
John Jantsch: Yeah, that is what I’m saying. But at some times, maybe the edgier the stand, the more loyal the people are going to be, and so that’s something worth experimenting with. It’s not for every.
Anne Janzer: True.
John Jantsch: But you’ve seen countless examples of people using that to the edge, I think, and having just a rabid commnuity because of it.
Anne Janzer: Right, right.
John Jantsch: So Anne, where can people find out more about you and your work, and obviously, Subscription Marketing?
Anne Janzer: Sure. So best place is just probably to hop on over to my website, which is my name, A-N-N-E, don’t forget the silent E, Janzer, J-A-N-Z-E-R. And there you can find out about what I’m blogging about and writing about. I’ve got a free course for those content marketers on the call, a free course on managing the approval and reviews process. So go check out what’s there.
And the book subscription marketing is on Amazon and all of the usual ebook and audio book and places that you can find books, and you’ll find it there.
John Jantsch: And we’ll have links in the show note, of course, as we always do.
So Anne, thanks for joining me, and hopefully we’ll run into you down the road.
Anne Janzer: Great. Thanks. I enjoyed it.