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Increasingly regarded as the ‘holy grail’ of eCommerce income, subscription revenue has a number of benefits for brand owners.
But what kind of product lends itself to a subscription model? And how can a brand owner optimize their business for a growing percentage of recurring revenue?
In this week’s episode of the Brand Builder Show we’re joined by Matthew Holman from subscription software QPilot.
We discussed how to get started, improve conversion rate, and reduce churn rate to make your subscription offer a long-term success.
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Ben Donovan
Well, Hey folks, welcome to another episode of The Brand Builder show in today’s episode, we are chatting to Matthew Holman from QPilot, and we’re talking all about subscriptions, recurring revenue, what kind of products subscriptions work for and which kind of products they don’t how to improve conversion rate for subscriptions, how to decrease churn rate all of the important metrics that you need to be aware of if you’re going to run a successful subscription model within your Ecommerce brand. If you liked episodes like this, be sure to like this episode on YouTube, subscribe on your favorite podcast player. And if you want to hear more from us do sign up to our newsletter at BrandBuilderUni.com/subscribe. Now let’s get into the episode. Awesome. Well, hey, Matthew, welcome to the brand builders show today. Thanks for coming on the episode.
Matthew Holman
Absolutely, thanks, man.
Ben Donovan
That’s gonna be a good one talking about all things subscriptions, recurring revenue, all those juicy words that ecommerce brand owners love to love to hear, but sometimes struggle to implement and find solutions for so we’re going to try and make this a real practical episode, find some solutions, and help people optimize if they are already running subscriptions. And so it’s going to be action packed full of lots of info. Before we get into that, Matthew, why don’t you tell us a bit about yourself about how you found yourself doing what you’re doing today?
Matthew Holman
Yeah, absolutely. So yeah, run growth, which is a fancy way of saying marketing at cute pilot, which is a SaaS company that is delivering great subscription experiences for brands to give to their customers. I do a lot of work with community, I love building up the Ecommerce space. And I kind of is kind of funny, I was actually doing marketing at an Ecommerce logistics company. So we were selling shipping technology, which is pretty boring. But you know, so we had to get a little creative and how we’re doing content and education and and ultimately just kind of want to take the plunge into more of entrepreneurship. So you know, cutie pie that was looking for a marketing co founder, and I was able to, you know, got connected with the founder of key pilot and learn more about the space and dough head in and you know, two years later, here we are.
Ben Donovan
And what kind of solution is Kubala? Is it to help merchants run subscriptions on a ecommerce store? Or is it more specific?
Matthew Holman
Yeah, absolutely. So you can think of a kind of like a typical app or plugin that you’re adding to your store. And while it’s kind of like tip of the iceberg, just doing that initial conversion element. There’s a lot that the platform does from an enablement standpoint. Ultimately, we like to think of subscriptions are typically viewed as somewhat inflexible. So QPilot is really geared towards flexibility. So you can a customer can change literally anything they want on there without disrupting the brand’s operations. So there’s a lot of integration work and operational, like logic that we’re running to make sure that the brand can literally sell whatever they want to whoever they want within a subscription.
Ben Donovan
Okay, awesome. And is it polite platform specific?
Matthew Holman
No. Well, WooCommerce and Shopify specifically, right now
Ben Donovan
you have two pretty big players covers a lot of the market.
Matthew Holman
And that’s, that’s awesome.
Ben Donovan
Just out of interest, are you? What kind of volume do you see for Shopify vs. WooCommerce? Because I think Shopify gets talked about a lot. But WooCommerce is actually bigger than a lot of people realize, I think.
Matthew Holman
Yeah, so from like, from our own business, we’re fairly new to Shopify. So like, our own volume is a little bit skewed favoring WooCommerce. I think what it’s what’s interesting is that there are more WooCommerce stores than there are Shopify stores. But WooCommerce gets used in a lot of different ways than just selling like, you know, I’m shipping pet food or like a shirt, like WooCommerce is used for digital subscriptions. There’s big brands that are using WooCommerce to manage like a content management system, like basically, they want to blog with WordPress, and so they want to be able to take payments. So it gets used in a wider variety of applications. But when it comes to just straight ecommerce play, it’s kind of Shopify is kind of undeniable as a as a growing source. And I think that you’ll see you see more established companies doing more revenue on Shopify than you do on WooCommerce.
Ben Donovan
Yeah, definitely. Okay, cool. So let’s talk about subscriptions. Then there’s obviously a lot of draw and a lot of talk about recurring revenue subscriptions, for obvious reasons, growing customer lifetime value, right? Yeah. As marketing gets more expensive, customer acquisition costs grow, you know, something that clearly keeps people on the back end, of course is attractive to ecommerce brand owners. But right at the beginning of that process, is this a model of revenue that every brand owner should aspire to is only for a few? We only speaking to a narrow audience here Well, what are your thoughts on that?
Matthew Holman
Yeah, I think it’s it’s it’s a little bit narrower, but it’s growing. I think the subscriptions are definitely increasing their adoption and how people feel about them are definitely changing in an upward to the right motion. I think really, cuz I get asked that question a lot, right. And there’s a lot of different business models, whether you’re talking ecommerce or even service providers and others, like should I implement a subscription model and and and a lot of finance people or your board might say, Yes, you got to do this recurring revenue is predictable, but it really needs to come down to a word I’m going to use a lot when we’re talking is the word engagement? Is, is there an opportunity for you to engage more with your customers? And subscriptions is a really great way to do that.
Ben Donovan
Yeah, that’s awesome. Do you are there particular, obviously stuff like food, beverages, that kind of thing? Because it is a consumable is going to really lend itself to a subscription model? Do you see that product type widening, as well? People offering more, you know, product types for this kind of? Model?
Matthew Holman
Absolutely. I think, well, the way a lot of people have envisioned subscriptions for a long time had been through subscription boxes, this idea of like, you know, you’re getting this delight, whether it’s every month or every quarter, you know, like say you’re getting butcher box, or you’re getting, you know, some some, like a cosmetic thing, right? Where they’re picking different things for you to try. Right. So that’s that’s one element. And then you have the one you mentioned, which is consumables, right? Pet food supplements. CBD is like playing massively into that space right now. And so somebody’s using something regularly, they want to get on a subscription, but I think we’re starting to see more innovation to is things related to like, refills, right, like you have an air filter system, right? So you sell the system, and then you put the filter on a subscription. So basically, and also, it’s coming down to technology is starting to advance now. So it’s less about, you’re using this every month, so you’re just gonna get it every month. But the ability to kind of schedule the fact that I want something like this every three months, because I use it less frequently than you do, or I want something every six months is is allowing the space to continue to grow.
Ben Donovan
Yeah, I’ve got a few things like on Amazon, Subscribe and Save. You know, like just different supplements and coffee and that kind of stuff. And it’s so flexible, you know, you they’ll remind you when it’s coming up, and they’ll almost prompt you to edit it. And do you want it in that frequency? Do you want to change the quantities? It’s so easy to do. And that’s obviously where I stick with it? Because I know that it’s super easy to change. And so I imagine then the retention rate is huge. Is that something then the technology that you guys run helps manage?
Matthew Holman
Absolutely, yeah, definitely. So like from a technical standpoint, it can be difficult, like say, within a subscription, maybe you want to double the size of your coffee order, like right now a limit a common limitation with software and brands is that you don’t like say your Are you just eating the shipping cost? Are you charging for shipping? Like, do you know how much inventory you have on that product? So you can make it available in the subscription portal? Right? Like there’s there’s there’s just little things logistical things that kind of come up. So to be able to make that possible, you have to solve some of those problems, because you want it to be really flexible, like, you know, you’re getting coffee, and you’re going to be out of town for two weeks on vacation. Do you want your coffee subscription paused? Or do you want to redirect it to where you’re going to be? Right?
Ben Donovan
Yeah, that’s great. Definitely redirected to where I’m gonna be. Now, that’s good. For someone that’s just looking at getting started with subscription, recurring revenue, you know, maybe they’ve got a brand that they feel has potential to lean into it. What is the kind of this the what are the starting steps for people? If they’ve not done subscription before, and they want to kind of explore the avenues? Can you give us a bit of a guide on how to get started?
Matthew Holman
Absolutely. Yeah, let me start with like the things not to do, or, you know, you’re gonna see there’s a lot of brands out there that do really, really well, with subscriptions. They’ve got these incredible offerings, right? Like Dollar Shave Club is one that I ordered them a ball guy shaved my head regularly. They’ve been doing this for a long time, right. So they have a lot invested in their customer experience and their technology. So the first thing, the biggest mistake I see people make is they come up with this really complex offering that they want to do. And so like most things, you want to actually kind of keep it as simple as possible. But some of the key fundamentals you want to think about as like, first, are you being asked for this. So a lot of brands, if you’re selling a consumable product, you should be getting you have even just a decent sales volume, you’re doing at least a few 100 orders a month, you’re you should be getting requests for a subscription. And if you’re not, that’s a good place to start asking why. The other thing is thinking about what kind of value am I giving here? Is it just I know that people are buying this on repeat? So I’m just going to offer a subscription and give them 10%? Off? Because that makes it predictable for me? Or is there something more I want to get out of it? And the reason I say that is because you want to be collecting data on not just why people cancel, but why people are buying the subscription in the first place, what value are they seeing what possibility they’re seeing, what solution are they are they are they looking for? So any good subscription program should really just be thinking about a basic offering. And I’m going to be collecting data around the acquisition and like what my conversion rates are and then also churn reasons. And a lot of times when you’re initially doing this, it’s you don’t get data at scale. So you have to do more outreach, you have to talk to people to find a figure that out.
Ben Donovan
Yeah, definitely. I’d love to talk about some of those stats in terms of conversion, retention, churn, etcetera. You know, let’s start with conversion rate. How how do people increase conversion rate with a subscription? Because a subscription is obviously a commitment, I imagine, you know, I don’t run a subscription model myself. So I, you know, I imagined the, one of the biggest barriers to conversion is going to be, well, I’m committed to this, and it’s going to charge my credit card every month. What are some of the things that you would recommend to people starting this process for just getting that initial conversion, signing people up on the subscribe, option?
Matthew Holman
Yeah, so first things first is thinking about what are the common reasons why people don’t do subscriptions. One is they’re worried about ending up with too much product. The second one is they’re worried about forgetting it. Three, they’re often wondering if this is something they really need on a consistent basis. So I would start by addressing those three things. One, this is easy to cancel or manage at any time. And that needs to be a pop up modal or messaging that’s like, right by the subscription option. The second thing is like if you’re worried about having too much product, same thing, it’s easy to pause, skip, change the frequency you want, is something important to offer. The third thing is really just as a question of messaging and copyright. Like if you’re selling coffee, it might seem like you don’t need to emphasize how great the product is, and consuming it on a regular basis, because most coffee drinkers already know why they’re drinking coffee on a regular basis. And yet, and yet, that is a place where I would start about that, like, are you? Are you asking your fans of your product or potential new fans? Like what it’s like without coffee on the day that they want the most? Right? Like? Are you asking that question? Are you reinforcing what it’s going to be like, if they’re out, you know, and so that’s a good place to start with copy. And emphasizing, like regular usage, consumption benefits, especially if you have a product that’s like solving a problem, right? Like, like, it’s if it’s a supplement or something like that. So that’s that those are the places I would always start. But then again, that’s why I kind of come back to wanting to get to this question of why people are buying it. You can, if you just start offering the subscription, you’re gonna see some conversions. But then you want to kind of understand that that consumer a little bit more, why did you pick this instead of one time, the dream is to get people in a subscription right away. But most of the time, when you’re starting, at least people are going to be buying your product a couple times, and then subscribing. Or people are willing to try it, but they’re just going to cancel if they don’t like it. So you want to understand those customers a little bit better. So you can frame that offer better to increase conversions.
Ben Donovan
Yeah, I think that’s really interesting that, you know, because my initial thought would be, well, I’ll just offer a subscription, cheaper, you know, and then people will sign up, I love how you didn’t just straight away go to price. You know, it’s about selling the value of it. copywriting is obviously the really important factor.
Matthew Holman
I think it should be emphasized, you can test price like instantly, right? Like, if you want to test a sale over the weekend, you can go in and I mean, you can change update pricing on your website in five minutes, right. So it’s always easy to go to there. And so I do like science saying some of the other things if you want to invest long term, and that’s why I say collect data, talk to customers find out the reason they’re buying. Because if you can start to identify some like really interesting ideas of why somebody subscribed versus why somebody didn’t. That becomes a lever you can pull in your marketing, right, and not just your product page, but the actual ads or articles that are driving people to that page.
Ben Donovan
Yeah, and I imagine that your most successful clients would be utilizing a lot of follow up email marketing someone’s purchase once part of their follow up closing costs gonna be promoting the subscription
Matthew Holman
inserts definitely like if you’ve if you’re on the third order, third one time order. People are getting inserts about around subscriptions, like, Hey, you bought this three times. Yeah. Why don’t you Subscribe and Save?
Ben Donovan
Yeah, that’s a really good shot, because anybody that’s bought it three times would surely be a shoo in for a subscription.
Matthew Holman
Yep.
Ben Donovan
That’s really good. And so once they’re signed up, enjoying the subscription or enjoying the product, what kind of churn rates do you generally look for? Is it product dependent? Give us some thoughts on that side of things.
Matthew Holman
Yeah, I think one of the interesting things is, it’s really easy to look at, I think most software will show you average subscription lifecycle like basically how long somebody’s around. And I think that that’s that can be a little bit misleading. Because say, like your average, you know, say you’re selling a monthly subscription and say the average is five months. Well, that’s that data can be skewed because you might have a core group of customers that stick around for forever. And then you have always there’s always with subscriptions going to be a percentage of people that sign up for the subscription a month one and they cancel, right and depending on your business that that percentage can vary. So so instead of I teach brands instead of looking at it at an average necessarily to start looking at common drop off points. And what I mean is like, month zero, you might use month zero, you have 100% retention, that’s your first purchase, but say month one, do you have a 90% retention, meaning you lost 10% of people before the first subscription fired? month two, you might have 80%, month three, you might have 65%. Right? So month three, we see that it went from 10% 10% to 15%. You know, and maybe month seven to eight is like, there’s like negligible. So I’m really worried about that month three to month seven. So that’s kind of what I start getting into is like, think about the over time how people are behaving and where your biggest drop off points are. And that’s when you want to get into the why if you’re uncovering reasons why, through turn reasons, cancellation reasons. Understanding behavior consumption, is it. Sometimes it’s something as simple as, hey, they wanted to try a different flavor. Like they drank this coffee for three months, and they were interested in trying something different than and so maybe you need to build a little bit of an upsell feature at month two into your flows, right? It’s like those are types of the types of information that you just don’t know until you’re getting on with it. Are they not seeing enough value on that? Right? Do you need to do a better job of reinforcing the benefits or reinforcing engaging more with your customers is the start the kind of thing you want to get into with the Yeah, from looking at churn that way?
Ben Donovan
And what some of the most common, easily solvable reasons that people are seeing churn, you know, if you could identify the top three, five, whatever reasons that your subscriptions
Matthew Holman
yeah, there’s, there’s two different was looking at. So one of the most common ways is actually a passive churn, which is like credit card, credit cards are expiring. And there’s tools you can use to do that, as well as just making sure you have a good communication system in place for when that happens, right that your software is notifying them via email that this has happened. And then your customer service team is following up. Because a lot of times those people are like 60 70% Winback, on a canceled credit card. They don’t want the subscription to cancel, so you need to reach out to them. So that’s kind of like passive, but more active is the essentially the most common reason we see is like people have too much product. And so whatever they were getting, they now have too much of and so a really common practice, especially on Shopify right now is this idea around the skip, right, you want people to push their their order out. You want people to just say, oh, like you have too much, just just push it off into the future. So there’s some whether using text, whether using email, there’s a way of engaging with people to let them know that their orders about the process. And depending on your brand, I don’t like suggesting the skip. I do like asking people how much product they have. I don’t have a ton of data around it, because the merchants that are testing that it’s a little bit different. But for me, I like the psychology around, you’re not suggesting that they skip right away, because then they will just do it. But around asking somebody to think about how much product they have. Because if they think about it, then they’ll then decide whether they should be skipping or not. So you can build the flow a little bit differently that way.
Ben Donovan
Yeah, no, my Amazon one it says, each time they’ll email or text me and it’ll say, if you need to make changes to your order, go to this link. Right. So it’s very Yes. Yeah. Subtle. Exactly. Yeah. So you mentioned text area, your clients, your most successful clients, are they utilizing text a lot in this process?
Matthew Holman
A lot of them are but a lot of them are still relying on email, you’d be amazed at how many brands are still not implementing SMS in their marketing?
Ben Donovan
Yes, I think the viewpoint on it is definitely changing, isn’t it? Because I think, you know, a couple of years ago, the idea of text marketing was seen as almost a bit intrusive, where people really didn’t like that you’re getting a lots of complaints. But everyone is saying that it’s working really well.
Matthew Holman
It’s certainly it’s regulated more tightly than email is. So there’s a lot of things you can say or can’t do within text. But if you think about it as a conversation, like the idea of asking somebody like, hey, like your orders about the process, like you could say, just say do you want changes you say like, how is the product treating you do you need to make any updates, right? And people can do that right? Within a text message, they can reply, it’s a web hook can change change enough to empty or update the order really easily. So it’s definitely an improved customer experience that people like being communicated with that way.
Ben Donovan
Yeah. And then do you suggest like a different way of communicating. I mean, I know I’ve recently tried a new standard like a subscription junkie here but I tried a new like a coffee subscription, I got a new coffee machine and I went from pods to you know, like actual beans and so getting the beans delivered and and so I’ve loved the convenience of it on Amazon with the pods, but now I’ve got the beans. You know, I wanted to maintain that kind of convenience. And so I’ve signed up for it and it’s it’s a bit different to Amazon because they were like email me every week. Send your orders on the way they’ll kind of send me tips about how to use it. They’ll engage me in the process of the the brewing process, the educational stuff, and obviously I suppose then they are educating me on how to you get the most out of them products, I enjoy it the best. And I suppose then I don’t mean to answer the question for you. But I imagine your best clients again, must be communicating with their subscribers differently more frequently to their others.
Matthew Holman
Yeah, it’s it again. So I’ve mentioned this early on, but the term is engagement. So thinking about this brand is engaging with you more, and what I think is really fascinating, like the example you just gave is perfect, because what more could they offer you on a subscription to keep you around longer. And if you are roasting your own beans or putting your own beans in this press, it’s a little more custom, it’s a little bit different. You know, maybe you are a little bit more select as a coffee drinker, right. And so the idea might be that coffee related content, how they curate their beans, how they like develop farming systems, and, and you know, all those things. Maybe that’s a video that you get access to that you don’t otherwise, right, or you want to hear from, like the coffee expert that that brand uses to select their beans like, would that be fascinating to you. So it’s this idea of you can add additional content, and you want to make it so that people can select some of that, right. So people aren’t necessarily getting just spammed all day long. But the idea is you’re creating a deeper relationship with somebody and on the brand side, that means you get more data. I know, I know, Ben’s consumption of coffee better, I know what he prefers. From a flavor standpoint, I know what he likes or doesn’t like about his past coffee, or potentially new coffee, and I can build other products out around that I can build a better experience around that you get just a lot more information and makes the engagement, the retention that much stronger.
Ben Donovan
Yeah, definitely. The example keeping on with the example of the coffee, early on, the obvious way to keep me as a customer is educating me on how to use these beans, how to grind them in the right way how to, you know, use them in my machine in the right way to get the best tasting coffee out of it, because then I’m going to enjoy it keep buying it, that’s an obvious one. But you know, it gets to the point where, of course, I can only learn so much about the coffee. And the only reason I’m keeping it subscription is because I like the coffee, right. But then there may be other coffees, I could try there could be, you know, different options out there. So once someone kind of gets into, and I suppose it would carry across in lots of examples, you know, face cream or whatever, you know, how, after that initial period of educating the customer, what are some things sort of 3 6 12 months down the line that can keep a customer for a really long time? Because that’s got to be the ultimate goal, right? 12 24? First, great customer, right?
Matthew Holman
So when are talking about churn earlier, I was mentioning like these common drop off points, and what happens when you’re looking at your subscription data as you start to uncover like, hey, if I can get somebody to month seven, right, then then they’ll be around for two years. Yeah. So the retention data is really teaching you from your own customer base. And this is why I again, to emphasize the idea behind launching an MVP and not worrying too much about making it too complicated, because you actually need a lot of time to gather retention data to know what people are doing or not. So you actually start to learn like what’s what’s working. So this brand, I would assume has a pretty good idea that if they can get you to month six, for example, you’re going to stick around for a long time, because at that point, you have done it all, you’ve watched the videos, you’ve consumed it, and now you’re just a fan, the idea that you would leave at that point is actually a lot less likely. So this is actually maybe the opposite of an answer is you actually might not have to do as much at that point, it’s actually more about upsells and other value as you can offer, right? It’s like, Hey, Ben, you’ve been with us for 12 months, we’re going to give you a free month, right? We’re going to give you a free discount, we don’t give this we only give this to our best customers, right we, whether it’s discount other products, I think upsells are like if you’ve been around with the brand, that long, you’re going to trust them, you’re going to be maybe interested more in trying other offerings they have, that’s when the they can really start to unpack more LTV from you. So I would think that it’s more about selling directly engaging in that way. But But realistically, it’s it’s not the retention is a little bit easier. But you also sometimes get less data around that point, right? Somebody between month 12 And month 14, you know, maybe they’re just tired of it. And they just want to do something different, right? Or, you know, decided they have a new job. And now there’s a Starbucks in the lobby of their job. And so they just buy Starbucks every day, you know. So there’s, there’s some ways where you just can’t win that. But it is really about understanding the journey from that initial point to trial phase getting to it, and getting them over that hump into that green pasture where it’s where it’s a lot easier to retain.
Ben Donovan
Yeah, Definitely the brands that are doing this, well what percentage of their revenue is going to be coming from subscriptions
Matthew Holman
60 to 70%
Ben Donovan
Really that high. So you’re gonna see 20 25
Matthew Holman
A lot. I mean, a lot of brands do subscriptions pretty well and they get 20 30%. But the ones that are because what ends up happening is they start to change their acquisition strategy to go after more and more subscription to customers that are will go on a subscription. So, you know, the product page is designed that way the marketing materials are designed that way. And so they’re looking at converting at a higher rate. So yeah, the best ones, it’s like 60 70%, if not a lot higher, because that ends up becoming the core focus of their business.
Ben Donovan
Yeah. I mean, that’s so much value to the business, you know, we talk a lot about, you know, positioning for an exit, you know, getting acquired by, you know, someone and and that’s gonna add so much value, isn’t it to a business, that recurring revenue, that level of it as well, such an asset?
Matthew Holman
Right, right.
Ben Donovan
So, in terms of case studies, obviously, I’m aware, you’re not able to give all the details of clients and stuff like that. But are there any kind of key kind of case studies or, you know, projects that have gone really well, you can draw on and give examples of to, you know, how it was implemented, or the changes it made? or anything like that?
Matthew Holman
Yeah, without necessarily getting into like, QPilot specific stuff. Like, you know, how great we are, because that’s just maybe a little bit? Well, I mean, there’s some fun things, I think for the purpose of like the the spirit of our discussion, one of the best examples from a case study standpoint is so so I heart dogs is one of our customers, then they do a lot with a donate, they donate pet food to shelters based off of like, you know, you buy cat food, they donate cat food, right? So so there have a great humanitarian, maybe, you know, pet mission on what they’re doing. But they essentially launched with us for and for around two years, they weren’t doing much with their subscriptions, they were focusing on bringing in like their landed cost, and you know, how to boost their average order value, because the subscriptions wasn’t necessarily super profitable for them. So, but they were collecting data during that timeframe. And one of the things that they learned that was really, like most businesses, people had too much product that was the like, the number one reason for cancelling. And the reason I bring this up is because of the lesson here is they started to get into why people had too much product, because regardless of your brand, there’s a reason why people aren’t using the product the way you thought they would. And the information that they got on this pet food was that depending on the size of the dog, or the cat, cat, what cat systems, that depending on the size of the dog, people would not be sure how much to order. And so they were churning people, because they had a little dog and they had too much food, or they had a big dog and they had too little food, they overestimated what they should order. So they went back to the drawing board and redesigned their landing pages. So that now when you’re on there that one of the first things you do is you select how big your dog is estimated size, and then it makes a recommendation default into the subscription option on how much food you should get. And on this schedule, you should get it. And what they saw was like a, like 25% lift in conversions and like a 30 to 40% lift in retention. So they’re basically making a change to the product page made their retention better. And so why I emphasize this data so much is because you start to collect reasons on why people cancel. And when you can marry that with the information on what people are thinking or trying to figure out on the product page. You can create this flywheel where you’re actually creating this unified holistic experience that’s catering to what people’s need is for that product. You know, and that’s I think, is the best lesson they’re the most success that brands are finding is they’re they’re, they’re uncovering the reasons why people love the product. And they’re doubling down on those. So I heard dogs does all this messaging related to, you know, remember, we’re donating to shelters because of your purchase. So that that they’re hitting that heartstrings, because that’s one of the main reasons why people buy in the first place. And then they’re also making sure they overcome their friction points that the reasons why people churn because they have too much product because they didn’t estimate the right size for their dog. Well, now they do a lot better at doing that helping people figure that out.
Ben Donovan
Yeah, that’s really good. I love how you mentioned the how they reinforced the values, the first initial values that made them someone buy, they continue to reinforce those, because it’s as less as much as it is a less is less work to get them to buy the second, third, fourth time if they’re subscribed, it’s still as a transaction, right? You still need to convert them each month to keep the subscription. So reminding of them of why they purchased is a great idea.
Matthew Holman
And even if something is like, Oh, well, I’m just gonna say a great example I was giving a brand the other day was they were talking about putting gifts at there. So they had identified their biggest drop off point. Let’s say it was like month three to four and they were going to start giving some gifts that were like ancillary to their product as a means of trying to but but they people were canceling because they weren’t using the product, which again is a common problem. So the idea is like, well, you could put inserts into all the boxes to help with the unboxing experience that have like user generated content around the benefits they’ve seen from from regular usage on the product and that in the cost of printing like, you know, 10,000 inserts is nothing compared to the cost of like 10,000 gifts. And so. So again, it’s just thinking about ways you can have greater engagement, you can reinforce the benefits remind people of why they bought it in the first place. It’s just common, like those are ecommerce basic practices, and they should be used within the subscription lifecycle, too.
Ben Donovan
Yeah, that’s awesome. And I love the thought you shared before as well about setting up on the initial purchase, you know that how you frame the purchase? And the copy the story you tell? In the initial purchase conversion is going to help with the retention, real key for people absolutely through that. So it’s really good man.
Matthew Holman
Absolutely.
Ben Donovan
In terms of a couple more questions, and then we’ll sort of look to wrap up, but a couple of things. In terms of shipping. How are most of your clients kind of solving the process of shipping is all completely automated, they have something kind of hooked in with Shopify WooCommerce, that just picks up the, you know, subscription orders and ships them out on time.
Matthew Holman
Yeah, so shipping is a little bit different. I mean, we we are dependent on the typical order management system. So we’re, essentially we’re injecting the order into Shopify or WooCommerce. And then they fulfill as normal as they would for anything else. If, if the order has specific like pick and pack requirements, like say you’re triggering month, three of the order, there’s some logic we can use to append to the order so that people know that like, it comes up in ShipStation, hey, this is a number three, it needs an extra insert, kind of thing. There’s, there’s some functionality there. A lot of the ways that we do really well with shipping is actually related to like, like similar cart rules on the subscription order. So for example, if you want to trigger free shipping on a $75 threshold within the cart, it’s easy to do right now, there’s tons of things you can make do that. We do that on a subscription order. So if you want people to incentivize them to increase the average order, or the order value on their subscription, you can use shipping rules for that, if you wanted to make certain products free shipping or or not. You can do that within hours as well.
Ben Donovan
Yeah. Nice. And then the last question I just had was about more like bespoke subscriptions, you know, like clothing is one I’ve seen, you know, bespoke tailored box of clothes, or, you know, makeup, I suppose, or food, food boxes, that kind of thing. Do you see much success with a more sort of custom approach?
Matthew Holman
So we don’t have a lot of people doing it quite that way, just because it’s less reliant on automation, as it is on the the customization part. So but yes, I think it’s possible, it just comes down to the level of engagement information you’re getting from people. That’s, that’s typically more of like a, there’s a lot of work to prepare those boxes, but also, you’re looking more for the Wow, and the impressive effect. And it’s less about like, you know, scaling the, you know, a bottle of CBD that you’re selling to a million people.
Ben Donovan
Yeah. Good.
Matthew Holman
But certainly, like Stitch Fix is like, running into some issues. And they’ve been kind of the leader in that space for a few years now.
Ben Donovan
Yeah, I think would be when they’re like logistical issues. How do you, you know, how do you customize it scale? I mean, that’s always going to be an issue, isn’t it?
Matthew Holman
Right
Ben Donovan
Good. So just wrapping up with anything that I haven’t asked you that I should ask you, he feels important to share with people that are just getting started on the subscription journey.
Matthew Holman
Yeah, I would just, you know, just maybe double down on that idea of like, communicating with customers and getting a little more feedback on what people like about your product, what they’re expecting out of your product, I think is a really good thing to know. Because you can use that on your marketing materials and how you’re positioning yourself from month to month from ordered order.
Ben Donovan
Yeah, should every brand owner be looking to add subscription avenues to their brand? Is that too much, people force it too much.
Matthew Holman
I don’t think it’s getting forced, while I it does get forced, I think it’s something you should look at. There are, there’s just really kind of like two different approaches. There’s one where this is something I’m just going to add. And if people do it cool. And I’m going to put in some software to automate it, and I’m going to build a couple flows, I’m not going to invest heavily in it, and see how it goes. And so for a lot of times, I think that’s not It’s not that hard to actually just kind of get going and start offering that and fulfilling that especially again, if you’re just doing like a a consumable product that it seems like it would fit so I think it’s not too hard to get that off the ground. The one that requires a lot more thought and purpose is something that’s like you want to kind of go all in on it right I want to launch ads specifically for this, I want a product page that’s designed for this. And that is that again, the time where it’s like you know, just be careful around that if you can launch an MVP without going making a huge investment in it and start gathering data on what people like and don’t like. That is always the the process I would recommend for any good experiment with any calm.
Ben Donovan
Yeah, nice. Nice. And I know I said last question, but that made me think of another one, he said last product page. Any kind of tips was of advice for a product page that is optimized for subscriptions?
Matthew Holman
Yeah, so like most, you’re gonna go with some of the still the basic rules right around great product photography, great titles, you definitely want to lead with benefit. Benefit rich copy. An experiment, you could try as defaulting to the subscription option. Some some brands find success with that some don’t. But I would certainly work on looking at what what it looks like for somebody that’s using the product regularly, right. So for me, a good example is I take I take delta eight CBD for sleep. So you know, if you’re selling Delta eight, there’s a lot of different reasons that can get bought. So maybe you have a couple different variations where you’re directing people, and one of them is sleep. And it’s talking all about what life is like taking delta eight every day. And that means you’re getting a full night’s sleep you’re getting you know what I mean? You you want to evoke the outcome for people so that they start thinking like, okay, yeah, maybe I do need this all the time. So I can have that. Yeah, that’s where I would start with everything and then play, you can always experiment with discounts and stuff after the fact too.
Ben Donovan
Yeah. I mean, it sounds like a lot of the core principles that we were talking about for, you know, converting a standard sale are going to be very much applicable to subscriptions is just the delivery of that on the back end.
Matthew Holman
Right, exactly. And just how you’re making sure you’re tracking it like you would any other experiment, right? Like you’re, you’re tracking your conversions, who’s touching the subscription button versus not, you know, hitting hitting that frequency option, and then see what motions you can do to increase that activity and ultimately result in a sale.
Ben Donovan
Good. So finally, then on QPilot that’s helping store owners manage all this stuff. Tell us a bit about that, and where people can find out some more.
Matthew Holman
Yeah, absolutely. So you can visit visit at qpilot.com. If you’d like to learn more, we’re really do really well with people that are seeing either delivery or shipping outcomes that they need to be a little bit different a little bit better. That is like if you’re having more product variations, and or, you know, we’ve got brands that are doing delivery, like people can switch from shipping to a local delivery pickup option within the subscription order that stuff that we do really, really well as well as data around change. So if you just set and forget it static subscription, we can still probably help but that’s not what our bread and butter is. It’s around subscriptions that can change.
Ben Donovan
Yeah nice. And so is q the letter Q pilot.com.
Matthew Holman
Yes, that’s correct. Yep.
Ben Donovan
Good stuff. We’ll leave obviously the link in the description in the show notes, etc. But just in case people want to head there and check it out. That’s great. Matthew, thanks for joining us on the show today. I feel like that’s really some super helpful information from different angles that I probably didn’t expect it to go in, which I think is really helpful. So yeah, thank you so much for coming on and sharing your knowledge.
Matthew Holman
Absolutely. It’s been a pleasure, Ben. Thank you.
Ben Donovan
Awesome. Well, thanks for listening everyone. I hope you got a lot of value out of that. Do explore the idea of subscriptions because it can obviously really help your income month to month but also the value of your brand definitely worth exploring. Check out QPilot in the link will be in the description the show notes below. And check out all they have to offer there and we’ll see you in the next episode real soon.
Well, Hey folks, welcome to another episode of The Brand Builder show in today’s episode, we are chatting to Matthew Holman from QPilot, and we’re talking all about subscriptions, recurring revenue, what kind of products subscriptions work for and which kind of products they don’t how to improve conversion rate for subscriptions, how to decrease churn rate all of the important metrics that you need to be aware of if you’re going to run a successful subscription model within your Ecommerce brand. If you liked episodes like this, be sure to like this episode on YouTube, subscribe on your favorite podcast player. And if you want to hear more from us do sign up to our newsletter at BrandBuilderUni.com/subscribe. Now let’s get into the episode. Awesome. Well, hey, Matthew, welcome to the brand builders show today. Thanks for coming on the episode.
Matthew Holman
Absolutely, thanks, man.
Ben Donovan
That’s gonna be a good one talking about all things subscriptions, recurring revenue, all those juicy words that ecommerce brand owners love to love to hear, but sometimes struggle to implement and find solutions for so we’re going to try and make this a real practical episode, find some solutions, and help people optimize if they are already running subscriptions. And so it’s going to be action packed full of lots of info. Before we get into that, Matthew, why don’t you tell us a bit about yourself about how you found yourself doing what you’re doing today?
Matthew Holman
Yeah, absolutely. So yeah, run growth, which is a fancy way of saying marketing at cute pilot, which is a SaaS company that is delivering great subscription experiences for brands to give to their customers. I do a lot of work with community, I love building up the Ecommerce space. And I kind of is kind of funny, I was actually doing marketing at an Ecommerce logistics company. So we were selling shipping technology, which is pretty boring. But you know, so we had to get a little creative and how we’re doing content and education and and ultimately just kind of want to take the plunge into more of entrepreneurship. So you know, cutie pie that was looking for a marketing co founder, and I was able to, you know, got connected with the founder of key pilot and learn more about the space and dough head in and you know, two years later, here we are.
Ben Donovan
And what kind of solution is Kubala? Is it to help merchants run subscriptions on a ecommerce store? Or is it more specific?
Matthew Holman
Yeah, absolutely. So you can think of a kind of like a typical app or plugin that you’re adding to your store. And while it’s kind of like tip of the iceberg, just doing that initial conversion element. There’s a lot that the platform does from an enablement standpoint. Ultimately, we like to think of subscriptions are typically viewed as somewhat inflexible. So QPilot is really geared towards flexibility. So you can a customer can change literally anything they want on there without disrupting the brand’s operations. So there’s a lot of integration work and operational, like logic that we’re running to make sure that the brand can literally sell whatever they want to whoever they want within a subscription.
Ben Donovan
Okay, awesome. And is it polite platform specific?
Matthew Holman
No. Well, WooCommerce and Shopify specifically, right now
Ben Donovan
you have two pretty big players covers a lot of the market.
Matthew Holman
And that’s, that’s awesome.
Ben Donovan
Just out of interest, are you? What kind of volume do you see for Shopify vs. WooCommerce? Because I think Shopify gets talked about a lot. But WooCommerce is actually bigger than a lot of people realize, I think.
Matthew Holman
Yeah, so from like, from our own business, we’re fairly new to Shopify. So like, our own volume is a little bit skewed favoring WooCommerce. I think what it’s what’s interesting is that there are more WooCommerce stores than there are Shopify stores. But WooCommerce gets used in a lot of different ways than just selling like, you know, I’m shipping pet food or like a shirt, like WooCommerce is used for digital subscriptions. There’s big brands that are using WooCommerce to manage like a content management system, like basically, they want to blog with WordPress, and so they want to be able to take payments. So it gets used in a wider variety of applications. But when it comes to just straight ecommerce play, it’s kind of Shopify is kind of undeniable as a as a growing source. And I think that you’ll see you see more established companies doing more revenue on Shopify than you do on WooCommerce.
Ben Donovan
Yeah, definitely. Okay, cool. So let’s talk about subscriptions. Then there’s obviously a lot of draw and a lot of talk about recurring revenue subscriptions, for obvious reasons, growing customer lifetime value, right? Yeah. As marketing gets more expensive, customer acquisition costs grow, you know, something that clearly keeps people on the back end, of course is attractive to ecommerce brand owners. But right at the beginning of that process, is this a model of revenue that every brand owner should aspire to is only for a few? We only speaking to a narrow audience here Well, what are your thoughts on that?
Matthew Holman
Yeah, I think it’s it’s it’s a little bit narrower, but it’s growing. I think the subscriptions are definitely increasing their adoption and how people feel about them are definitely changing in an upward to the right motion. I think really, cuz I get asked that question a lot, right. And there’s a lot of different business models, whether you’re talking ecommerce or even service providers and others, like should I implement a subscription model and and and a lot of finance people or your board might say, Yes, you got to do this recurring revenue is predictable, but it really needs to come down to a word I’m going to use a lot when we’re talking is the word engagement? Is, is there an opportunity for you to engage more with your customers? And subscriptions is a really great way to do that.
Ben Donovan
Yeah, that’s awesome. Do you are there particular, obviously stuff like food, beverages, that kind of thing? Because it is a consumable is going to really lend itself to a subscription model? Do you see that product type widening, as well? People offering more, you know, product types for this kind of? Model?
Matthew Holman
Absolutely. I think, well, the way a lot of people have envisioned subscriptions for a long time had been through subscription boxes, this idea of like, you know, you’re getting this delight, whether it’s every month or every quarter, you know, like say you’re getting butcher box, or you’re getting, you know, some some, like a cosmetic thing, right? Where they’re picking different things for you to try. Right. So that’s that’s one element. And then you have the one you mentioned, which is consumables, right? Pet food supplements. CBD is like playing massively into that space right now. And so somebody’s using something regularly, they want to get on a subscription, but I think we’re starting to see more innovation to is things related to like, refills, right, like you have an air filter system, right? So you sell the system, and then you put the filter on a subscription. So basically, and also, it’s coming down to technology is starting to advance now. So it’s less about, you’re using this every month, so you’re just gonna get it every month. But the ability to kind of schedule the fact that I want something like this every three months, because I use it less frequently than you do, or I want something every six months is is allowing the space to continue to grow.
Ben Donovan
Yeah, I’ve got a few things like on Amazon, Subscribe and Save. You know, like just different supplements and coffee and that kind of stuff. And it’s so flexible, you know, you they’ll remind you when it’s coming up, and they’ll almost prompt you to edit it. And do you want it in that frequency? Do you want to change the quantities? It’s so easy to do. And that’s obviously where I stick with it? Because I know that it’s super easy to change. And so I imagine then the retention rate is huge. Is that something then the technology that you guys run helps manage?
Matthew Holman
Absolutely, yeah, definitely. So like from a technical standpoint, it can be difficult, like say, within a subscription, maybe you want to double the size of your coffee order, like right now a limit a common limitation with software and brands is that you don’t like say your Are you just eating the shipping cost? Are you charging for shipping? Like, do you know how much inventory you have on that product? So you can make it available in the subscription portal? Right? Like there’s there’s there’s just little things logistical things that kind of come up. So to be able to make that possible, you have to solve some of those problems, because you want it to be really flexible, like, you know, you’re getting coffee, and you’re going to be out of town for two weeks on vacation. Do you want your coffee subscription paused? Or do you want to redirect it to where you’re going to be? Right?
Ben Donovan
Yeah, that’s great. Definitely redirected to where I’m gonna be. Now, that’s good. For someone that’s just looking at getting started with subscription, recurring revenue, you know, maybe they’ve got a brand that they feel has potential to lean into it. What is the kind of this the what are the starting steps for people? If they’ve not done subscription before, and they want to kind of explore the avenues? Can you give us a bit of a guide on how to get started?
Matthew Holman
Absolutely. Yeah, let me start with like the things not to do, or, you know, you’re gonna see there’s a lot of brands out there that do really, really well, with subscriptions. They’ve got these incredible offerings, right? Like Dollar Shave Club is one that I ordered them a ball guy shaved my head regularly. They’ve been doing this for a long time, right. So they have a lot invested in their customer experience and their technology. So the first thing, the biggest mistake I see people make is they come up with this really complex offering that they want to do. And so like most things, you want to actually kind of keep it as simple as possible. But some of the key fundamentals you want to think about as like, first, are you being asked for this. So a lot of brands, if you’re selling a consumable product, you should be getting you have even just a decent sales volume, you’re doing at least a few 100 orders a month, you’re you should be getting requests for a subscription. And if you’re not, that’s a good place to start asking why. The other thing is thinking about what kind of value am I giving here? Is it just I know that people are buying this on repeat? So I’m just going to offer a subscription and give them 10%? Off? Because that makes it predictable for me? Or is there something more I want to get out of it? And the reason I say that is because you want to be collecting data on not just why people cancel, but why people are buying the subscription in the first place, what value are they seeing what possibility they’re seeing, what solution are they are they are they looking for? So any good subscription program should really just be thinking about a basic offering. And I’m going to be collecting data around the acquisition and like what my conversion rates are and then also churn reasons. And a lot of times when you’re initially doing this, it’s you don’t get data at scale. So you have to do more outreach, you have to talk to people to find a figure that out.
Ben Donovan
Yeah, definitely. I’d love to talk about some of those stats in terms of conversion, retention, churn, etcetera. You know, let’s start with conversion rate. How how do people increase conversion rate with a subscription? Because a subscription is obviously a commitment, I imagine, you know, I don’t run a subscription model myself. So I, you know, I imagined the, one of the biggest barriers to conversion is going to be, well, I’m committed to this, and it’s going to charge my credit card every month. What are some of the things that you would recommend to people starting this process for just getting that initial conversion, signing people up on the subscribe, option?
Matthew Holman
Yeah, so first things first is thinking about what are the common reasons why people don’t do subscriptions. One is they’re worried about ending up with too much product. The second one is they’re worried about forgetting it. Three, they’re often wondering if this is something they really need on a consistent basis. So I would start by addressing those three things. One, this is easy to cancel or manage at any time. And that needs to be a pop up modal or messaging that’s like, right by the subscription option. The second thing is like if you’re worried about having too much product, same thing, it’s easy to pause, skip, change the frequency you want, is something important to offer. The third thing is really just as a question of messaging and copyright. Like if you’re selling coffee, it might seem like you don’t need to emphasize how great the product is, and consuming it on a regular basis, because most coffee drinkers already know why they’re drinking coffee on a regular basis. And yet, and yet, that is a place where I would start about that, like, are you? Are you asking your fans of your product or potential new fans? Like what it’s like without coffee on the day that they want the most? Right? Like? Are you asking that question? Are you reinforcing what it’s going to be like, if they’re out, you know, and so that’s a good place to start with copy. And emphasizing, like regular usage, consumption benefits, especially if you have a product that’s like solving a problem, right? Like, like, it’s if it’s a supplement or something like that. So that’s that those are the places I would always start. But then again, that’s why I kind of come back to wanting to get to this question of why people are buying it. You can, if you just start offering the subscription, you’re gonna see some conversions. But then you want to kind of understand that that consumer a little bit more, why did you pick this instead of one time, the dream is to get people in a subscription right away. But most of the time, when you’re starting, at least people are going to be buying your product a couple times, and then subscribing. Or people are willing to try it, but they’re just going to cancel if they don’t like it. So you want to understand those customers a little bit better. So you can frame that offer better to increase conversions.
Ben Donovan
Yeah, I think that’s really interesting that, you know, because my initial thought would be, well, I’ll just offer a subscription, cheaper, you know, and then people will sign up, I love how you didn’t just straight away go to price. You know, it’s about selling the value of it. copywriting is obviously the really important factor.
Matthew Holman
I think it should be emphasized, you can test price like instantly, right? Like, if you want to test a sale over the weekend, you can go in and I mean, you can change update pricing on your website in five minutes, right. So it’s always easy to go to there. And so I do like science saying some of the other things if you want to invest long term, and that’s why I say collect data, talk to customers find out the reason they’re buying. Because if you can start to identify some like really interesting ideas of why somebody subscribed versus why somebody didn’t. That becomes a lever you can pull in your marketing, right, and not just your product page, but the actual ads or articles that are driving people to that page.
Ben Donovan
Yeah, and I imagine that your most successful clients would be utilizing a lot of follow up email marketing someone’s purchase once part of their follow up closing costs gonna be promoting the subscription
Matthew Holman
inserts definitely like if you’ve if you’re on the third order, third one time order. People are getting inserts about around subscriptions, like, Hey, you bought this three times. Yeah. Why don’t you Subscribe and Save?
Ben Donovan
Yeah, that’s a really good shot, because anybody that’s bought it three times would surely be a shoo in for a subscription.
Matthew Holman
Yep.
Ben Donovan
That’s really good. And so once they’re signed up, enjoying the subscription or enjoying the product, what kind of churn rates do you generally look for? Is it product dependent? Give us some thoughts on that side of things.
Matthew Holman
Yeah, I think one of the interesting things is, it’s really easy to look at, I think most software will show you average subscription lifecycle like basically how long somebody’s around. And I think that that’s that can be a little bit misleading. Because say, like your average, you know, say you’re selling a monthly subscription and say the average is five months. Well, that’s that data can be skewed because you might have a core group of customers that stick around for forever. And then you have always there’s always with subscriptions going to be a percentage of people that sign up for the subscription a month one and they cancel, right and depending on your business that that percentage can vary. So so instead of I teach brands instead of looking at it at an average necessarily to start looking at common drop off points. And what I mean is like, month zero, you might use month zero, you have 100% retention, that’s your first purchase, but say month one, do you have a 90% retention, meaning you lost 10% of people before the first subscription fired? month two, you might have 80%, month three, you might have 65%. Right? So month three, we see that it went from 10% 10% to 15%. You know, and maybe month seven to eight is like, there’s like negligible. So I’m really worried about that month three to month seven. So that’s kind of what I start getting into is like, think about the over time how people are behaving and where your biggest drop off points are. And that’s when you want to get into the why if you’re uncovering reasons why, through turn reasons, cancellation reasons. Understanding behavior consumption, is it. Sometimes it’s something as simple as, hey, they wanted to try a different flavor. Like they drank this coffee for three months, and they were interested in trying something different than and so maybe you need to build a little bit of an upsell feature at month two into your flows, right? It’s like those are types of the types of information that you just don’t know until you’re getting on with it. Are they not seeing enough value on that? Right? Do you need to do a better job of reinforcing the benefits or reinforcing engaging more with your customers is the start the kind of thing you want to get into with the Yeah, from looking at churn that way?
Ben Donovan
And what some of the most common, easily solvable reasons that people are seeing churn, you know, if you could identify the top three, five, whatever reasons that your subscriptions
Matthew Holman
yeah, there’s, there’s two different was looking at. So one of the most common ways is actually a passive churn, which is like credit card, credit cards are expiring. And there’s tools you can use to do that, as well as just making sure you have a good communication system in place for when that happens, right that your software is notifying them via email that this has happened. And then your customer service team is following up. Because a lot of times those people are like 60 70% Winback, on a canceled credit card. They don’t want the subscription to cancel, so you need to reach out to them. So that’s kind of like passive, but more active is the essentially the most common reason we see is like people have too much product. And so whatever they were getting, they now have too much of and so a really common practice, especially on Shopify right now is this idea around the skip, right, you want people to push their their order out. You want people to just say, oh, like you have too much, just just push it off into the future. So there’s some whether using text, whether using email, there’s a way of engaging with people to let them know that their orders about the process. And depending on your brand, I don’t like suggesting the skip. I do like asking people how much product they have. I don’t have a ton of data around it, because the merchants that are testing that it’s a little bit different. But for me, I like the psychology around, you’re not suggesting that they skip right away, because then they will just do it. But around asking somebody to think about how much product they have. Because if they think about it, then they’ll then decide whether they should be skipping or not. So you can build the flow a little bit differently that way.
Ben Donovan
Yeah, no, my Amazon one it says, each time they’ll email or text me and it’ll say, if you need to make changes to your order, go to this link. Right. So it’s very Yes. Yeah. Subtle. Exactly. Yeah. So you mentioned text area, your clients, your most successful clients, are they utilizing text a lot in this process?
Matthew Holman
A lot of them are but a lot of them are still relying on email, you’d be amazed at how many brands are still not implementing SMS in their marketing?
Ben Donovan
Yes, I think the viewpoint on it is definitely changing, isn’t it? Because I think, you know, a couple of years ago, the idea of text marketing was seen as almost a bit intrusive, where people really didn’t like that you’re getting a lots of complaints. But everyone is saying that it’s working really well.
Matthew Holman
It’s certainly it’s regulated more tightly than email is. So there’s a lot of things you can say or can’t do within text. But if you think about it as a conversation, like the idea of asking somebody like, hey, like your orders about the process, like you could say, just say do you want changes you say like, how is the product treating you do you need to make any updates, right? And people can do that right? Within a text message, they can reply, it’s a web hook can change change enough to empty or update the order really easily. So it’s definitely an improved customer experience that people like being communicated with that way.
Ben Donovan
Yeah. And then do you suggest like a different way of communicating. I mean, I know I’ve recently tried a new standard like a subscription junkie here but I tried a new like a coffee subscription, I got a new coffee machine and I went from pods to you know, like actual beans and so getting the beans delivered and and so I’ve loved the convenience of it on Amazon with the pods, but now I’ve got the beans. You know, I wanted to maintain that kind of convenience. And so I’ve signed up for it and it’s it’s a bit different to Amazon because they were like email me every week. Send your orders on the way they’ll kind of send me tips about how to use it. They’ll engage me in the process of the the brewing process, the educational stuff, and obviously I suppose then they are educating me on how to you get the most out of them products, I enjoy it the best. And I suppose then I don’t mean to answer the question for you. But I imagine your best clients again, must be communicating with their subscribers differently more frequently to their others.
Matthew Holman
Yeah, it’s it again. So I’ve mentioned this early on, but the term is engagement. So thinking about this brand is engaging with you more, and what I think is really fascinating, like the example you just gave is perfect, because what more could they offer you on a subscription to keep you around longer. And if you are roasting your own beans or putting your own beans in this press, it’s a little more custom, it’s a little bit different. You know, maybe you are a little bit more select as a coffee drinker, right. And so the idea might be that coffee related content, how they curate their beans, how they like develop farming systems, and, and you know, all those things. Maybe that’s a video that you get access to that you don’t otherwise, right, or you want to hear from, like the coffee expert that that brand uses to select their beans like, would that be fascinating to you. So it’s this idea of you can add additional content, and you want to make it so that people can select some of that, right. So people aren’t necessarily getting just spammed all day long. But the idea is you’re creating a deeper relationship with somebody and on the brand side, that means you get more data. I know, I know, Ben’s consumption of coffee better, I know what he prefers. From a flavor standpoint, I know what he likes or doesn’t like about his past coffee, or potentially new coffee, and I can build other products out around that I can build a better experience around that you get just a lot more information and makes the engagement, the retention that much stronger.
Ben Donovan
Yeah, definitely. The example keeping on with the example of the coffee, early on, the obvious way to keep me as a customer is educating me on how to use these beans, how to grind them in the right way how to, you know, use them in my machine in the right way to get the best tasting coffee out of it, because then I’m going to enjoy it keep buying it, that’s an obvious one. But you know, it gets to the point where, of course, I can only learn so much about the coffee. And the only reason I’m keeping it subscription is because I like the coffee, right. But then there may be other coffees, I could try there could be, you know, different options out there. So once someone kind of gets into, and I suppose it would carry across in lots of examples, you know, face cream or whatever, you know, how, after that initial period of educating the customer, what are some things sort of 3 6 12 months down the line that can keep a customer for a really long time? Because that’s got to be the ultimate goal, right? 12 24? First, great customer, right?
Matthew Holman
So when are talking about churn earlier, I was mentioning like these common drop off points, and what happens when you’re looking at your subscription data as you start to uncover like, hey, if I can get somebody to month seven, right, then then they’ll be around for two years. Yeah. So the retention data is really teaching you from your own customer base. And this is why I again, to emphasize the idea behind launching an MVP and not worrying too much about making it too complicated, because you actually need a lot of time to gather retention data to know what people are doing or not. So you actually start to learn like what’s what’s working. So this brand, I would assume has a pretty good idea that if they can get you to month six, for example, you’re going to stick around for a long time, because at that point, you have done it all, you’ve watched the videos, you’ve consumed it, and now you’re just a fan, the idea that you would leave at that point is actually a lot less likely. So this is actually maybe the opposite of an answer is you actually might not have to do as much at that point, it’s actually more about upsells and other value as you can offer, right? It’s like, Hey, Ben, you’ve been with us for 12 months, we’re going to give you a free month, right? We’re going to give you a free discount, we don’t give this we only give this to our best customers, right we, whether it’s discount other products, I think upsells are like if you’ve been around with the brand, that long, you’re going to trust them, you’re going to be maybe interested more in trying other offerings they have, that’s when the they can really start to unpack more LTV from you. So I would think that it’s more about selling directly engaging in that way. But But realistically, it’s it’s not the retention is a little bit easier. But you also sometimes get less data around that point, right? Somebody between month 12 And month 14, you know, maybe they’re just tired of it. And they just want to do something different, right? Or, you know, decided they have a new job. And now there’s a Starbucks in the lobby of their job. And so they just buy Starbucks every day, you know. So there’s, there’s some ways where you just can’t win that. But it is really about understanding the journey from that initial point to trial phase getting to it, and getting them over that hump into that green pasture where it’s where it’s a lot easier to retain.
Ben Donovan
Yeah, Definitely the brands that are doing this, well what percentage of their revenue is going to be coming from subscriptions
Matthew Holman
60 to 70%
Ben Donovan
Really that high. So you’re gonna see 20 25
Matthew Holman
A lot. I mean, a lot of brands do subscriptions pretty well and they get 20 30%. But the ones that are because what ends up happening is they start to change their acquisition strategy to go after more and more subscription to customers that are will go on a subscription. So, you know, the product page is designed that way the marketing materials are designed that way. And so they’re looking at converting at a higher rate. So yeah, the best ones, it’s like 60 70%, if not a lot higher, because that ends up becoming the core focus of their business.
Ben Donovan
Yeah. I mean, that’s so much value to the business, you know, we talk a lot about, you know, positioning for an exit, you know, getting acquired by, you know, someone and and that’s gonna add so much value, isn’t it to a business, that recurring revenue, that level of it as well, such an asset?
Matthew Holman
Right, right.
Ben Donovan
So, in terms of case studies, obviously, I’m aware, you’re not able to give all the details of clients and stuff like that. But are there any kind of key kind of case studies or, you know, projects that have gone really well, you can draw on and give examples of to, you know, how it was implemented, or the changes it made? or anything like that?
Matthew Holman
Yeah, without necessarily getting into like, QPilot specific stuff. Like, you know, how great we are, because that’s just maybe a little bit? Well, I mean, there’s some fun things, I think for the purpose of like the the spirit of our discussion, one of the best examples from a case study standpoint is so so I heart dogs is one of our customers, then they do a lot with a donate, they donate pet food to shelters based off of like, you know, you buy cat food, they donate cat food, right? So so there have a great humanitarian, maybe, you know, pet mission on what they’re doing. But they essentially launched with us for and for around two years, they weren’t doing much with their subscriptions, they were focusing on bringing in like their landed cost, and you know, how to boost their average order value, because the subscriptions wasn’t necessarily super profitable for them. So, but they were collecting data during that timeframe. And one of the things that they learned that was really, like most businesses, people had too much product that was the like, the number one reason for cancelling. And the reason I bring this up is because of the lesson here is they started to get into why people had too much product, because regardless of your brand, there’s a reason why people aren’t using the product the way you thought they would. And the information that they got on this pet food was that depending on the size of the dog, or the cat, cat, what cat systems, that depending on the size of the dog, people would not be sure how much to order. And so they were churning people, because they had a little dog and they had too much food, or they had a big dog and they had too little food, they overestimated what they should order. So they went back to the drawing board and redesigned their landing pages. So that now when you’re on there that one of the first things you do is you select how big your dog is estimated size, and then it makes a recommendation default into the subscription option on how much food you should get. And on this schedule, you should get it. And what they saw was like a, like 25% lift in conversions and like a 30 to 40% lift in retention. So they’re basically making a change to the product page made their retention better. And so why I emphasize this data so much is because you start to collect reasons on why people cancel. And when you can marry that with the information on what people are thinking or trying to figure out on the product page. You can create this flywheel where you’re actually creating this unified holistic experience that’s catering to what people’s need is for that product. You know, and that’s I think, is the best lesson they’re the most success that brands are finding is they’re they’re, they’re uncovering the reasons why people love the product. And they’re doubling down on those. So I heard dogs does all this messaging related to, you know, remember, we’re donating to shelters because of your purchase. So that that they’re hitting that heartstrings, because that’s one of the main reasons why people buy in the first place. And then they’re also making sure they overcome their friction points that the reasons why people churn because they have too much product because they didn’t estimate the right size for their dog. Well, now they do a lot better at doing that helping people figure that out.
Ben Donovan
Yeah, that’s really good. I love how you mentioned the how they reinforced the values, the first initial values that made them someone buy, they continue to reinforce those, because it’s as less as much as it is a less is less work to get them to buy the second, third, fourth time if they’re subscribed, it’s still as a transaction, right? You still need to convert them each month to keep the subscription. So reminding of them of why they purchased is a great idea.
Matthew Holman
And even if something is like, Oh, well, I’m just gonna say a great example I was giving a brand the other day was they were talking about putting gifts at there. So they had identified their biggest drop off point. Let’s say it was like month three to four and they were going to start giving some gifts that were like ancillary to their product as a means of trying to but but they people were canceling because they weren’t using the product, which again is a common problem. So the idea is like, well, you could put inserts into all the boxes to help with the unboxing experience that have like user generated content around the benefits they’ve seen from from regular usage on the product and that in the cost of printing like, you know, 10,000 inserts is nothing compared to the cost of like 10,000 gifts. And so. So again, it’s just thinking about ways you can have greater engagement, you can reinforce the benefits remind people of why they bought it in the first place. It’s just common, like those are ecommerce basic practices, and they should be used within the subscription lifecycle, too.
Ben Donovan
Yeah, that’s awesome. And I love the thought you shared before as well about setting up on the initial purchase, you know that how you frame the purchase? And the copy the story you tell? In the initial purchase conversion is going to help with the retention, real key for people absolutely through that. So it’s really good man.
Matthew Holman
Absolutely.
Ben Donovan
In terms of a couple more questions, and then we’ll sort of look to wrap up, but a couple of things. In terms of shipping. How are most of your clients kind of solving the process of shipping is all completely automated, they have something kind of hooked in with Shopify WooCommerce, that just picks up the, you know, subscription orders and ships them out on time.
Matthew Holman
Yeah, so shipping is a little bit different. I mean, we we are dependent on the typical order management system. So we’re, essentially we’re injecting the order into Shopify or WooCommerce. And then they fulfill as normal as they would for anything else. If, if the order has specific like pick and pack requirements, like say you’re triggering month, three of the order, there’s some logic we can use to append to the order so that people know that like, it comes up in ShipStation, hey, this is a number three, it needs an extra insert, kind of thing. There’s, there’s some functionality there. A lot of the ways that we do really well with shipping is actually related to like, like similar cart rules on the subscription order. So for example, if you want to trigger free shipping on a $75 threshold within the cart, it’s easy to do right now, there’s tons of things you can make do that. We do that on a subscription order. So if you want people to incentivize them to increase the average order, or the order value on their subscription, you can use shipping rules for that, if you wanted to make certain products free shipping or or not. You can do that within hours as well.
Ben Donovan
Yeah. Nice. And then the last question I just had was about more like bespoke subscriptions, you know, like clothing is one I’ve seen, you know, bespoke tailored box of clothes, or, you know, makeup, I suppose, or food, food boxes, that kind of thing. Do you see much success with a more sort of custom approach?
Matthew Holman
So we don’t have a lot of people doing it quite that way, just because it’s less reliant on automation, as it is on the the customization part. So but yes, I think it’s possible, it just comes down to the level of engagement information you’re getting from people. That’s, that’s typically more of like a, there’s a lot of work to prepare those boxes, but also, you’re looking more for the Wow, and the impressive effect. And it’s less about like, you know, scaling the, you know, a bottle of CBD that you’re selling to a million people.
Ben Donovan
Yeah. Good.
Matthew Holman
But certainly, like Stitch Fix is like, running into some issues. And they’ve been kind of the leader in that space for a few years now.
Ben Donovan
Yeah, I think would be when they’re like logistical issues. How do you, you know, how do you customize it scale? I mean, that’s always going to be an issue, isn’t it?
Matthew Holman
Right
Ben Donovan
Good. So just wrapping up with anything that I haven’t asked you that I should ask you, he feels important to share with people that are just getting started on the subscription journey.
Matthew Holman
Yeah, I would just, you know, just maybe double down on that idea of like, communicating with customers and getting a little more feedback on what people like about your product, what they’re expecting out of your product, I think is a really good thing to know. Because you can use that on your marketing materials and how you’re positioning yourself from month to month from ordered order.
Ben Donovan
Yeah, should every brand owner be looking to add subscription avenues to their brand? Is that too much, people force it too much.
Matthew Holman
I don’t think it’s getting forced, while I it does get forced, I think it’s something you should look at. There are, there’s just really kind of like two different approaches. There’s one where this is something I’m just going to add. And if people do it cool. And I’m going to put in some software to automate it, and I’m going to build a couple flows, I’m not going to invest heavily in it, and see how it goes. And so for a lot of times, I think that’s not It’s not that hard to actually just kind of get going and start offering that and fulfilling that especially again, if you’re just doing like a a consumable product that it seems like it would fit so I think it’s not too hard to get that off the ground. The one that requires a lot more thought and purpose is something that’s like you want to kind of go all in on it right I want to launch ads specifically for this, I want a product page that’s designed for this. And that is that again, the time where it’s like you know, just be careful around that if you can launch an MVP without going making a huge investment in it and start gathering data on what people like and don’t like. That is always the the process I would recommend for any good experiment with any calm.
Ben Donovan
Yeah, nice. Nice. And I know I said last question, but that made me think of another one, he said last product page. Any kind of tips was of advice for a product page that is optimized for subscriptions?
Matthew Holman
Yeah, so like most, you’re gonna go with some of the still the basic rules right around great product photography, great titles, you definitely want to lead with benefit. Benefit rich copy. An experiment, you could try as defaulting to the subscription option. Some some brands find success with that some don’t. But I would certainly work on looking at what what it looks like for somebody that’s using the product regularly, right. So for me, a good example is I take I take delta eight CBD for sleep. So you know, if you’re selling Delta eight, there’s a lot of different reasons that can get bought. So maybe you have a couple different variations where you’re directing people, and one of them is sleep. And it’s talking all about what life is like taking delta eight every day. And that means you’re getting a full night’s sleep you’re getting you know what I mean? You you want to evoke the outcome for people so that they start thinking like, okay, yeah, maybe I do need this all the time. So I can have that. Yeah, that’s where I would start with everything and then play, you can always experiment with discounts and stuff after the fact too.
Ben Donovan
Yeah. I mean, it sounds like a lot of the core principles that we were talking about for, you know, converting a standard sale are going to be very much applicable to subscriptions is just the delivery of that on the back end.
Matthew Holman
Right, exactly. And just how you’re making sure you’re tracking it like you would any other experiment, right? Like you’re, you’re tracking your conversions, who’s touching the subscription button versus not, you know, hitting hitting that frequency option, and then see what motions you can do to increase that activity and ultimately result in a sale.
Ben Donovan
Good. So finally, then on QPilot that’s helping store owners manage all this stuff. Tell us a bit about that, and where people can find out some more.
Matthew Holman
Yeah, absolutely. So you can visit visit at qpilot.com. If you’d like to learn more, we’re really do really well with people that are seeing either delivery or shipping outcomes that they need to be a little bit different a little bit better. That is like if you’re having more product variations, and or, you know, we’ve got brands that are doing delivery, like people can switch from shipping to a local delivery pickup option within the subscription order that stuff that we do really, really well as well as data around change. So if you just set and forget it static subscription, we can still probably help but that’s not what our bread and butter is. It’s around subscriptions that can change.
Ben Donovan
Yeah nice. And so is q the letter Q pilot.com.
Matthew Holman
Yes, that’s correct. Yep.
Ben Donovan
Good stuff. We’ll leave obviously the link in the description in the show notes, etc. But just in case people want to head there and check it out. That’s great. Matthew, thanks for joining us on the show today. I feel like that’s really some super helpful information from different angles that I probably didn’t expect it to go in, which I think is really helpful. So yeah, thank you so much for coming on and sharing your knowledge.
Matthew Holman
Absolutely. It’s been a pleasure, Ben. Thank you.
Ben Donovan
Awesome. Well, thanks for listening everyone. I hope you got a lot of value out of that. Do explore the idea of subscriptions because it can obviously really help your income month to month but also the value of your brand definitely worth exploring. Check out QPilot in the link will be in the description the show notes below. And check out all they have to offer there and we’ll see you in the next episode real soon.
