#177: Subscription Programmes as a Must-Have Tool for Brand Success

PAULA: Welcome to Let’s Talk Loyalty, an industry podcast for Loyalty Marketing Professionals.

PAULA: I’m your host, Paula Thomas, and if you work in Loyalty Marketing, join me every week to learn the latest ideas from loyalty specialists around the world.

PAULA: This show is sponsored by Comark, a global provider of innovative software products and business services.

PAULA: Comark’s platform is used by leading brands across all industries to drive their customer loyalty.

PAULA: Powered by AI and machine learning, Comark technologies allow you to build, run, and manage personalized loyalty programs and product offers with ease.

PAULA: For more information, please visit comark.com.

PAULA: Hello and welcome to today’s episode of Let’s Talk Loyalty, featuring author, consultant, podcaster, and speaker Robbie Kellman Baxter.

PAULA: Robbie is best known for her first book entitled The Membership Economy.

PAULA: And in it, she explains the power of subscriptions and membership programs, lessons she learned from over 20 years advising industry leading clients like Netflix on the power and potential for recurring revenue.

PAULA: This book was way ahead of its time and earned Robbie multiple awards, including one of the best marketing books of all time.

PAULA: And now Robbie has just released her second book entitled The Forever Transaction.

PAULA: In today’s episode, you’ll learn how subscription programs and membership programs differ from each other, as well as Robbie’s top tips for success with these exciting models in 2022.

PAULA: So Robbie Kellman Baxter, welcome to Let’s Talk Loyalty.

PAULA: How are you today?

ROBBIE: I’m great, thanks.

ROBBIE: I’m excited to talk to you.

PAULA: I’m super excited as well, Robbie.

PAULA: You know, we only met very briefly, in fact, for the first time last week.

PAULA: And since then, I have immersed myself in all of your work in preparation for our call today.

PAULA: And to be honest with you, I can’t believe how much similarity there is between the messages you’re sending out and the messages we’re sending out.

PAULA: So very excited to get into the conversation and learn all about your amazing expertise.

PAULA: So I’ll explain to our listeners exactly more about that in a moment.

PAULA: But before we start, please tell me what is your favorite loyalty program, Robbie?

ROBBIE: Well, timing is everything.

ROBBIE: And the one that’s front of mind for me today is Taco Bell.

ROBBIE: Because, you know, taco a day, every day for 10 bucks a month.

ROBBIE: Really, really interesting way of tapping into that loyalty of their most engaged customers.

ROBBIE: My son happens to be one of those very engaged customers, and I think it’s actually saving us a lot, but also increasing the number of times that he and his friends stop in at the bell.

PAULA: Yeah, absolutely.

PAULA: Would you say you were surprised, Robbie, because for me, I certainly feel like the explosion of subscription, I’m going to use that term for now, the explosion in, whether it’s Panera Bread, you told me about Sweetgreen.

PAULA: I didn’t realize they had also launched Pret a Manger in the UK, for example, Espresso House in Europe.

PAULA: Everybody’s just getting into this model.

PAULA: So it probably wasn’t surprising to you, was it?

ROBBIE: Well, it’s funny, Paula, because like you, I’d seen all of the ones that you’ve been talking about, which are mostly coffee subscriptions, which is a known habit that many people have, including myself.

ROBBIE: And when I saw Taco Bell basically doing the same thing, but with tacos, I thought my first thought honestly was who in the world is going to get a taco every single day, or even three times a week or twice a week, which I think is what you need for it to be valuable.

ROBBIE: And then I mentioned it at dinner to my family, and I realized that you should never make the mistake of judging something by would I buy it, right?

ROBBIE: Do they know who their audience is and how that audience behaves?

ROBBIE: And so while I wasn’t surprised, I’ve seen a lot of premium loyalty programs for retail, hospitality, and of course, fast food and quick serve restaurants.

ROBBIE: It took me a minute to really put myself in the shoes of a major fan consumer of Taco Bell.

PAULA: Sure, sure.

PAULA: Absolutely.

PAULA: And I will credit, first of all, Alex Brown from London Business School for actually introducing us, Robbie.

PAULA: And I wanted to get straight into like your positioning is incredibly clear.

PAULA: And also, I’m going to say you’re probably one of the leading thinkers in this entire field, but there are some really important distinctions.

PAULA: So I think subscription is the term that I’ve been using in the, I’m going to say, very short period of time that this concept has been on my radar.

PAULA: So, you know, subscription loyalty.

PAULA: I will credit also actually the guys in Liquid Barcodes, a company I was consulting for, for really understanding the potential for subscription in convenience retail.

PAULA: But you started working, well, certainly even writing about this book in 2014.

PAULA: So I’d love you to tell us, how did you become aware of the sheer power of the subscription model way back in 2014?

ROBBIE: Well, actually, I really started to fall in love with subscription pricing and the bigger concept of membership as a tool in building loyal, trusted relationships with customers around 2001, which is when I started consulting.

ROBBIE: I know, I know that makes me pretty old.

ROBBIE: It’s amazing.

PAULA: Yeah.

ROBBIE: It was Netflix.

ROBBIE: It was Netflix.

ROBBIE: And so I live in Silicon Valley in the United States in California.

ROBBIE: Not too far from the Netflix headquarters.

ROBBIE: And they were a client of mine right around the time they went public.

ROBBIE: And just to bring you back there to that time, they had a strong following on the East and West coasts of the United States.

ROBBIE: They were moving rapidly to penetrate the entire US.

ROBBIE: But they weren’t fully able to hit every market with the three day turnaround that they were promising for physical DVDs in the mail.

ROBBIE: And when you think about where they are today, it’s sort of hard to remember that, like every other company, they started small.

ROBBIE: But I fell in love there with this concept of treating your customers like members, treating your best customers the best, and building trusted, predictable, recurring relationships with them, which honestly has a lot of overlap with what traditional loyalty programs have always tried to do, building those habits, building that engagement, building that kind of trusted, special, preferential relationship.

ROBBIE: And that was where I really started to see it.

ROBBIE: And what happened with Netflix is I started making connections between what Netflix was doing and what traditional loyalty programs were doing, with what Netflix was doing and what had been happening in news, with newspaper subscriptions, what was happening with gym memberships, what was happening with software as a service.

ROBBIE: And I really started seeing that there were certain shared techniques that worked across almost any industry if you wanted to build trusted, engaged relationships with your best customers.

PAULA: Wow, wow.

PAULA: You’re absolutely right, Robbie.

PAULA: And thank you for bringing us back to 2001, because I definitely had a CD subscription and popping it back in the post and all of the offline equivalent, or the predecessor is probably a better word.

PAULA: And for them to transition, it’s incredible that you were consulting with them.

PAULA: And I did see one of your speaking engagements, and I think it’s absolutely brilliant that what people now seem to come to you for is they want to be the Netflix of hair salons or the Netflix of car wash or the Netflix of whatever.

PAULA: So it’s amazing that that model has become so clearly understood, adopted, and dare I say loved that every business seems to be all over it, particularly where you’re working.

ROBBIE: Yeah, it’s so interesting because when I first started working on it, and I would tell people that I worked with subscriptions and that I believed in the power of what I call a member mindset for organizations to treat their customers like members.

ROBBIE: If they’re going to be with me for a long time, what does that mean for my business model and how that could really impact lifetime customer value, whether it was with a loyalty program or subscription pricing or some other tactic?

ROBBIE: People kind of scratched their head and looked at me.

ROBBIE: That doesn’t really apply to what I do.

ROBBIE: You’re from Silicon Valley, maybe that works in software as a service, or maybe that works at Netflix, which is a really unique company or a company that’s starting from scratch, a de novo company.

ROBBIE: They don’t have the legacy and the history and the challenges we have.

ROBBIE: But 2014, I wrote my book, The Membership Economy, and really the purpose of that book was to tell people, hey, what I’m doing at Netflix, what Netflix is doing, what Intuit is doing with their QuickBooks Online, what these companies are doing, this can be applicable to you in your business, whatever that is, if you care about having a differentiated relationship with your best customers.

ROBBIE: And I wrote that book, it was kind of like, you know what it was, Paula, it was like a one pound business card that said, this is what I believe.

ROBBIE: If this sounds crazy to you, great, let’s not waste each other’s time.

ROBBIE: But if this sounds interesting to you, let’s have a conversation.

ROBBIE: And five years later, I don’t have to explain to anyone anymore, the power of subscriptions, why loyalty is so important.

ROBBIE: But today, you know, the bigger issue is, how do you do it well?

PAULA: Yes, absolutely, absolutely.

PAULA: And I would love to go back to the title and this point that I alluded to.

PAULA: You didn’t call the book The Subscription Economy.

PAULA: You did really very clearly focus on this concept, which you talk about, the mindset of membership.

PAULA: So to me, this wasn’t a distinction I had thought through before.

PAULA: And again, having immersed myself in your work now, I’m very passionate about that difference.

PAULA: So for everyone listening who hasn’t really experienced or understood maybe that distinction the way I didn’t, will you explain the difference between a subscriber and a member for any business?

ROBBIE: Well, the way I think about it, and this has been a helpful distinction for me in understanding what makes some subscriptions work and others not work, subscription is a pricing decision.

ROBBIE: And there is no implication of loyalty or trust or anything.

ROBBIE: It’s just paying on a regular basis.

ROBBIE: It’s a contract.

ROBBIE: Membership is the way that you treat the people you serve.

ROBBIE: It’s much more about a mindset.

ROBBIE: Whether or not you price as a subscription, you can treat your customers as members.

ROBBIE: So I’ve seen subscriptions where the company does not really invest in trust.

ROBBIE: They’re not trustworthy, in my opinion.

ROBBIE: But they do use subscription pricing.

ROBBIE: And I’ve seen the opposite.

ROBBIE: I’ve seen companies like Apple is a great example.

ROBBIE: Especially Apple, when you think of their hardware, they weren’t selling their hardware on a subscription.

ROBBIE: But people would say, I’m an Apple member.

ROBBIE: When something breaks, I go to Apple.

ROBBIE: If I need to buy a piece of hardware, I go to Apple.

ROBBIE: If I need a phone, I go to Apple.

ROBBIE: I say, tell me what phone I should buy.

ROBBIE: If I need a computer, what computer should I buy?

ROBBIE: If I need a printer, this is, you know, for 20 years, I need a printer, Apple, what printer should I buy?

ROBBIE: Apple says, well, we don’t sell printers.

ROBBIE: And then I say, oh, well, but I’m an Apple person.

ROBBIE: I’m an Apple member.

ROBBIE: You know, Apple didn’t have a membership.

ROBBIE: What do you recommend for me?

ROBBIE: What should I buy?

ROBBIE: Because I trust you to solve an ongoing problem for me, my tech footprint, my hardware footprint.

ROBBIE: So membership is really about how you treat your customers.

ROBBIE: Subscription is a pricing decision.

ROBBIE: It’s a tactic.

PAULA: OK, OK, I got it.

PAULA: And the word that definitely came to mind as I was doing the research with the positioning of the membership economy was almost like, and I hope I’m right in saying this, Robbie, but it felt interchangeable with community.

PAULA: So that sense that I belong and identify with this particular brand and the other people perhaps that also identify.

PAULA: So we’re all members of a community.

PAULA: Am I taking it too far or does that make sense?

ROBBIE: You know, it’s funny.

ROBBIE: This is something that I thought a lot about too.

ROBBIE: You know, what’s the difference between membership and community?

ROBBIE: And I kept bumping my head up against certain organizations, one of which is Netflix, another one here in the United States, AAA, which is the biggest kind of emergency roadside service for automotive owners.

ROBBIE: I’m a member of AAA.

ROBBIE: I’ve been a member.

ROBBIE: My parents gave me a membership when I turned 16 and got my driver’s license.

ROBBIE: I’ve had it ever since.

ROBBIE: I’ve been a member of Netflix almost since they started, but I don’t feel any affinity with other Netflix subscribers, and I don’t really feel any affinity with other AAA subscribers.

ROBBIE: So if you were sitting next to me and you said, oh, you have Netflix, so do I.

ROBBIE: That wouldn’t make us better friends in the same way that if you said, are you a member of whatever, the American Medical Association, this church.

ROBBIE: So I don’t think it’s a requirement of a membership model.

ROBBIE: Not every membership that we have, it feels like a community.

ROBBIE: Just because we both go to the same library does not make us feel like we’re part of something together, I don’t think.

ROBBIE: But I think it’s great that you bring, community is a really valuable element of a lot of memberships.

ROBBIE: It does layer in, I think, a lot of stickiness, right?

ROBBIE: If you can, like I know Netflix has tried different things around communities, many of which haven’t really taken off.

ROBBIE: But the reason that organizations even try is because you might come for the initial products or features, but you stay because you build friendships.

ROBBIE: That’s what people tell me all the time, for example, about professional associations.

ROBBIE: I joined for the 20% discount or I joined to take this training program, but I stay because that’s where my people meet twice a year, and it’s how I stay connected and how I stay current and hear about new job opportunities.

ROBBIE: It has nothing to do with the training programs they offer.

ROBBIE: It has to do with who else is there under the umbrella of that brand.

PAULA: So again, another, I suppose, important distinction.

PAULA: I could be a member of a professional organization, but never connect with them, you know, in a community way.

PAULA: They may not invest in that type of strategy and that type of relationship, but I could be a member again, but not as connected.

PAULA: So almost like there’s degrees of loyalty, if I’m right.

PAULA: So going from transactional to emotional to full community type relationships.

ROBBIE: Yeah, I think that’s a good way of saying it.

ROBBIE: You know, for me, but what I do come up with is that there are really successful membership businesses and organizations that have no plans to ever use loyalty.

ROBBIE: So it’s not like, I mean, to use community.

ROBBIE: So it’s not like, OK, we did this first, we’re doing that next, and then we’re getting to community.

ROBBIE: OK, but it’s always something worth considering.

ROBBIE: Like, if you have a subscription, at some point, you should take a step back and say, is there any value in community that would make this a more meaningful relationship with our members?

ROBBIE: Can we layer in some form of community?

ROBBIE: And sometimes you might say, no, no, it doesn’t make sense.

ROBBIE: We’ve looked at it, but at least consider it for sure.

PAULA: And one I’ve been, I suppose, mulling over myself because I know, for example, IKEA have been on this show and they very much believe in, you know, the power of community.

PAULA: And that was very interesting and just lovely to hear.

PAULA: And I suppose when you think about the people who are loyal or potentially loyal to IKEA, they’re looking for inspiration.

PAULA: So there are things that the products themselves, you know, stand alone, maybe buying a piece of furniture, mightn’t be able to deliver, but somebody else might be able to showcase to you how that can become something greater.

PAULA: So you have to be a member of the community and then the community itself, I suppose, builds that loyalty on top of it as well.

PAULA: So I thought it was a really good example.

PAULA: But the one that I was thinking as well, I wanted to just kind of, you know, see if you had any thoughts on was we have a lot of people say in the airline industry.

PAULA: And that I think has, you know, probably the longest legacy of loyalty overall as an industry.

PAULA: So I know there were things like, you know, green shield stamps, for example, that predated it.

PAULA: So there are loyalty models earlier than kind of points within airlines.

PAULA: But I think the airlines have done an extraordinary job of, you know, building on these layers of benefits.

PAULA: But I don’t see yet that many of them have cracked the idea of subscribing or becoming a member.

PAULA: So I just wanted to see, do you have any thoughts or have you ever seen within the airline sector where there’s an opportunity within subscription or membership?

PAULA: Putting you on the spot now.

ROBBIE: No, no, no, this is great.

ROBBIE: I love this.

ROBBIE: I love talking to an expert because it really, you know, it pushes me too.

ROBBIE: And, you know, learning from you is a big part of the reason why I’m so excited to be on your on your show.

ROBBIE: So there’s Surf Air here in the Bay Area in California, where you pay a fixed price and you have access to certain routes, unlimited access.

ROBBIE: It’s a small number of routes, and they’re mostly short hops.

ROBBIE: But it’s almost like having a bus pass, except that they’re airplanes.

ROBBIE: Right.

ROBBIE: So that’s one model.

ROBBIE: That’s kind of interesting.

ROBBIE: Another model, and I can’t think of who’s done this.

ROBBIE: I think United has has experimented with this, but I’m sure that there are others as well, which is you pay upfront for access to a bundle of benefits.

ROBBIE: So kind of like that Taco Bell or Panera Bread or Pret a Manger example, but instead of paying upfront to have coffee or tacos, you pay upfront and that gives you the privilege of always sitting in the premium section of the plane or being able to board early or having another kind of bundle of benefits that you’re paying for.

ROBBIE: So it doesn’t come with your credit card or come with the number of miles you accrue and you achieve that status through your purchases, but rather you say upfront, I’m going to pay a premium to have access to this bundle of benefits, whether I fly once a year or every day.

ROBBIE: Those are two options that I could see being really interesting for airlines that are trying to differentiate and build deeper relationships with their most active travelers.

PAULA: Yeah, yeah.

PAULA: And you used that term earlier, actually, the whole, you know, the intention of the leadership team to have a differentiated relationship.

PAULA: That seems to underpin the overall, I suppose, decision to invest in this strategy in the first instance and then whether it works or not.

ROBBIE: Absolutely.

ROBBIE: And, you know, one of the things I really struggled with when I was writing my first book, because, you know, like you do, you know, I really wanted to get clear on the terms and who was in and who was out.

ROBBIE: And, you know, one of the things that I get asked all the time is, is there ever a kind of business or organization that shouldn’t invest in membership, that shouldn’t treat their customers like members?

ROBBIE: And what came up for me after, you know, sort of really thinking about this a lot was if you don’t have competition, if your customer has no choice, then you don’t really need membership.

ROBBIE: You don’t need to treat them specially because they have no choice.

ROBBIE: Most cases, eventually, somebody comes up with an alternative if there’s no choice.

ROBBIE: So you can see, you know, you know, taxis in most parts of the world have enjoyed a monopoly and Uber and Lyft and all of the other ride sharing services have come in because the experience was so bad in so many places.

ROBBIE: But, you know, if you think about companies that have a geographic advantage, a patent advantage or, you know, that are only going to be used once in someone’s life.

ROBBIE: So, for example, you know, the last gas station, you know, for a very long distance, you know, doesn’t matter if the restrooms are dirty and they treat you badly and they charge a lot because you don’t have a choice, right?

ROBBIE: If your tank is empty, you’re going to buy from them.

ROBBIE: If one company has the vaccine that you need, it doesn’t matter if they charge a high price, treat you badly, require you to drive three hours to get it because you don’t have a choice.

ROBBIE: But anytime that the customer has alternatives, not just for your product category, but to achieve the goal, to solve the problem, that’s when membership really becomes interesting.

PAULA: For sure.

PAULA: And I saw you, I suppose, focusing a lot in your own terminology, Robbie, and I love it.

PAULA: And it’s all about the insights.

PAULA: So that underlying human need that you’re trying to satisfy.

PAULA: So I feel like you really do go very much back to basics as a marketeer, you know, to really understand that before recommending if it’s a subscription or a membership or any other model.

PAULA: I thought that was a lovely way to work.

ROBBIE: Thank you.

ROBBIE: Yeah.

ROBBIE: I mean, for me, that’s, you know, a lot of times, you know, working with companies, right, we’ve been talking about these huge companies, right, the airlines and, and these, these large quick serve restaurants and, you know, Netflix that have so much money and so much data.

ROBBIE: But these are things that you can do, even if you’re just running your own corner shop, right?

ROBBIE: Take a step back and say, who am I serving?

PAULA: Yeah.

ROBBIE: What is the ongoing problem that brings them to me repeatedly?

ROBBIE: What is the ongoing goal they have that brings them to me repeatedly?

ROBBIE: Whether that’s, you know, I run a gym and the people are coming because they want to feel fit.

ROBBIE: Or if I have a, you know, a shop and it’s people never want to run out of their basics.

PAULA: Sure.

ROBBIE: If you start with that, which you don’t need any data for, and you don’t need a huge amount of sophistication for, just understand who’s coming and why.

ROBBIE: And then you say, if that’s what I’m optimizing for, what would I do differently to give them more value?

ROBBIE: That’s where the lights start to go on with what kind of subscription could I offer?

PAULA: And honestly, you were on my mind all day, Robbie.

PAULA: And aside from this recording, I am looking for what next to do with Let’s Talk Loyalty.

PAULA: And I think I alluded to this when we spoke the last time, because again, I really want to get a good understanding of everyone listening to this show.

PAULA: You know, what is it that they’re coming for?

PAULA: Because they are listening.

PAULA: So thank goodness it’s found an audience.

PAULA: But I love that idea of being more curious and more inviting, I guess, to bring in that research and feedback to understand what my customers need so that I can create the right content so that they’ll keep listening and get more and more value out of it.

ROBBIE: And I would even, you know, since we’re talking about your business, I would even take that one step further.

ROBBIE: So, you know, you said, you know, what can I do?

ROBBIE: How can I listen to provide them with more, you know, better content?

ROBBIE: But they might be saying, you know what, Paula, we love that your content is fantastic.

ROBBIE: But what we’d also like is to meet the other people that are listening to this, because those are my people.

PAULA: Totally.

ROBBIE: Right.

ROBBIE: Or what I’d also like is a survey of the other people that are listening.

ROBBIE: Or what I’d also like are discounts or ranking in review, you know, to the best, you know, supporting technology products.

ROBBIE: If you say, what is the problem?

ROBBIE: This is the exercise I always do.

ROBBIE: What is the ongoing problem or the ongoing goal that brings them back?

ROBBIE: And if you were starting from scratch today and you said, I am starting a company from scratch today that helps people who have the ongoing goal of X, what would that be?

ROBBIE: So if you were a newspaper, right, a lot of newspapers started because they wanted to help the people in their town understand the world around them so they could make better decisions and feel more confident.

ROBBIE: And it used to be that we were limited to printed paper was the best way to deliver on that promise.

ROBBIE: Today, that’s not the best way to help people understand the world around them.

ROBBIE: There’s all kinds of other, there’s different media, there’s video and photography and audio, but also there’s access to a real person.

ROBBIE: If I want to understand the world around me, I might call an expert and talk to them.

ROBBIE: I might gather with other people that are grappling with the same thing.

ROBBIE: I might take a class.

ROBBIE: If you’re a news organization, you might take a step back and say, maybe we shouldn’t just be selling newspapers.

ROBBIE: Maybe we should be offering tours.

ROBBIE: Maybe we should be offering access to our journalists.

ROBBIE: Maybe we should be offering certainly video and audio and other media.

ROBBIE: You kind of turn it on its head by saying, what’s the thing that brought them here and how can I provide more of that to them?

PAULA: Lovely.

PAULA: Lovely, Robbie.

PAULA: And I love that you mention newspapers because I listened to one of your own podcasts again today.

PAULA: And it was a fabulous guest, again, talking about the membership concept, literally for newsrooms, who would never, I think, have considered themselves in this business.

PAULA: So I learned loads.

PAULA: I don’t know how many pages of notes.

PAULA: And even back to your own website as well, Robbie, you have a lovely manifesto.

PAULA: And again, hopefully everybody listening who’s equally passionate, I think, as we are about these topics, you used a brilliant word, which to me was quite startling and I felt it quite profound.

PAULA: And what you said, Robbie, is that people are craving membership.

PAULA: And that stopped me in my tracks.

PAULA: Because again, you know, it’s one thing to be, you know, me as a podcaster or an airline, you know, to be thinking about the transactional benefits, as you said, we can layer them on.

PAULA: But to come back to the fact that probably accentuated by the pandemic, people are craving to actually be members of things together.

PAULA: I thought that was a wonderful word.

ROBBIE: Oh, thank you.

ROBBIE: Yeah, I do think it’s true.

ROBBIE: I mean, right now, subscriptions are getting a very bad rap.

ROBBIE: Because, you know, I told you, it used to be that when I would tell somebody that I was an expert on subscriptions, they would say, I don’t really understand why that’s relevant.

ROBBIE: Today, when I say I work in subscriptions, they say, let me tell you about this terrible subscription that I couldn’t get out of.

ROBBIE: Let me tell you about this membership I had, this gym membership, that required me to write them a letter in order to cancel my membership.

ROBBIE: And it was so hard.

PAULA: Yeah.

ROBBIE: So there is a lot of bad rap about membership and about subscriptions.

ROBBIE: But at the same time, people want to belong and they want to be known and they want their services to make sense for them.

ROBBIE: There’s nothing better.

ROBBIE: I was just shopping for clothes the other day.

ROBBIE: And I was thinking, I just want someone to tell me, these are the three items you need, Robbie, and these are the three versions of them that are going to fit you the best and fit what you need the best.

ROBBIE: And I’m going to charge you 100% margin on those things.

ROBBIE: I would pay double to have the right things and to have an expert really handling that for me.

ROBBIE: So there is room to be known, to belong, to have somebody who has your goals at heart, to be connected with other people that share those goals or those challenges.

ROBBIE: So if you do it right, your members, your customers today that become members tomorrow, they’re going to thank you.

ROBBIE: But you have to earn their trust.

ROBBIE: I think a lot of bad loyalty programs, they take advantage of the behavior.

ROBBIE: They say, my customer is so dumb, they’re not even going to notice if I change the pricing.

ROBBIE: Or my customer is locked in, so I can add this extra fee and they can’t do anything about it.

ROBBIE: And that is true.

ROBBIE: And for some period of time, when we’ve engaged and committed to one vendor for something, we may not notice it.

ROBBIE: And even if we notice it, it’s hard for us to leave.

ROBBIE: There’s a lot of inertia.

ROBBIE: But that doesn’t mean that we feel loyalty.

ROBBIE: It means that we feel trapped.

PAULA: I agree.

PAULA: And I think, you know, dare I say it as a category, but I feel like in financial services, I feel like there can be a lot of that inertia, which leads to resentment.

PAULA: And then people wonder why there’s disruption.

PAULA: So I agree.

PAULA: It may work for a certain amount of time, but human beings are very good at getting out of things, you know, if they’re determined to.

PAULA: And I love the point about loyalty, sorry, about trust to build loyalty.

PAULA: The one that always struck me when I was writing about the same topic was the Dollar Shave Club.

PAULA: And I’m sure many people know that.

PAULA: Again, it was a very radical, you know, FMCG brand doing shaving products on a subscription basis.

PAULA: And that company started from nothing and with some brilliant marketing and I believe was sold for about a billion dollars, I think to Unilever.

PAULA: Yeah, so an extraordinary, but the single most powerful thing that struck me on their homepage was here’s how to unsubscribe, here’s how to cancel.

PAULA: And immediately I went, OK, great, I can get in, I can get out.

PAULA: So it’s interesting that you’re now focusing on how to do it well.

PAULA: And I’m guessing that’s what led to the new book that you’ve written.

PAULA: So maybe tell us exactly what the transition and the journey has been from the membership economy now through to your latest book.

PAULA: Tell us all about it.

ROBBIE: Yeah, well, when I wrote the membership economy in 2014, I was really just trying to help people see what I was seeing.

ROBBIE: That subscription pricing is powerful, that treating customers like members drives up your lifetime customer value, and that driving up lifetime customer value had a very direct impact on the value of the business, of the firm.

ROBBIE: And that’s really all I was trying to say.

ROBBIE: This is a really powerful model and maybe you should look at it.

ROBBIE: Maybe you should give it a try.

ROBBIE: That was all.

ROBBIE: In 2020, or I should say by 2020 or 2019 even, I didn’t have to convince anybody anymore.

ROBBIE: I wasn’t having that conversation anymore where I was trying to explain why subscriptions were powerful.

ROBBIE: Instead, what was happening was people were saying, we tried subscription, it didn’t work.

ROBBIE: We’ve been talking about subscription for two years at our exec team, and we haven’t been able to really invest in it yet.

ROBBIE: We’re afraid.

ROBBIE: It used to work really well for us, and for some reason, we’re not growing anymore.

ROBBIE: We’re doing well with acquisition, but people are churning out and we’re losing money on every new customer.

ROBBIE: So I wrote The Forever Transaction, my second book, which came out in 2020, really is a how to.

ROBBIE: If you want to launch a subscription, if you already have a subscription and you’re trying to scale it, to operationalize what you’ve been doing in a more kludgy way, or even if you’ve been doing subscription for a long time, but it’s not working as well, it feels dated, it feels long on the tooth, your customers are complaining.

ROBBIE: How do you keep it relevant?

ROBBIE: And that’s really what this book is about.

ROBBIE: It’s very, very practical and almost in the weeds to help the practitioners that are in the trenches every day building subscription models.

PAULA: Well, they’re exactly the people listening, Robbie.

PAULA: So that’s certainly music to my ears.

PAULA: And practitioners, I feel, at the end of the day, we’re the only people who really understand, I suppose, both the consumer mindset and then the operational piece.

PAULA: I think it’s absolutely wonderful to have a practitioner-led book that we can actually sit down with a whole how-to model, pardon me, and figure out literally the framework because I know you’ve built a framework for the membership economy in the first book and sounds like you’ve just added to it in the second one.

ROBBIE: Yeah.

ROBBIE: Well, thank you.

PAULA: Super exciting.

PAULA: And just on the point about dilution, Robbie, because it’s a question I hear, I suppose brands like maybe a coffee shop, for example, and I’m thinking outside the US here, where, for example, there mightn’t be the same level of expertise, mightn’t be the same level of actual consumption of a product.

PAULA: And a couple of people have reached out to me from time to time and said, well, you know, maybe those people would have come in and paid full price for that coffee on a daily basis.

PAULA: So what do you say to somebody who thinks that they’re going to lose money by building a subscription model for their business?

ROBBIE: Yeah, so the thing that I would say to them is you have to know your customer and you have to understand their behavior.

ROBBIE: So if you’ve never, many organizations that are moving to subscription have never had to understand how any one customer behaves over time.

ROBBIE: So this can be really daunting.

ROBBIE: In fact, many of them sell through third parties.

ROBBIE: Like if you think about consumer products that are sold at stores, like the example you gave of Dollar Shave Club, it was very, very hard for Gillette, which was one of the biggest manufacturers of shaving products, to compete with this little upstart, Dollar Shave Club, because even though they sold millions of razors and razor blades and shaving cream and all these things, they had never sold direct to consumer.

ROBBIE: So they didn’t know who those consumers were, really, and they didn’t know how they bought, and they didn’t know how to handle the logistics.

ROBBIE: How do I ship to one person, not on a pallet, but an individual box?

ROBBIE: And even worse, how do I handle returns?

ROBBIE: And how do I handle all of the little details about what you want in your kit versus what I want in my kit?

PAULA: Yeah.

ROBBIE: So, you know, what I would say to somebody who’s thinking about this is first understand your audience, segment out and say, who am I designing this subscription for?

ROBBIE: And then if you have real variable costs, this becomes really important.

ROBBIE: So if you’re selling content, you can take more risks.

ROBBIE: But if you’re selling something where there’s a physical cost, you say, like, the coffee costs me 50 cents, and I’m selling it now for 40 cents.

ROBBIE: This is a terrible business.

ROBBIE: What you need to do is experiment, test, really understand.

ROBBIE: And what you want to understand is usage.

ROBBIE: For example, with the Netflix example, when they were doing three DVDs out at a time, they were dependent on the mail, right?

ROBBIE: They actually had distribution centers where somebody would go and find the DVD that you asked for, and they’d put it in one of those red envelopes, and they’d put it in the mail for you, and they’d pay the postage, and then you’d return it, and they’d have to put it back on the right shelf.

ROBBIE: And they had very real cost, and they knew that people actually were very heavy users.

ROBBIE: They had more turns in the first two weeks, the trial period, the free trial period.

ROBBIE: So actually, they were spending the most per subscriber during the period where that subscriber was providing no revenue.

ROBBIE: So it became very important to them that the people who were getting the trial were the right kind of customers coming for the right kind of reasons.

ROBBIE: So it actually changed how they marketed.

ROBBIE: It changed how they tracked trials.

ROBBIE: So it wasn’t like you could have unlimited trials.

ROBBIE: In the same way that if you walk by the bakery in your town, they might give you a taste the first time and they might not recognize you the second time, but the third time they’re going to say, I think you’ve already tasted this cookie and I think you know what it tastes like.

ROBBIE: If you want more, go buy one.

ROBBIE: So you need to really understand behavior and your own costs and then experiment bit by bit to build your confidence level.

ROBBIE: I call it learning and leverage.

ROBBIE: What do you need to know so that you’re more confident or so that you have more leverage either with your customers or your partners or your vendors so that you can make this change?

PAULA: Wonderful.

PAULA: And I know, Robbie, that you’ve written for some of the biggest publications in the US, whether it’s Harvard Business Review or I think The Economist and I think it was CFO magazine.

PAULA: So plenty of editorial work that you’re doing.

PAULA: I know you’re a very well thought after speaker, obviously in terms of going out and presenting at lots of conferences, your podcast, so subscription stories.

PAULA: So tell us a bit about your podcast and what inspired you to get that started?

ROBBIE: Yeah, that was my, you know, I think that was kind of my how I spent my COVID vacation project.

ROBBIE: I actually had just started it and was sort of playing with it.

ROBBIE: I think I had one episode before COVID.

ROBBIE: My first episode with Joanna Strober, who at the time was at Wheat Watchers, WWU, my first guest.

ROBBIE: And I just had time and it was a way, what I found was it was a way for me to learn, an excuse to talk to people.

ROBBIE: It was very much a continuation of the experience of writing the book, right?

ROBBIE: I loved, the part I love the most about writing a book is kind of gives you an excuse to reach out to people, to research, to ask questions, to learn more, to build relationships.

ROBBIE: So Subscription Stories, which I’m going on my second year now, is really, I call it True Tales from the Trenches.

ROBBIE: So it’s mostly interviews with practitioners.

ROBBIE: So people who work at companies building subscription models.

ROBBIE: And what I try to do is tease out some of the specific tactics that they use and I’m always looking for what is applicable across industries and across business structures and what is unique.

ROBBIE: What is unique to streaming?

ROBBIE: What is unique to consumer products?

ROBBIE: What is unique to wearables?

ROBBIE: And then what is, you know, all of them are dealing with churn.

ROBBIE: All of them are dealing with how do you acquire the right people?

ROBBIE: All of them are dealing with onboarding.

ROBBIE: So that’s really what I try to do is go back and forth between, oh, that’s very unique to your funky little business versus, wow, that’s something, you know, you might think you have nothing to take from HBO Max.

ROBBIE: But actually, if you have an intermediary, if you sell through a distributor of some sort, you might want to listen to, you know, how they manage going through all these telcos, but also having a direct to consumer business.

PAULA: For sure.

PAULA: And it reminds me actually, Robbie, because when I started consulting, it was that same level of wanting to transfer knowledge, because there was so much evident to me that I could see that could be transferred from one industry to another.

PAULA: But again, we’ve both ended up podcasting.

PAULA: And I think to me, I keep saying, I have more questions than answers.

PAULA: It’s an extraordinary position that we have to be able to sit and have these wonderful conversations with people that we find fascinating.

PAULA: So I love that you’re doing that show and definitely will make sure in our show notes that we link to that for anybody who might want to listen, because as I can say, you’re a brilliant interviewer, by the way, so well done.

PAULA: I was listening to how you were doing it.

ROBBIE: Thank you for that.

ROBBIE: It’s funny, we talked about this, I know last week when we were chatting, you’re an excellent interviewer.

ROBBIE: You’re so prepared and so thoughtful with your questions and able to kind of jump in and follow the stream where it goes, but also stay on the topic.

ROBBIE: And that is a lot harder than it looks.

PAULA: Thank you, Robbie.

ROBBIE: When you see Oprah, you’re like, Oprah, she has teams and teams of people to do all the research, to help her set up with questions.

ROBBIE: She’s been doing this for 30 years.

ROBBIE: She was good when she started.

ROBBIE: It’s her only job.

PAULA: Totally.

ROBBIE: It’s not easy to kind of be in the moment, to be thinking about where you want to go.

ROBBIE: And then, of course, all the heavy lifting of the editing afterwards and the follow up and all of that.

ROBBIE: I’m impressed with your work.

PAULA: Oh, thank you.

PAULA: Thank you, Robbie.

PAULA: And clearly, it’s mutual.

PAULA: We’re doing great work and long may it continue.

PAULA: But listen, my final piece then is around, I suppose, the advice you were just giving, Robbie, which is excellent about really understanding your customer.

PAULA: And clearly, the other work that you do really is the consulting work.

PAULA: So am I right in saying that anyone listening, if they wanted to reach out and get your help on understanding what to expect in their category, whether it’s the cross sale or the upsell or the dilution that you can at least offer again, I really think a global perspective on what they can expect in their industry so they can get, I guess, the expert guidance as well that definitely plenty of people need.

PAULA: So is that fair and that’s available that you do for people?

ROBBIE: Yeah, absolutely.

ROBBIE: I’ve worked with a really broad range of companies from really big organizations like Microsoft or Netflix, which are huge companies with very sophisticated teams working on subscriptions, as well as traditional businesses that are moving into subscription, a lot of newspapers around the world, magazines, and also startups.

ROBBIE: I’m in Silicon Valley in Northern California, where my business for many years was focused on venture-backed private companies and some of the newly public digital natives.

ROBBIE: Wherever an organization is, what I try to do is help them identify what their specific opportunities are for improvement, based on all the work that I’ve done, and then help to prescribe some tactics that they can take to improve their model.

ROBBIE: Or if they’re starting out, to help them get to a point where they can make a go-no-go decision or be confident that their plan is going to get them where they need to go, while also providing what I think of as guardrails.

ROBBIE: If you’re switching from transactional to subscription, like you were saying, and you don’t want to sell your coffee for less than it costs you to make it, how do you put those guardrails in so that you don’t bet everything you have on a model that you haven’t fully figured out?

PAULA: For sure, because none of us has all the answers.

PAULA: And I think what I said to you, Robbie, as well is because you are in such a wonderful country with so many leading edge thinkers, that it is very well established in the US, but I don’t have that same expectation of my global audience.

PAULA: So I think there’s a lot of people that are still catching up with this brilliant idea.

PAULA: And yes, they’ve seen it done well, and yes, they’ve seen it done badly, but I don’t think everybody has even kind of thought it through fully for their own businesses, because they might still be of that mindset of, oh, that’s not how we work.

PAULA: I might be a pizza company or whatever, or a taco business.

ROBBIE: I’ve worked with dairies in Africa and streaming services in Asia and supermarkets in Latin America, and of course, software companies everywhere and financial services firms everywhere.

ROBBIE: There’s so many interesting business models and entrepreneurial thinkers, both operating on their own around the world and operating.

ROBBIE: I have a bunch of courses on LinkedIn Learning that I’ve developed with them.

ROBBIE: They’re video courses.

ROBBIE: One of them is about intrapreneurship, so intra with an I, meaning that you can have that same level of creativity and vision to do something completely new inside a large company.

ROBBIE: I spent a lot of time there too, which is fascinating and it’s very high stakes because I used to feel, it’s funny, I used to feel that all these Silicon Valley companies, they’re so fast, they’re so much better than these slow cargo ships of old line big companies.

ROBBIE: But then one day it occurred to me, I was listening, I was thinking about that metaphor and I was like, well, of course the speedboat can run circles around the cargo ship because they don’t have any cargo.

ROBBIE: They’re actually not carrying anything of value.

ROBBIE: So if you make a mistake, who cares?

ROBBIE: Nobody’s going to fall off the side of the boat.

ROBBIE: You’re not going to lose your precious cargo.

ROBBIE: Whereas for these big companies, like you said, making a big change is very risky because there’s real money involved, there’s real customers involved.

ROBBIE: And if you make a misstep, it has very real implications.

PAULA: And for the person who might make that recommendation as a strategy, there’s also career risk for sure.

ROBBIE: Oh, absolutely.

ROBBIE: Which often either accelerates their ability to take risks or pulls them way back to say, I don’t want to go anywhere near that new business opportunity.

ROBBIE: I’m going to move as slowly as I can because, you know, way too risky.

PAULA: Totally, totally.

PAULA: Well, listen, Robbie, I have loved our conversation.

PAULA: I feel like I’ve learned absolutely loads.

PAULA: I definitely want to make sure that everyone can, you know, find all of your books, listen to your podcasts, reach out to you on LinkedIn.

PAULA: But before we give all of those details, do you want to just, is there any kind of final closing thoughts or words of wisdom as we come into 2022?

PAULA: If anything’s changing with subscription that people should be thinking of or do you think all of the principles just need to be understood, I suppose, to make it successful for this year?

ROBBIE: You know, it’s such a good question, Paula.

ROBBIE: I think that, you know, where we are with subscriptions right now is it’s on the verge of being completely mainstream.

ROBBIE: So every business either has a subscription, has considered having a subscription and made a decision not to have it or is actively working on it or is stressing about the fact that they have no strategy.

ROBBIE: So if you are not building something or at least evaluating whether or not there’s a place for subscriptions in your business, you can be sure that your competitors are.

ROBBIE: So what I would advise anyone listening, whether you run a corner store or a large airline or a big hospitality chain, thinking about subscriptions as an additional tactic, an additional bow in your quiver.

ROBBIE: I think that’s the metaphor.

ROBBIE: One more tool in your toolkit, something to consider.

ROBBIE: And then the second thing that I would say is to consider it in service of loyalty.

ROBBIE: How can you use subscriptions as a tactic to help you build deeper and more meaningful relationships with the customers that are most important to you?

PAULA: Wonderful advice, Robbie.

PAULA: On that note, we will end.

PAULA: And I will say Robbie Kellman Baxter, author of The Membership Economy, author of The Forever Transaction, and host of the fantastic podcast called Subscription Stories, True Tales from the Trenches.

PAULA: Thank you so much from Let’s Talk Loyalty.

ROBBIE: Thanks so much for having me.

ROBBIE: It’s been a pleasure.

PAULA: This show is sponsored by The Wise Marketeer, the world’s most popular source of loyalty marketing news, insights and research.

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