Change is here for the subscription industry. Customer retention is top priority while competition grows and customer expectations shift. So, which trends should be on your radar? And what strategies and tactics should you be using to ensure subscriber growth?
In this on-demand webinar, two subscription industry leaders, Guy Marion, CEO of Brightback, and Dan Burkhart, CEO of Recurly will share their insights on today’s businesses trends and discuss what companies should do to ensure success in 2020.
- Navigate the subscription industry’s current phase of growth
- Balance customer retention and acquisition
- Overcome challenges in saving customers and extend LTV
- Define ownership of customer churn in your organization
- Start using new retention tactics tailored to B2C and B2B companies
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OUR EXPERTS
About Guy Marion, CEO and co-founder, Brightback
Guy brings unique SaaS growth, product, and sales experience, from launch to $100M ARR to IPO. Prior to founding Brightback, Guy was an Entrepreneur In Residence (EIR) at Matrix Partners, Autopilot COO, Zendesk Head of Online Sales, CollabNet VP & GM, and CEO/growth at Codesion (acq. by CollabNet, 2010). He has a Ph.D. in natural sciences from The University of Queensland, and enjoys hiking, sailing, and hanging with his wife and two kids.
About Dan Burkhart, CEO and co-founder, Recurly
Dan co-founded Recurly with a deep appreciation for the combination of commerce, marketing, business analytics and good user experience design. Dan brings extensive experience from his background of 20 years in roles spanning marketing, strategic partnerships, business development and corporate development for eBay (Nasdaq: EBAY) and NBC Internet. Dan received his MBA from UCLA, and currently lives in San Francisco with his wife and two children. Outside of the office, Dan enjoys being a dad, and taking full advantage of the many benefits of living in the Bay Area.
About Kathy Greenler Sexton, CEO, Subscription Insider
Kathy Greenler Sexton is the CEO & Publisher of Subscription Insider, a media company uniquely focused on the business of subscriptions. Subscription Insider reports on daily subscription economy news and delivers best-practice information, training and research through memberships, training events and conferences. Subscription entrepreneurs and executives representing all sectors of the subscription economy depend on Subscription Insider to improve decision making, team skills and business profitability. Learn more at qa.subscriptioninsider.com and www.subscriptionshow.com
TRANSCRIPT
Kathy Greenler …: Welcome, everybody. I’m Kathy Greenler Sexton, and welcome to Customer Retention 2020. We are going to be talking about five trends that are impacting your subscription business because change has come to our subscription in recurring businesses, and today we’re going to be talking about those trends and what you need to be thinking about right now in order to manage them. So with that, I want to just remind everybody do your best to focus on the webinar. I totally understand what it’s like to be juggling everything at home these days, but do your best because we have some really interesting information for you today. And, you want to give yourself a chance to learn.
Kathy Greenler …: I want to remind you that this is your session. For everybody that’s showing up here live, ask questions. Don’t be shy. We can take any question you can give us and we want to talk about it because that’s the whole purpose of a live session. So in the chat window, ask your questions. We’ve got the team monitoring it and if you have any questions that we for some reason don’t have time to get back to, put them in the chat window and we’ll be recording them and we can certainly follow up with you afterwards. Deal? Okay.
Kathy Greenler …: So, Subscription Insider, we are hosting this webinar. For those of you that don’t know us, we provide insight on how to run and scale a profitable business and we do that through our daily news, through our training, our conferences and even events like this. I want to help you understand what’s coming up on our calendar. In two weeks, I’m actually running another webinar similar to this, but it’s going to be focused on the ways that your subscription business can thrive through uncertain times. Robert Skrob, if you know him, he’s spoken at our conferences and done a number of different projects with us, he’s going to be getting online with me and we’re going to be running a workshop for you. That’s free, and that’s going to be held on April 15th at 2:00 pm.
Kathy Greenler …: So, heads up on that. Then, we have a couple of other things I just want to make sure you’re aware of. We have a training program that’s called Subscription Fundamentals, and we have one that’s On Demand right now that’s focused on setting up and managing your recurring payments. And then, we have one that we’ll be opening up shortly and we’ll be training live starting April 22nd focused on subscriber retention. And, we have our signature conference in the fall so mark your calendars for that, as well.
Kathy Greenler …: So with that, I am going to hand the reins over to Guy, and I just need to give me two seconds. You know, Guy, when we practiced this earlier, I didn’t have a choice of the hundreds of people on the line to also give control to versus just you, so here you go.
Guy Marion: All right.
Kathy Greenler …: I think I’ve given the right guy control.
Guy Marion: You’ve got it. All right. There we go. Thank you, Kathy, and good morning, everybody. Thank you for taking time out of your busy day during these unusual and historic times. It’s the first time I’m doing a webinar live from my living room at home, so thanks for bearing with us here and Kathy, thank you for hosting this webinar today. Brightback enjoyed being a participant of Subscription Show last year where we met quite a few of the companies who are attending today, and we will also be there later this year in New York. So, looking forward to that.
Guy Marion: I’m very privileged and delighted to be joined by Dan from Recurly, who we really appreciate his perspective as an innovator in this industry and pleased to be working together with Dan. We actually just integrated with Recurly, which has brought an attribution system to what Brightback offers so that subscription professionals are able to assess the ROI of their retention activities directly on revenue and on winning back customers.
Guy Marion: A little background on myself. My name is Guy. I’m the CEO and co-founder of Brightback. I started the company on the belief that retention, not acquisition is the most underrated and misunderstood focus area of subscriber growth. Today, we’re helping both consumer and SaaS brands to reduce their voluntary churn cancellations by 10 to 25% or more using a combination of intelligence, automated offer testing and win-backs. And, also in general, getting very much more involved in the retention community.
Guy Marion: So with that, I’ll pass it over to Dan to introduce himself as well.
Dan Burkhart: Thank you, Guy. I appreciate being here as well. Thank you, Kathy, for hosting. I am the co-founder and CEO of Recurly. We are a 10 year old subscription billing and revenue optimization platform. 10 years old means we are now seeing many different stages of the evolution of subscription businesses, and throughout that period have gained a lot of insights and pattern recognition to help bring to bear for our customers as they go through the gearbox learning how to grow and encounter different stages of growth, and the different challenges that come with different stages of growth. So, I’m delighted to be here.
Dan Burkhart: I had conversations with Guy back when Brightback was in the idea stage, and it’s really delightful to see how Brightback is growing and it’s not a surprise given the value that they deliver.
Guy Marion: Thank you. All right, so the agenda for today … At any point, as Kathy already mentioned, if you have any questions please do submit them within Go to Webinar in the questions chat, and our team will be monitoring those and we’ll respond to those pretty organically here. And, we just introduced ourselves. I’m Guy, here’s Dan. We’ve covered that now.
Guy Marion: So, admittedly the agenda for today was originally conceived from research that Brightback and our research partner, Sentiment published back in January, which included 435 subscription professionals speaking on the state of automated retention. We learned some really great insights from there, some of which we are covering today, as well as the world has been since impacted by what we’re all living through together, COVID-19. So, we’re actually going to bring some very fresh perspectives from recent articles, as recently as yesterday, and bring some commentary on how COVID also is affecting both the subscription industry as well as the retention of customers during these historic and upheaval based times.
Guy Marion: So the key agenda, we’re going to start off with looking at some context; how has the digital subscription industry matured? Secondly, a key insight and a key trend that retention is considered to be more important, or as important, than acquisition is what 93% of subscription executives said coming into this year, which was quite surprising. Third, evaluating how companies are extending their customer’s lifetime values while making them happier. Fourth, this progression towards the digital cancel process from traditional offline approaches, and then finally we’re going to look at who really owns retention and is this is the new frontier for marketers today.
Guy Marion: With that, we’re going to go ahead and kick in here and a little perspective on the industry. I think it’s worth noting that we’re really only now entering the main majority phase of subscription adoption in the digital industry. If we use Jeffrey Morris sort of crossing the chasm viewpoint, then we saw the innovators in the early 2000’s Salesforce moving enterprise software and CRM online and replacing sort of upfront implementations and extended risk-based purchasing to more of a subscriber partnership alignment with customers, Amazon prime, bringing consumers subscriptions to the main front Shopify going from selling snowboards to providing a platform for any company to present their services online, which has evolved into a subscription based approach.
Guy Marion: Netflix of course bringing digital streaming as they undermined and co-opted their own DVD mailing services with the first video streaming services. Recurly, bringing a subscription billing as a platform that could support the next wave of innovators and early adopters within the space. So we really saw the first phase here of the building blocks upon which the industry has grown. And then from there we’ve seen the early adopters as those businesses started become broader and increase the adoption within industries, both in the tech space and the consumer space. Things like Dollar Shave Club, introducing direct to consumer services that became that served core day to day lives and needs of our lives.
Guy Marion: Birchbox ushering in the industry of the box for everything. Office 365 and Adobe taking enterprise software from the early work of Salesforce and really making that available to millions of small and large businesses and New York Times, of course making and Wall Street Journal really proven success for the first time that media streaming services with a subscription model was a wave of the future, both to improve the product and improve the business model.
Guy Marion: And subsequently we’ve seen now the current time where we’ve really shifted into the sort of the main majority rapid growth, huge numbers of companies. The industry spend now I think it was valued at 100 billion revenues in 2020. We’re seeing a substantial growth with the subscription box service companies. And then some more recent changes we saw, as we started shifting into the latter phases of majority adoption, really California Regulations passed in 2018 which pronounces that services with an online signup flow need to have an online cancel flow as well. So starting to see the pendulum swinging in favor of the consumer experience.
Guy Marion: 2019, we saw the end of the… or sort of the beginnings of the end of the current investment wave with WeWork hitting the fan and dealing with reductions in investor and industry expectation for unprofitable growing businesses. And this year, of course we’ve seen COVID kick in and we’re going to talk about how that’s affecting the industry so far. So I’m going to pause there. Dan, would love your perspective on having them with a builder’s going through this entire phase.
Dan Burkhart: Yeah, it makes me feel old. I’ve actually been in my professional career throughout the entire spectrum of the bell curve, but it’s a nice framework because a lot has happened and a lot of development has happened in the form of just business model innovation throughout this period. Looking at the left side of the bell curve, call it the first act of the play. It’s sort of the advent of the internet first dot com era. Salesforce was a really phenomenal innovative company that sort of came to the forefront because that was right at the transition between one time E-commerce transactions where everyone was looking to sell CDs and shoes and clothes and everything for a onetime purchase and figure out that model of going to market. And it was really innovative for Salesforce to say, “Hey, we’re going to give you a 360 degree view of the customer.”
Dan Burkhart: And that was really about tracking for your Salesforce, the prospect pipeline through to that revenue event and it was Salesforce that helped pioneer and innovate the repeat revenue visibility. Now business and commerce was still geared towards that one time revenue event. And so it really is interesting to see the development of even the brands that you’ve listed here because as you get into Dollar Shave Club of course Recurly at the time of right around 2009, we were founded New York Times’ Publishing has gone through the paywall challenges and the sort of disintermediation of the ad model for digital newspaper and publishing. Adobe is a great one because if you go back in time, they originally were selling, say Photoshop through a shrink wrap, $1,200 purchase on the shelves of Best Buy and you could buy it, paying that $1,200 through an E-Commerce model.
Dan Burkhart: And it wasn’t till quite late that they realizeD Adobe Creative Cloud by rolling out a $39 a month subscription, they could dramatically reduce their pirating where it was easier to go get a pirated copy of Photoshop and take the risk of downloading some virus to your computer. It was easier to actually subscribe and get a clean version. And so they have seen something like two dozen consecutive quarters of revenue growth ever since they moved to the subscription model. So the innovation that’s happened throughout the period that you’ve outlined here in the bell curve is fascinating and it’s a good sort of intro context for the remainder of the conversation because at the other piece, it’s here that I have to comment on is I was working at eBay at between 2003 and 2007 where we were very much locked into that hyper-growth customer acquisition mindset.
Dan Burkhart: And it was during that period with the rise of Google Ad words with that gave rise to the competitive bidding around just keywords and Ad words spend. So customer acquisition costs went up increased in just about every single category, forcing companies to innovate in the way that they thought about monetizing their customers because the customer acquisition cost to lifetime value, if you’re only planning on one revenue event, it got really out of whack. So it sort of forced the industry to figure out how they can plan for multiple revenue events and start to win over the loyalty and re-engagement of customers for repeat purchase, which sort of paved the way for the subscription and the recurring model. So I’ll just leave it at that, but it’s a great sort of intro here.
Kathy Greenler …: Mm-hmm (affirmative).
Guy Marion: Great. Yes, I think that those are a couple of key points you’ve said there, which is that it’s so far really been mostly growth through acquisition at all costs has been really the primary focus and driver of the industry. And we’re seeing now this big shift into retention being a primary means by which companies continue to grow healthily, where it’s Seven, eight cheaper to retain a customer than acquire one. As you said, marketing channels have become largely consumed and saturated at this point like CPLs are increasing. And moreover, retention drives word of mouth. It drives increased customer lifetime value is that it increases the focus on the most value users of the community, which is your customers themselves.
Guy Marion: So we really sort of seeing from a number of angles what we’re coming into right now, which is the need to focus on retaining customers, which leads to the next comment here, and this is actually an article that just was published two nights ago in The Wall Street Journal, talking about how after we’ve seen this sequential growth in the industry right now we’re living through historic times as the impacts of coronavirus and COVID-19 are rearranging the subscription landscape.
Guy Marion: Coincidentally, Dan, both you and I were quoted in this article. And some of the key takeaways I took, time on HBO up 40% on the week of March 9th, 14th onwards based on the prior four week average. Some data that Brightback is seeing, which I’ll share in a few minutes. We’ve seen a 50% increase in churn and cancellations in the second half of March relative to the first. So really seeing some substantial changes right now. We’d love your perspective on what having seen the last 10 years of growth and now you’re seeing this. Like what are some of the takeaways you’ve taken from what you’re seeing at the moment?
Dan Burkhart: Yeah. I think the big sort of dawning moment here with the challenges that we’re facing is that companies are really very much acutely realizing the value of investing in a longterm relationship of their customers. And that I’ve always felt has been one of the hallmark benefits of the subscription model in general in that it sort of forces a nice balancing act between the product app service provider and the consumer meaning the consumer benefits because the onus of the provider, the software publisher, the media producer, the media streamer, is to really delight on a recurring basis and continue to win over the hearts and minds of the subscribers. And to continue to earn the right to provide your service over the long haul. And so this moment is challenging different businesses in different categories in different ways.
Dan Burkhart: So this article highlighted some of the data that we provided and you provided around media streaming entertainment, things like distance learning, workforce collaboration, a lot of SaaS products that are providing collaborative services for distributed workforce utility. All of those companies are really seeing some nice acceleration. We’re seeing acceleration in free trials, we’re seeing increases in active paid subscriptions, net active paid subscriptions outpacing cancellations. And then there are cancellations. And so the cancellations are sort of to certain businesses and certain categories. And I think the big message here, which is sort of the interesting point of the remainder of this conversation is that companies really have to be actively focused on the life cycle marketing and retention of their customers, not just customer acquisition. And it’s important to be ahead of that decision point and then not chase your customers while they’re walking out the door.
Dan Burkhart: But to make sure you’re planning for that eventuality and thinking about it in everything you do from the product that you provide, the way you message, the way you segment your communications and make it more personal and appealing and continue to ensure that you’re delivering value. But as your customers, if you might have the lagers and decliners start to head for the door, it’s great to have some prepared functionality and a win back strategy that allows you to focus on retaining those valuable customers before you have to go get in line to go acquire another net new replacement customer.
Guy Marion: Right, exactly. And that brings us to a good point, which is let’s take a quick moment here. We’re going to do our first poll today. How has the COVID-19 pandemic impacted your current churn rate? We’d be curious to get a take of how many of the attendees today have seen impacts in their businesses. And while this runs for a second here, which we can share the results of in just a moment, Dan from what you’ve seen so far, we saw one of our customers freshly mentioned on the article yesterday, I’ve seen basically they’ve had to stop taking new signups during this period because they’ve basically reached the capacity it grew so quickly. And at the same time we’ve seen other companies that have seen reductions in numbers of customers and we’ve found really effective ways to help them turn that around. Pausing customers voluntarily and so on. Have you seen or been receiving feedback or questions from your customers around best practices and tips during this period?
Dan Burkhart: Yes, definitely. And part of that is I think it applies differently perhaps for different companies in different categories. The companies that have been the hardest hit are the companies that depend on foot traffic and are providing venues that might also have a membership component to it. Theme parks, movie theaters, et cetera. And so what some of these companies have been doing is to actually proactively pause their subscriptions they’re offering because the service they’re providing has been paused now, value based pricing. That’s not a new concept for us here. But it was an interesting best practice in my opinion, in that they were paying it forward to their customers and saying, “I’m not going to expect you to come back and pause your subscription. We’re doing it for you.” And it allows them to take the, we’re all in this together approach being empathetic and understanding from the customer’s viewpoint what is doing right by your customer.
Dan Burkhart: So that one I felt should be held up as a best practice. And we are seeing a number of companies do that when their facilities that their subscribers or members come to patronize are closed. That makes perfect sense. I think the other sort of continual best practice is making sure that there’s a clean well lit place if you will, or a pathway to pausing or even canceling. So you don’t want to get yourself in a position where your customers are guessing how to cancel and they end up calling their credit card company and issuing a charge back.
Kathy Greenler …: Okay. I just closed the poll and we had just about a full participation. 69% said that they are impacted by COVID-19. Which is significant. I mean, as we’ve talked about, there’s definitely some winners and some losers, but we are all being impacted one way or another with COVID-19. So obviously everybody online is supporting that assumption.
Guy Marion: All right. Well what this brings us to is really to succeed in today’s environment pre and post COVID By the way, this isn’t just a related to what we’re seeing at the moment. The industry has matured. Past practices do exist. And being a best practice practitioner of retention tactics and retention strategies is more important now than ever. There’s many ways fortunately to take advantage of the resources available today, whether it’s starting with customer data and like Dan was mentioning, being able to accurately segment customers based on LTV or based on engagement approach or their billing terms or their subscription tenure, the acquisition source or even their preferred channel to engage on.
Guy Marion: And then being able to use that to start to drive experiences that we can use testing based approaches and learnings from other customers to start to understand and trigger updates to both assist the customer record, to how customers respond to specific types of win-back workflows or offers. And then being able to evolve and improve based on what you know that your customers respond to at the right time and for the right reasons. So these are some of the opportunities I think that we’re now starting to see as this tech landscape is evolving and supporting the subscription businesses in general and then actually trying to support the retention flows more specifically.
Kathy Greenler …: I just want to add my observation. As a media company, we’re observers of everything and I am seeing more technology and expertise really focus on the full life cycle. And it’s great to see that because it’s so critical to understand that cost of acquisition and how it flows through to that lifetime value. And even a year or two ago there were not effective tools to track and manage and you could just see that in the maturing of the business and these tools and the expertise within our teams to be able to understand that is so critical for us to really grow our businesses and survive challenging times like we are at now. So my 2 cents.
Guy Marion: Good.
Kathy Greenler …: Alrighty. Oops.
Dan Burkhart: [crosstalk 00:24:21]I totally agree, I’ll jump in here. Yeah, I’m sorry, I’ll jump in. I agree with Kathy. I’ll again date myself back to my eBay days at eBay. Under Meg Whitman era Dell was a partner. Meg was on the board of Dell and Michael Dell was on the board of eBay at the time. Dell was fantastic and had pioneered catalog and lifecycle marketing for technology companies for what they were doing. They had a huge, massive catalog of skews of items that they were selling. eBay was great at customer acquisition, at very data driven customer acquisition with Google Ad words, but also all of the display advertising and decision making analytics and optimization around that. It was a huge amount of money. It was material to EPS. And so Dell taught eBay about lifecycle marketing. ebay taught Dell, conversely about customer acquisition.
Dan Burkhart: The takeaway from that was that lifecycle marketing and retention marketing used to really be kind of the bastion of very sophisticated large enterprises that had gazillions of dollars to invest in these capabilities. And if you fast forward through the bell curve that you started out with here, these very sophisticated technologies, which were best practices only at the top of the market, then are now available as tools and services and platforms for companies of all stages to take advantage of. And now it’s frankly one of the requirements for success. You can’t actually just set it and forget it for any subscription or recurring business and expect to be successful. You have to bring to bear the capabilities and tools and the analytics and insights to make more informed decisions quickly in order to outpace your competitors.
Guy Marion: Yeah, I think it’s a really good point, Dan. And obviously coming from a specific perspective, we’ve started a retention service, but one of my observations was to your point, these are approaches that have been used by the most sophisticated companies very successfully for a very long time. And it really hasn’t been an accessible set of best practices for the broader industry. And so that’s really where I think now there’s substantial opportunities, frankly, for companies to gain some quick wins in areas that they haven’t traditionally been focused on. So I think that we are there from our landscape perspective and this is also impacting of course the KPIs that companies are measuring. The retention KPIs have evolved from being a hindsight afterthoughts to be in the top tier KPIs that companies are being valued on today. Right?
Guy Marion: Obviously a recurring revenue growth is still the King metric or the queen metric that that companies are measured on primarily. But the net retention of that revenue is more important than ever. And that really started to hit, I think last year around the WeWork time period, or even a little bit before. It was no longer in Vogue to be growing at all costs and highly unprofitable. And that’s even more the case right now. As we’ve seen a focus on gross AAR churn being a key metric that B2B enterprises typically look at, which is how much of my customers are canceling, which is can be offset by expansion, which drives the ultimate net. But gross is really an area that you can focus on, whether that’s through a self service approaches or through retention and renewals typical gross AAR churn or MRR churn rates should be usually three to 5% per month in the B2B side for SMB facing companies, for enterprises.
Guy Marion: And by the way, net ARR retention typically 105% per year is considered good. 125% or more is considered fantastic. These are often metrics that are being achieved now. Renewal rates, anything North of 95%, 90% in the enterprise space are numbers that are held as strong benchmarks and then LTV – CAC companies are still thinking about a three to one ratio where you want to make sure that you either pay back the customer in a year or you achieve a 3X lifetime value to customer acquisition costs. These metrics that have traditionally been considered efficiency or optimization metrics are really now being viewed as primary value drivers for the organizations and then on the consumer side, we see a couple other additionals as well, right? So daily and weekly active users is still of course in many cases a primary driver of retention or users logging in and using services or actively engaged in the packages that are being sent to them.
Guy Marion: As well as another key metric that’s often overlooked is save rates. And this is an area that Brightback looks at pretty closely. It’s very much possible in standard best practices. We see anywhere from 10 to 25% of customers who are canceling can be saved at the point of cancel through the most appropriate offer, whether it’s incentive based or otherwise. And we’ve come across companies and industries that save routinely more than 50% of customers there as well, both of which have a substantial increase on the LTV and therefore in your LTV – CAC as well. So really important to sort of monitor that as the industry shifts. So to do these KPIs and the relative importance of them.
Dan Burkhart: I couldn’t agree more if I can jump in just quickly. These metrics and the evolution of these metrics are critical. So we over the course of 10 years have built out a large stable thousands of merchants that we help power billing for. But we also have visibility into various churn rates and cancellation rates. So of course the data at the landscape view and benchmarking view is very important for us to help gain an understanding for which companies are outperforming their peer group within a certain cohort. And so at the highest level, I like to think of this as revenue engines. These businesses are in the customer acquisition, monetization and retention business of whatever variety. And we see as we scan the horizon for all different businesses and different categories, even within categories, you’ll have a bell curve distribution of companies that are outperforming their peers.
Dan Burkhart: And the metaphor I like to think of is these financial engines are either running hot or they’re running cool meaning depending on how sticky their service is. And to the extent that they are over delivering against the price point promise, that cognitive hurdle rate that is in everyone’s brain, that it can be triggered for a variety in a variety of ways to say, “Hmm, I’m not sure if I’m getting value from this service anymore. I might want to cancel or I might consider canceling.” So the sort of the engine metaphor is a good one because when companies are running hot and you see that there, they’re churning out customers really quickly they’re on this treadmill of customer acquisition that’s going to get really expensive and it’s difficult to sustain. They better improve that mixture otherwise, the engine’s not going to go to the last essentially.
Dan Burkhart: And I couldn’t agree more about the notion of metrics and how this has changed over a fairly quick period of time. We’ve seen the charter of CMOs that we talk to in a variety of different companies from fortune 500 companies on down to mid enterprise and even certainly SMB businesses that are highly tuned to the recurring revenue model. The charter for CMOs, even five to 10 years ago, used to be largely in big companies. It was about brand awareness, unaided awareness. You might have customer sat loyalty, and certainly demand gen. How do you get more customers in the door? Maybe to an establishment, a fast food restaurant. It could be a theme…
Guy Marion: Did we lose Dan?
Kathy Greenler …: He’s paused so I guess we’ll just continue for the moment.
Guy Marion: He was right in the middle of a good [crosstalk 00:32:17]. I’m sure [inaudible 00:32:18].
Dan Burkhart: [inaudible 00:32:20] and today CMOs have a very different charter. CMOs are tasked with not only those
.
Kathy Greenler …: Thanks Dan.
Guy Marion: Dan, we’re going to continue. There was a little a skip there, but we’re going to continue on to the next slide. Are you back with us by the way?
Dan Burkhart: Yup.
Guy Marion: All right. So we’re going to skip through here a little bit. I mentioned early on that 93% say retention is as, or more important than acquisition. This is data that we got from our study earlier in the year and we’ve spent some good amount of time talking about that today. And sure enough this is Google trends data in the last four weeks and you can see the real spike on the Google trends data for people searching for cancel online and Brightback aggregate data across our platform. We can also see a substantial increase in churn about a 50% increase in cancellations in the second half of March relative to the baseline early in March of this year. So we’re going to go ahead and jump into what are some of the things we can do about this before we do, let’s learn a little bit more. Second question from the audience. How has COVID-19 impacted your budgeting or planning as it relates to the subscriber growth?
Kathy Greenler …: So if you can just choose what you would like to do. I see everybody’s a choosing here.
Guy Marion: Right.
Kathy Greenler …: Fairly even across the top, although that’s changing as the percentages are going up. Good chunk of people have no changes right now, which is interesting.
Guy Marion: Got it. That’s interesting. Yeah, we’ve asked about are you adding more value for your current customers, investing in acquiring new customers during this period, paused all growth initiatives entirely or really no change in business during this period in time?
Kathy Greenler …: Yeah, it’s interesting. It’s actually changing fairly rapidly and we’re getting close to not everybody voting, but we’re at a minute. So I’m going to be closing the poll very shortly and we can look at that. The percentages seem to be stabilizing now even as we’re getting a few percentages. So I’m going to close the poll and I’m going to share results for everybody. There we go for everybody to really look at.
Guy Marion: Okay.
Kathy Greenler …: Any surprises?
Guy Marion: I’m not too surprised. It looks like only 17% of people, less than a fifth of people are doing nothing at all right now. So more than 80% of the people are taking actions which is not surprising and very much aligned with what we’ve seen. It looks like either pausing growth or adding more value for the current install base really is more than half the majority of the audience are investing there. And then some are obviously recognizing their opportunities in the market at the moment, both to help and to grow.
Kathy Greenler …: Yeah, I mean, a lot of people are investing, which is really great to see.
Guy Marion: Mm-hmm (affirmative). Excellent. All right. So third trend is growing lifetime value and customer happiness are very much aligned in today’s model. Then you mentioned earlier that one of the key elements around the subscription model is creating alignment between the vendor and the customer and ensuring you’re delivering a great product over time. We actually have a customer in the media space that shifted in the last year and a half from an ad driven model to a subscription driven model. And apart from the fact it’s been very successful financially one of their comments directly is that it’s allowed them to focus on the quality of their product, more, less focused on sort of hit you know blockbuster type of stories and more focused on consistent high quality journalism. And I think that general anecdote is a great alignment around 96% of the subscription executives that we surveyed early this year said that when customers are leaving, they could actually resolve those questions and those concerns because they have unmet needs that are still being addressed.
Guy Marion: And so one of the areas that Brightback’s recognize is that if you can identify those users in real time and then present the right alternative or provide the right strategy to engage them, then there’s a lot of gain to be had at that moment in time. Another customer has said that, that moment of cancel is actually the most important moment in the entire customer journey. So when they’re willing to tell you a lot about what they’re doing and they’re voting with their wallets at that moment, and yet it’s very easy and very common to overlook that moment. So the reasons that we’ve typically seen that have substantial opportunity to resolve the customer problem and keep that subscriber at that moment is those who never onboarded or figured it out to begin with.
Guy Marion: People early in their tenure or people who maybe haven’t been very engaged so far, in many cases they came to your service for a reason. They just didn’t achieve that desired outcome yet. You could identify them or present the right window of opportunity to either re-engage or provide an extension or a pause or some sort of alternative that’s more relevant to the customer. That can be a great way to quickly retain and win back those customers. Pricing, we’re seeing a lot of that right now. Customers and companies who either are shutting down, which is very difficult to deal anything with or they’re temporarily not achieving any need. Their product is not being delivered. We’re seeing this with some indifferent spaces right now where the current product is not relevant. Well at that moment in time, it doesn’t mean they dislike the product or have lost interest, it means that they’re not seeing the value.
Guy Marion: So again, switching to a plan that does make sense or proactively extending the service for example, could be really good opportunities to help overcome this temporary misalignment between the value of the customer’s looking for and what your product is able or services able to deliver. So, and a final sort of really key one that we all can relate to is while we’d love to think that all of our customers are treated with utmost care at all times. Things happen. Most cases, as we all know, subscribers just want to be heard. They want to be listened to, they want to be responded to like a human being.
Guy Marion: And so if we could identify customers who have had some sort of negative experience and respond accordingly, Brightback’s found that to be a highly retrievable type of reason for customers who canceled. If we can instead make it right, how can we address this? Can we provide a free strategy review? Can we provide a period of use to make good on this? These are all types of opportunities that we’re both solving customer problems while increasing the health of our business in a highly systematic way.
Kathy Greenler …: Yeah.
Guy Marion: Dan, I’d love to get your take on some of the approaches that you’ve seen here or just general perspective on the ability to increase retention through solving problems at key moments in the journey.
Dan Burkhart: Yeah, I love this topic and this slide because it does highlight a lot of conceptual comments and thoughts here. One is no single subscription business out there launches a product or prices of product in a Pareto optimized way on day one. There’s just not a single company out there. You have to use that price point as a measure and a yardstick to look at churn and to look at the extent to which as your product evolves and you add more features and you add more capabilities and that’s always going to change over time. To what extent do price point changes alter your churn rate? So it helps you understand from a micro economic perspective, it’s price elasticity of demand, but basically what you’re testing for is where is that cognitive threshold where your customers want to vote with their feet and leave the service and ultimately cancel.
Dan Burkhart: So what we are seeing right now in the context of this big exogenous shock with COVID is that we have a lot of customers that are trying different durations of free trials. Some companies are adding more premium services to their free trial mix in order to sort of sweeten the upfront funnel and to get more customers in. Conversely, on the tail end of the life cycle companies are getting more aggressive about providing the ability to pause as well as to perhaps downgrade a service to hidden levels of tiers that may not be advertised on their pricing page, but a soft sort of landing for companies that might feel… companies or customers that might feel that they’re no longer receiving value.
Dan Burkhart: It allows them to downgrade into that non published private tier that might have a different ratio of offering to that price point. That could be more appealing. And this is a great method and tactic to use as a way to anticipate the mindset that companies might be in or customers might be in when they start to reevaluate whether they’re getting value from a service and might want to look for a path up to the door.
Kathy Greenler …: Mm-hmm (affirmative).
Dan Burkhart: Yeah, I think those are all good points and right on, and what you’re really alluding to here is making it easier for customers to have flexibility in choice. This is another story from earlier in the year, which is there’s an opportunity and a desire from today’s online consumer to have a frictionless experience both to purchase new services and to cancel especially for those where it’s solving a daily need. And so when we’re trying to build a longterm relationship with our customers making more flexible options available for customers, making things obvious and overt taking the friction out of the process. Those all generate sort of positive emotional bank account gains with customers. And a surprisingly strong finding we’ve found is that you know, more and more companies are actually letting their customers easily just quit and leave.
Dan Burkhart: We’ve seen and the message we’ve learned is that that doesn’t necessarily have to fly in the face of creating a lot of risks that you’re going to lose more customers. In fact, our experience has been that it’s quite possible to manage, maintain or actually exceed retention of customers even with a very simple, frictionless cancel flow through the appropriate use of technology targeting and offers that in turn allow you to maintain that type of customer retention for a fraction of the cost as well as less Twitter and Facebook and social risks.
Dan Burkhart: So I really think this focus on winning hearts and minds really plays well in the new world where customers are in control and subscription businesses are plenty.
Guy Marion: All right. So last poll question for the audience today. How far ahead are you planning to enact special means to retain customers in response to COVID-19? Kathy, over to you. We’ve sort of picked five time periods this quarter. Q3, Q4 of 2020, Q1 of 2021, Q2 of 2021, or don’t know, or no plans to enact any special means to retain customers.
Kathy Greenler …: So we’ll leave this open for a minute and I can see everybody’s voting quickly, which is great. As an old boss used to say to me, I think we’ve got some growth opportunities here based on what I’m seeing as the answers come in. I can’t wait for you to see.
Guy Marion: Oh, interesting.
Kathy Greenler …: Yup. I’m going to wait for a few more people to vote and that the percentages kind of… the trend lines stay consistent if you will.
Guy Marion: Got it.
Kathy Greenler …: And we are at a minute, so I’m going to close and five, four, three two and one. And let me share the results with everybody. There you go. What do you think?
Guy Marion: A lot of people taking a lot of action right now? Dan, what do you think?
Dan Burkhart: I think it’s interesting. There are things, there are all as quick wins. You know, it feels like Q3 and four is kind of the lion’s share of the distribution here. I would recommend getting it in gear and thinking about what you can do immediately that doesn’t require any big monumental lift.
Kathy Greenler …: I think for the 36% though that don’t have their plans yet, I think there’s an opportunity for you through some of the stuff you’ve learned today and to really think about what you need to do in your business because the time is now.
Dan Burkhart: Yeah.
Guy Marion: Really.
Dan Burkhart: Yeah, that’s absolutely true.
In general, customer acquisition is going to be challenged and it shouldn’t come as a surprise that budgets are going to tighten up and purchase consideration is going to change. And so we all have a responsibility to figure out how to retain and delight the existing customers that we have.
Guy Marion: The good news on that front, Dan, is I think that while reduced acquisition, our headwinds at the end, the entire industry will face to some degree. In many cases, retention is not very optimized for most companies. It’s been my experience, it’s not been an area traditionally with a lot of focus and therefore there are quick wins to be gained and it’s a lot easier to grow, increase growth by 10% through retaining more customers than through acquiring 10% new customers up to the top of the funnel. And I think that not only is that less cost, it’s less risk, it’s actually a lot easier to do and most companies haven’t really drilled into that so far. So a lot of opportunity here that’s really being brought forward.
Kathy Greenler …: So everybody’s been asking questions throughout and we’ve just got so much content. I’ve been letting you talk, but this is a great question. So I’m going to pull this up. Tony basically said “I believe COVID is going to give more emphasis on the consumer thinking more about getting overloaded with subscription services and they’re going to start to limit the number of subscriptions they have.” So the share of wallet conversation and it’s going to get more competitive. What are your thoughts on that?
Guy Marion: Dan maybe I’ll let you go first.
Dan Burkhart: Yeah, I’m happy to take it. So I have to preface all of these questions with it depends by category. But first we’ve seen… I’ll give a couple of examples that we’re all familiar with. Subscriptions are being used as a kind of a tactical means to ensure loyalty and think about Uber and Lyft. That’s like the classic all a gobbly if you will, of a zero sum game. If your customer is not using your service, they’re likely using your competitors service. And so subscriptions have been used to lock in to get brand loyalty and lock it in. We’ve seen the subscription model starting to emerge in quick serve retail fancy language for fast food chains. And it is because if you go back for forever, McDonald’s marketing has always focused on… back in the newspaper days, the coupons and getting people back in store for share of wallet and repeat visitation.
Dan Burkhart: Repeat consumption is a lot easier for a McDonald’s marketing team to continue to increase that retention of customers and keep that retention flywheel spinning than it is for them to go convince a net new customer to walk into a McDonald’s franchise. That is simple metaphor for a perhaps a broader concept that holds true right now more than ever, which is that the year… your existing customers. When you think about share of wallet and you think about the zero sum game between market share, it’s really in your best interest to make sure that you’re continuing to delight those customers and to get them back for repeat purchase and stay ahead of it. But also to make sure that if they are showing indications of lapsing and declining, that you’re reaching out proactively to make sure that you are figuring out if there’s a better way for you to provide a service or a different form of your service at a different price point to retain them.
Guy Marion: Yeah, I think that it’s a really good point right now companies are learning exactly who their core customer really is. It’s a important consideration that all companies right now and people at homes are reviewing their expenses and thinking about what do they really need and what do they not really need. And so I would say that from a subscription or a subscriber professional perspective, really having a finger on the pulse around what customers are telling you right now and being able to make decisions based on that information. And quickly is probably the most important thing you can be doing at the moment because the customers are telling you exactly who you’re going to see continued partnership with and who maybe are no longer is likely just to be truly trialing things.
Dan Burkhart: Yup. If you have people on your marketing team that are looking at your loyalty metrics, you got to look at last login dates. You’ve got to look at lapsers and decliners identify those that have not been using your service as frequently. Assume they are at risk and make sure you’re reaching out to them and figuring out the best way to serve their needs.
Guy Marion: Yeah, exactly. And I’m going to skip ahead a couple of slides here because we’re coming a little closer. I think something we’ve seen a lot of both within Brightback customers and across the industry is companies who are doing this well who are recognizing to this point that not every customer is going to necessarily be able to continue to use the service or will necessarily want to be using the service during the short period of time. We look at some metrics like the future likelihood for a user to return and their general sentiment right now as well as the reasons for leaving and in doing so can get, can gauge how many people are planning on coming back and how many people really are not a great target fit.
Guy Marion: And opportunities that we’ve seen and Dan, you mentioned this earlier, but proactively pausing customers and I think you had a couple of good examples then that you shared with me last week of vendors that are proactively engaging their customers, recognizing that they have loyalty and they are the most important VIP customers, but are going to be struggling to use their services during this period. So rather than losing them proactively extending their services or suspending the service free of charge just to maintain that subscriber.
Dan Burkhart: Yup. That’s right. I think if the presumption is that consumers have a lot of different subscriptions that are showing up on their bill and they’re going to be re-evaluating where they’re getting value and not, then you don’t want to be caught on the wrong side of that sort of perception of value scale. And it’s always better to pay it forward if your service is impacted in a way where you have to shut down your facilities as I mentioned. But this example you’re showing here is also a good one for subscription commerce companies that are delivering physical goods or box of the month.
Dan Burkhart: Consumption patterns change and consumers will cancel if they have boxes of your razor blades stacking up in their drawer and their cupboard in their bathroom. You want to make sure that you’re delivering at a pace that they can consume, that whether that goes up or down, but you need to provide that ability to pause or tailor the level of consumption to the appropriate level so that it doesn’t seem useless. Again, focusing on the longterm health and sustainability of the customer relationship. It’s what holds true in personal relationships also holds true in business relationships.
Kathy Greenler …: Mm-hmm (affirmative).
Guy Marion: Right. And I think the NBA League Pass example that I’ve posted here, and I’ve seen quite a lot of vendors doing this we’re all disappointed when the season unfortunately had to be suspended. They’ve recognized that of course customers love the content. Will want to continue to watching it. And so rather than seeing a lot of their customers leave voluntarily pausing that plan for a period of time so they can stay ahead of that. That potential movement has been a great example of how companies are generally succeeding in keeping their most valued customers around even when they can’t have a day to day relationship with that service.
Dan Burkhart: Yup, that’s right. We’ve seen it with movie theaters, theme parks, trampoline sort of golf facilities, membership loyalty clubs like that where there is a physical venue. Absolutely. And so this one’s not too far off and that the games are canceled. ESPN playing reruns of great games, but it’s not the same.
Kathy Greenler …: Nope.
Guy Marion: Got it. Well, this gives us… we’ve got about 10 minutes to go here. So we are going to skip to a final question, which is within companies as the prominence of retention has really grown, who is taking the responsibility and ensuring that companies have, or subscription businesses have a comprehensive approach to assessing the health of the customer and retaining those customers. So one thing that we saw on one article this year is that the number one area of perceived change and where they expect to invest in the coming 12 months was actually a 30% increase in retention. This was a pre COVID answers was in February. So there’s already a sense that this investment was going to increase. And in our recent survey, we found out that actually the top four departments within companies collectively represent 80% of all ownership of churn.
Guy Marion: And these are very different departments, success, sales, operations, marketing. I think the key takeaway from our perspective is it’s still true today that in many cases there’s no single department or team in charge of reducing churn. However, there’s a lot of opportunity to be gained here. And there’s a clear need now for whether it’s a chief customer officer or a head of retention or a head of retention marketing to be able to be a lightning rod that aligns the departments internally around that customer to be an innovator who’s able to test and deploy new approaches to demonstrate impact on revenue, to be a trusted listener and voice of the customer, to gather the inputs necessary as we’re going through shifts, not just this period, but through the standard seasonality of all businesses.
Guy Marion: And to think about retention really as a series of first dawns as opposed to a single hail Mary play right? Fortunately the likelihood of score is actually much higher. May not all happen in one dazzling campaign, but rather than through a consistent approach that generates more touchdowns over time. So but Dan, I’d be curious to get your take. You’ve been looking at this for a long time. Any perspectives on whether there should be and is clearly always a single owner for churn within companies?
Dan Burkhart: Yeah. Again, I’m gonna preface this one with, it depends. Different companies are different and have different needs. But I’ll offer up what we have found. And it was a hard lesson, but we’ve learned in our business that tasking one individual with both net new revenue growth in the form of new bookings and sales as well as retention of existing customers didn’t work. It is far more than a full time job and a full time discipline. So we break those two functions apart and we make sure that our customer success organization is a well honed machine that is tasked with metrics of loyalty engagement, retention and all of the hallmark metrics that you would expect ultimately leading to lifetime value and retention. Churn is a quarterly KPI. We even segment our KPIs because we have different churn rates for small, medium, large customers.
Dan Burkhart: So those are KPIs that we measure and have found it to be quite important for us to have that on our executive dashboard. But I think again different businesses might have different needs, but the earlier sort of version of the SaaS enterprise, the notion of a CRO. A CRO is a big title. A lot of companies have CROs and CROs typically want to be compensated and measured on both customer acquisition, net new sales, and they tend to spend the predominant majority of their time prospecting and working with marketing and getting new customers in the door.
Dan Burkhart: And then retention is an afterthought. And so for us, the big epiphany that perhaps we can share and might help some other companies here is that that was something that was a short live mistake and we had to make sure to course correct for that and really put a single individual in charge will full shoulder of weight behind the need to retain delight and engage with customers. And that requires an organization that is built to serve the needs of small, medium, large customers as well. That takes time to build an org around best practices to do that well.
Guy Marion: Great. That’s really interesting. So you’ve split the having a new business or a new revenue and a retention revenue falling under two areas of ownership within the organization.
Dan Burkhart: Yes. Yeah. And I’m not saying that works for every company. We are very squarely in the world of recurring revenue optimization and management. And so there are different forms of companies that might be operating. So it depends on the mix of your revenue and how much of it is one time driven versus retention driven that would have bearing on this decision and whether this is an appropriate recommendation that might serve your business well. But within the new context of businesses that are increasingly orienting themselves towards the recurring revenue model, this is something that we have found to be a game changer for us.
Guy Marion: Very interesting. Well that’s a lot. It’s a lot of great takeaways here. I think some final high level takeaways from today. The industry has really matured as is the vendor landscape, more capabilities to become best practice practitioners. Retention has really risen in importance this year. Pre and post COVID companies are successfully extending lifetime value while making customers happy. The cancel process and generally retention a lot of it is moving online and going digital both for regulatory and consumer preferences. And finally retention is the new domain for marketing or who drives the retention of ownership within the company or is it a distributed approach? We do see differences from space and vertical to vertical. And this will continue to evolve and most likely it will vary based on the company’s phase as well as what space you’re in as well.
Guy Marion: So I’m going to stop there. I want to thank everybody for taking your time this morning. Dan, for you joining, Kathy for hosting us. We do have a quick offer today, which is to get your free Brightback and Recurly revenue based retention session. You can go to Brightback.com/Recurly to request this. We can do a diagnostic and a quick review of your current situation and make any recommendations from a Brightback pespective, whether you use Recurly or not, although the Recurly integration is very well built right now and provides a ton of value. So Dan I’m going to say thank you. Give you a chance.
Dan Burkhart: Thank you as well. This was a fun conversation and I want to thank both Guy and Kathy for the opportunity. This has been great. I hope it’s been useful to the audience.
Kathy Greenler …: I want to ask of both of you before we head out. If there was one piece of advice for you guys, what would you say to everybody who is in the audience?
Dan Burkhart: Go ahead Guy.
Guy Marion: My one advice is if customers are canceling, let them pause instead and make it very easy to do so. And make sure they feel that is something you want to do to build the relationship with them through these difficult times.
Kathy Greenler …: Dan?
Guy Marion: Yeah, I’d say that customer relationships are important in every single context, whether we’re in the current sort of crisis state or not. And it has changed our thinking about it, but it’s like keeping a feather in the air. You have to continue to invest in it and it should not be someone’s part time job. It needs to be a full time job in order for your company to truly walk the talk.
Kathy Greenler …: Oh, that is so, so true. That is in my view, the number one mistake that people have. As we’re heading off, I want to remind everybody on April 15th is our next webinar, which is navigating your subscription business in these uncertain times with Robert Skrob. We also have our upcoming on demand training and I also want to remind you about what guy just mentioned. If you go to the URL on your screen, you can get the evaluation there. And with that I’d like to thank all of you for your time. We know your time is valuable. We will be sending out a link probably later this evening with this presentation for you and for your colleagues. So look out for that email and we’ll be sending that to you. So guy and Dan, thank you very much for your time, for everybody online. Thank you and have a great day everybody.
Dan Burkhart: Thank you.
Kathy Greenler …: Thanks everybody. Thank you.
