The secret every successful subscription business knows: LTV is “the” metric.
Leading brands know not only how to track LTV, but how to leverage LTV to supercharge their acquisition efforts to drive profitable subscribers from the start, successfully scale, and where to focus efforts for the biggest impact. And this skill set is unique to recurring-revenue businesses.
We asked Alycia Simpson of Recurly, a “Demand Generation Wonder Woman” who’s successfully built and run both new business and expansion functions, to host a workshop focused on how to execute on LTV-driven subscriber acquisition programs. Alycia will bring her expertise in subscription marketing and data analysis, plus subscriber acquisition benchmark data from Recurly as she teaches us.
What you will learn in this workshop:
- Actionable tips you can use to optimize your business
- How to calculate LTV, build cohort analysis, and more
- How to apply analysis and insights to optimize acquisition efforts for LTV
On-Demand Playback
Presentation Slides (PDF)
Click here to download the slides.
About Our Experts
About Alycia Simpson, Director of Demand Generation and Marketing Operations, Recurly
Alycia Simpson is a growth marketer, a copywriter, a full-funnel demand generation strategy leader, building processes and programs for both prospects and customers. As the Director of Demand Generation and Marketing Operations at Recurly, Alycia manages channels ranging from account based marketing to email marketing, paid advertising, in-person and virtual events, and organic. Driven by curiosity, a passion for innovation, and creating authentic human-to-human moments, Alycia thrives on finding ways to create value at every stage of the journey.
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 Sexton:
Well, welcome everybody to Subscriptions Insider’s workshop. Today, we are going to talk about how to track, apply, and optimize acquisition for lifetime value LTV.
Kathy Greenler Sexton:
So hello, and welcome. I am Kathy Greenler Sexton. I am the CEO of Subscription Insider and your host for today’s session. Today, I have with us Alicia Simpson, who is the Senior Director of Demand Generation and Marketing Operations at Recurly. She is going to teach us about subscription lifetime value, how to calculate it, how to use it, how to leverage it, to really help you understand your retention and growth opportunities in your business. Trust me, even though we’re going to get dirty with data today, it’s so going to be fun and worth your time. So as you can tell, I am super excited about the session.
Kathy Greenler Sexton:
For those of you who are new to Subscription Insider, and what we do, we are a media company, information company. And we focus on providing information to help you grow and operate your business. Today’s webinar is a great example of that. We offer daily news, conferences, events and other things to help you learn and grow your subscription business. One of the things that we offer for those of you who are looking for tools, or systems, or consultants, is our subscription business directory. And I have an example, it’s Recurly in our subscription billing. And you can see with all of the vendors who are listed there, subscription billing, legal support, M&A resources, marketing, retention, you have a great opportunity to research them, look at videos and download information as you start your research process.
Kathy Greenler Sexton:
Today’s workshop, we have a great ton of information for you. But we also have two coming up and you can find them at Subscription Insider Events next week, a week from tomorrow. How to achieve sustained subscriber growth. Let me try that one again. We have Subscription Journey Mapping expert, Matt Cronin. And with him is Courtney Tellefsen of the Produce Box. I’m having trouble talking right now. But they are going to walk through how to find that product scriber alignment, to really optimize all the different stages that your subscribers have with you and your subscription business. To optimize that for better retention and revenue potential.
Kathy Greenler Sexton:
In two weeks, we have a session called The Journey to Subscription Excellence. And this is a different type of journey, not the subscriber journey, but your business’s journey. And with us, we have Robbie Kellman Baxter with Nelson Viega, and we’re going to walk through how you need to think through different strategies, and face different challenges at different stages of your business. So both very different workshops, but lots of information like we are going to have today.
Kathy Greenler Sexton:
And speaking of learning, and all of you are the very first people to learn about this because we are officially launching this next week. For those of you who have new roles and subscription businesses, maybe you want to really get a good refresher or your business is transitioning into the recurring revenue mode.
Kathy Greenler Sexton:
We have three upcoming Boot Camps that are going to really address the fundamentals you need to understand. On June 2, Subscription Boot Camp: Marketing, we have three experts, we’re going to cover, go to market, journey mapping, and we’re also going to cover retention with that. On June 9, Revenue Operations. We’re going to go through how to set up and look at your revenue operations and billing operations, a specific dive into payment processing, and then we have a CFO who’s going to really talk through how we need to think through staffing, revenue Ops, and all of those very important details of your recurring revenue subscription business. And then, on June 16, we have Subscription Boot Camp: Technology.
Kathy Greenler Sexton:
And we have an expert who understands e-commerce, but specializes in recurring revenue technology. And he’s going to help us, one of our three experts, really understand the difference, and what’s unique from a tech stack point of view of setting up your recurring revenue business. We’re going to do a specific dive into payments, because there are specific issues you need to understand. And then we’re going to take a tour of the marketing tech stack unique for subscriptions as well. So, it’s going to be a unique series, and I’m really excited for all of those who participate in this. It’s going to be a really great session.
Kathy Greenler Sexton:
And then finally, Subscription Show 2021. This is our flagship conference, and we are bringing it back in-person in New York, November 1-3. You can check that out at subscriptionshow.com. And with that, I’m going to move right on into our workshop today. I know we all multi-process, I do the same. But Alicia has some really good information for you. And is going to really walk through and teach us a number of things. Use the chat and Q&A to ask questions as you go along. We are reading that, we are monitoring that. So anything you have, just put it in there. And if you have a private question, just put in private, and we can follow that up with you, not in person, but privately after this session. So I think I have everything covered. Alicia, are you ready?
Alycia Simpson:
I’m ready. Let’s rock.
Kathy Greenler Sexton:
I’m handing the virtual microphone over to you.
Alycia Simpson:
Awesome. Thank you for all that information. I work personally with Robbie, and she is delightful and a wealth of knowledge. So definitely, check out those programs that Kathy mentioned. You can just jump to the next slide, Kathy.
Alycia Simpson:
All right, so Kathy mentioned, I’m the Senior Director of Demand Gen and Marketing Operations. Typically, I think marketing people tend to shy away from these types of speaking sessions when it comes to promotional angles and things. But my entire job is really to find more efficient ways to deliver pipeline and revenue, all through creating value. Which means I look at numbers all day, forecasting, spend efficiency, metrics, channel and program performance. And I love a good spreadsheet, which makes me a little bit of a control freak. And I can admit that.
Alycia Simpson:
But through the years, I’ve been doing this for I think a decade or so now, I’ve learned a lot. I’m hoping to share some of that to help you optimize your efforts for greater impact. And Kathy mentioned, I work for a company called Recurly. Recurly is a subscription management and billing platform. We help all kinds of brands across a variety of verticals to grow revenue, recover more revenue, and then automate those recurring revenue processes. We do a bunch of different things, all specifically built for subscription. So, if you’re a subscription business, which you probably are, we should probably talk. Now, you can jump to the next slide.
Alycia Simpson:
I mentioned I’m going to cover a bunch of information. This is the nuts and bolts of what I’m going to talk about today. I’m going to go over the what and the why. How to create some different types of reports to both optimize efforts, excuse me, I’m also having some of those allergies happen, and forecast LTV, and then share some tips for implementing those insights to hopefully get you more back for what you’re putting in. And we can jump to the next slide.
Alycia Simpson:
Boom, so you’re likely no stranger to LTV, but I did want to cover some definitions first. So Kathy mentioned customer lifetime value LTV, whatnot. This is customer lifetime value CLTV, CLV, or LTV is all the different ways I’ve seen it presented. It’s really the total profit you make from an average customer between their first and last purchase. So, why are we talking about this today?
Alycia Simpson:
Since you’re no stranger to it, you probably have some kind of a grasp of LTV, but it’s really why subscription businesses have exploded in popularity over the last decade. They typically have a healthier than average LTV compared to businesses that sell one-time transactions. And there’s two main reasons why we’re really going to dig in here. For me and for you, I’m assuming, we’re looking to create some benchmarks for customer acquisition costs or CAC. So then we can compare customers and then ensure we’re targeting those who spend more with us to help optimize the return on our investments. And then ultimately, LTV is the way to optimize all efforts for the highest revenue.
Alycia Simpson:
The more money you make from someone for the longer amount of time, the more money you’re delivering to your business. For many subscription businesses, this is the value driver. It’s the value driver for a lot of different businesses. But this is the metric when I think of subscriptions. And this delivers a customer-centric guide that’s critical to effective marketing and sales strategies for acquisition, retention, upsells, cross-sells, the whole gamut.
Alycia Simpson:
So what you see ultimately, optimizing for CAC to LTV ratio, this is really the bread and butter. LTV on its own is phenomenal. But if you can really track your CAC to LTV ratio, you’re really tracking the ratio of cost to ROI. Because it really doesn’t matter if your LTV is $1,000 or $100,000. If it costs more than you get back to acquire that customer, you’re still spending money that you don’t need to, or you’re not actually growing at that point. So you need to track and constantly iterate across a subscriber journey to optimize for CAC to LTV. It’s the ultimate or a great indicator of profitability. So a benchmark for successful subscription businesses is somewhere around triple. So it’s 3:1, is the benchmark that you would shoot for. So you get three dollars back for every dollar that you spend.
Alycia Simpson:
Now, let’s talk about some calculations. I’ve got the calculations on the right for both LTV and CAC. A simple method to calculate LTV is to take the average monthly amount expected from each customer and divide it by your churn rate, which is the rate at which you lose customers each month.
Alycia Simpson:
These calculations cover what I’m saying on the left hand side, so I’m not going to go too deep into them. And we’ve talked a little bit already about the benchmark of that 3:1. So let’s dig into reporting because we’re going to spend a bunch of time on reporting. And then I want to spend a bulk of time on how you actually leverage those insights. So let’s jump to the next slide for how to create some reports.
Alycia Simpson:
All right. What I want to go through today, one of the main types of reports we’re going to look at is really a cohort analysis. Because a cohort analysis provide a deeper understanding of your data, and therefore, your subscriber base. It makes it easier to identify trends and any gaps for high performing channels, programs, most adopted areas of the product, et cetera. And it really, which you’ll probably hear Robbie talk about, help you identify your ideal subscriber. All of this is really to help you get more focused and do more productive efforts that drive revenue growth, and of course, LTV.
Alycia Simpson:
Plus, when you’re using a cohort analysis, you can actually get a sense of lifetime value before you’d actually be able to see lifetime value. Which can help you make better decisions for marketing, customer acquisition tactics, et cetera. So I’m really talking about forecasting LTV here. And you can create these types of reports for any area of your business. Trial performance, plan performance, payments, subscriber growth, churn, and all other things.
Alycia Simpson:
This is how you can automatically generate reports. And this is, of course, a little bit of a shameless plug, you can leverage technology, these types of reports come out of the box with Recurly. But if you don’t have a subscription management solution, then we should of course talk. But let’s walk through how you can create these in Google Sheets or Excel.
Alycia Simpson:
Building a cohort worksheet. First, you want to pull your data with required fields. In this case, I’ve pulled user ID, signup date, last login date, and cancellation date. Then you want to export your data and import into Excel or Google Sheets. We’re using Google Sheets for this example. Excel is, I think, maybe more powerful. Hopefully, I don’t get in trouble for saying that from Google, but we’re using Google Sheets here.
Alycia Simpson:
So you’ve exported, you’ve imported, then you need to reformat. And we’ll share this recording, of course, and then also some additional materials. And I’m happy to share any notes for this specific walkthrough too because we’re going to be covering this in-depth dry information, but it’s super useful. You’ve imported, then you’re going to reformat into groups, grouping by month. And for this example, we’ve added these four columns that are signup month, signup year, login month and login year. We do this because we need to break down the data further than what we have in our export because of how Google Sheets works. And we’re using Google Sheets for this.
Alycia Simpson:
So to do the regrouping, Google Sheets actually has a built-in month and year function. So you can enter in a formula, it’s equal, month, and then enter your time. So, 1/1/2021, and it’ll return one to represent January in this instance. And you can do this on repeat. So you get month one, month two, et cetera. There was a lot of information and I know you wouldn’t cover it all on the slide. So again, we’ll provide some notes, but now we actually create a pivot table.
Alycia Simpson:
So we’re going to select a whole range of data, and click pivot table from the data menu, I think you might need to hit enter, Kathy. So you can see the four columns I’ve added here. Maybe click one more time. So, we’re going to click add in the rows… Maybe one more time
Kathy Greenler Sexton:
There is your pivot.
Alycia Simpson:
So, we’re going to click add in the rows, and then add a sign up here, signup month, click add in the column sections and add a login year, and then we’re going to do again for a month. Does that say pivot table at the bottom?
Kathy Greenler Sexton:
It’s [crosstalk 00:16:18].
Alycia Simpson:
Maybe go to the next slide. Okay, so here’s where you’ll see. All of the adds and things. I think I was talking fast. You can click at enter one more time. Now, what we’re doing is, to calculate, you’re dividing the users and the cohorts depending on when they initially subscribed to your service.
Alycia Simpson:
So, I calculate retention at the end of the month, which is month end, and then by dividing the number of subscribers still subscribing after a month end, which probably sounded like complete babble. Essentially, I’m dividing the number of subscribers left by the total number of subscribers I started with. Might hit enter one more time. And then one more time.
Alycia Simpson:
What I’m left with are the numbers in the middle of this table. There’s some extra formatting to be done. But you get the idea here, where you can then see the number of subscribers that are left after each month. So obviously, for the subscribers that started in month one, we have 12 months of retention data. But if somebody started in month five or six here, we wouldn’t have all of the data because they wouldn’t have started… We just wouldn’t have that amount of data.
Alycia Simpson:
So this example is for a subscription business where the key value driver is the number of active subscribers. But again, you can create this for any type of repeat behavior. And you can do this in any type of timeframe, daily, weekly, quarterly. It doesn’t have to be monthly.
Alycia Simpson:
That was a quick and dirty how to create a pivot table for a cohort analysis. But I want to pivot into talking through… Now you have all this historical data, how do you use it to forecast LTV? Like you saw in that previous picture, and this is just a rough, I don’t know, image I created, we’ve got all these empty squares. So, that’s the empty squares where customers haven’t actually churned yet. So you don’t actually know what that expanded LTV is going to be.
Alycia Simpson:
So, how do we get that? How do we get to LTV for customers, we don’t know the tenure for? We can use our historical data to estimate that future LTV. Because ultimately, the issue with customer lifetime is that we don’t know the customer lifetime. What we do not know is how long a customer will stay. So we can make an educated guess based on the historical data. We can do this with a retention matrix which is just like what this is and what the last image was. And there are two axes in this cohort. You have your acquisition month, and then you have tenure on the bottom.
Alycia Simpson:
Now, we’re going to make some assumptions and assume that the trends we identify in our actual data will continue. So we’ll use that data we have from our initial analysis and look at marginal retention to fill in those remaining blanks essentially estimating the values we don’t know yet. So when your whole matrix is populated, now we have projected lifetimes for customers we don’t have lifetime values for yet.
Alycia Simpson:
We’re going to take the recurring amount generated by customers, minus any operational costs and include one-time add-on purchases or services when calculating LTV. And then multiply that by the average tenure from our new fancy graph. We can estimate the lifetime value of customers we wouldn’t otherwise know until they canceled. So basically, we’re taking all the information we have in those filled in squares, and we’re just pulling it forward. So we can then estimate what we’re getting back for that customer even though they haven’t canceled yet. So we get more of a fuller picture.
Alycia Simpson:
There’s one more graph I want to talk through. And it’s a way to look at projected LTV as a line chart. And I promise this is the last graph. So we start by taking a cohort of new customers, and then follow their cumulative spend over time. This approach gives us an accurate basis because cohorts have an actual customer data and already include all the parameters we need. So again, cohort analysis for the when. We’re going to tally the cohorts total cumulative revenues in Excel for each period. So starting with their first period, divide this figure than by the number of customers in the cohort to get an average per customer figure. You might see this listed as ARPA, A-R-P-A.
Alycia Simpson:
In this example, I’m looking at the cumulative revenue generated by the average customer with one particular cohort during the first six months. So you can see that’s the numbers on the left, this month, in revenue, that’s our first six months. And I’m using Excel for this. In Excel, there’s a built-in Trendline function to discover the formula. This is the one that I most use for this type of analysis because it’s the best fit for projections over time. You can use this formula to predict the value of the cohorts average customer in the future. So this is an alternate way to do what we just roughly did in that matrix.
Alycia Simpson:
To get this graph in Excel, and reveal that formula shown, we’re going to add a Trendline to your line chart by clicking Trendline, and then more Trendline options, which is what you see in that middle screen. And then select logarithmic, enter the number of periods you want to see in your forecast and select the display equation checkbox. Checked. You can now use this logarithmic formula determined by Excel to tally CLV, or LTV as far into the future as you consider reasonable. Here, I’ve plotted the six cumulative values, spending data for an average customer from our cohort, and then generated a predictive Trendline for an additional six months into the future. So you can see this is where we’re trending after month six, all that dotted line. This gives me some kind of an idea of how to gauge the health or profitability of said customer segment for whatever it is that I’m looking for.
Alycia Simpson:
I know a lot of people might be pulling reports for retention, et cetera when you’re creating these types of analysis, but there’s some other ideas for cohort analysis. One big one might be trials. Yes, trials, or your offers, or promotions, tracking your performance and conversions and cancellations, of course. When it comes to your trials, identifying how many customers didn’t convert, and then why? What were the common points of where they might have came from, or the offer they may have came from? And then, of course, you’re always going to be looking to optimize efforts for highest converting, highest purchase value, et cetera. So those are my standards when I’m looking at this type of reporting, and I’m segmenting customers out.
Alycia Simpson:
That was a lot of info on reporting. I want to pivot now and talk about what you do with all this info. This is probably, really, why you’re here. It’s like the meat and potatoes of the presentation, so let’s dig in.
Alycia Simpson:
First point that I want to make, and it’s a big one is all around segmentation because serving up the wrong content to the wrong audience really devalues your product. And you want to create higher value subscriptions, not just more subscribers, which is why you want to optimize your efforts for LTV in the first place, which is why we’re talking. So segmenting your audience is the best way to achieve longterm growth, optimize user experience, understand where your customers fit in your customer ecosystem. So then you can figure out how to promote or cross-sell et cetera.
Alycia Simpson:
And then, you can also leverage your segment to data to create dynamic programs. That might be paywalls, packaging, promotions, content, all for acquisition and retention. Some ideas for segmentation, of course, revenue LTV, but also plan, usage or those customers who upgrade and in what time frames by acquisition channel, of course. So then you can really report on the efficacy of your channel efforts by funnel stage or where they’re at in the buying process. I do this a lot so that I can figure out if someone is net-new to the database, I should be talking to them in a different way than if someone is highly engaged and much further along in our lifecycle. It’s much more targeted marketing that way.
Alycia Simpson:
Of course, by geographic, demographic or vertical, interest-based or behavior-based is a big one. This is one if you’re not leveraging now, I would start really looking at it. Because just because someone is in a specific location, or a specific buying place or place in the funnel stage, that doesn’t necessarily mean that they’re all going to want the same type of content from you. So starting to look at the ways that people are engaging with your products is going to be really powerful.
Alycia Simpson:
Of course, most likely to churn and when. And then there’s also splitting people into what subscriber are they? Non-returning sub, returning sub, new sub, tenured sub, et cetera. Just any way you can think of to slice and dice your data, and then overlay things, so you get more of a fuller picture.
Alycia Simpson:
So, what you’re ultimately looking to do when you’re cutting through all this data is you’re creating your ideal subscriber, or what I call your ICP, because I’m in SaaS. So we really deal with our ideal customer profile.
Alycia Simpson:
Let’s talk about your ideal customer profile because this is another one of those big points. You can use LTV as your guide, or your main parameter, or one of your main parameters for identifying your ICP. So this again, will help you to estimate a user’s likelihood to subscribe if you’re getting someone from a free trial, et cetera. And also focus efforts to deliver the biggest impact.
Alycia Simpson:
I mentioned I come from the SaaS world. So I work in fields with a lot of information, typically. So we use Marketo, and whatnot. So I’m able to glean a whole lot of information from someone when they’re downloading a piece of content, or registering for a webinar, et cetera. But doing this analysis that we’re talking through, can help replace some of those fields so that I can then make some inferences about customers without having to ask you for so much information upfront, which then helps me drive conversion rates.
Alycia Simpson:
Here are some ways to implement your ICP now that you’ve segmented all of your customer data. First and foremost, I would say build some personas based on your key buyers. Who they are, what they care about, the sites that they engage with, if you’re B2B, maybe company size, industry, et cetera. Define your messaging and value propositions so that you can implement that in your campaigns, your ads, your content, so you have content that’s targeted to each one of these types of buyers, so you’re really speaking to them in their language.
Alycia Simpson:
One note here is prepping your content. And content, I mean, it’s broad, so for me, that’s content, offers, product, et cetera. Tagging what your offers are by different things. You can tag it by persona, by value, by benefit, by vertical, so then, you can create these personalized journeys, or it makes it easier to recommend a cross-sell or an upsell if you know what somebody is already into, then the tagging helps that be simpler.
Alycia Simpson:
You could do, what areas of the product will resonate most with the audiences or what makes a product most likely to be sticky. All of these are different ways to tag your content. And then, now that you know who your audience is, you can advertise to your readers where they are. You’ve done the work to build the persona, partner with people like Sub Insider. Because we know that you’re here, we want to talk to you in the ways that you care about with the information that is, hopefully, relevant for you, so here we are.
Alycia Simpson:
And then you can tailor your offers promotions, comms, et cetera, to who you’re speaking to. And then one extra step I would take for really tracking your efforts, is to create a reporting framework. So you can really report on the efficacy of your efforts and then identify new trends within your ICP. Are you doing the right promotions to the right people, or are there new people you should be talking to, and can expand what your ICP is?
Alycia Simpson:
So, when it comes to channels, I’m always looking to what channels produce customers with the highest LTV? So, if you’re now segmenting your data by acquisition channel, you should know which channels are most effective and return the highest ROI and conversions, et cetera. So then you know where to focus efforts, where to put more budget, and what to optimize first. So for an example, if you’re using paid ads for advertising, then I would create a testing framework and optimize those channels first to expand them. And then, including additional ads targeted to your highest converting audiences, et cetera, before then expanding into a net-new channel. So that you nail that first channel first, and then expand into a new area to test. So you have an always on running engine that gives you a baseline.
Alycia Simpson:
When it comes to programs and packaging, I suggest… The next slide, Kathy. Packaging, thinking bigger. Using all the insights that you have, being able to… Hit enter.
Kathy Greenler Sexton:
Man, I’m [inaudible 00:31:12]. I don’t know what happened. I think I’ll take another sip of coffee.
Alycia Simpson:
Driving revenue by pivoting and expanding your offers and revenue streams, so finding new ways to engage your existing customer base, and then, to find net-new customers. Now that you’ve identified patterns of different customer segments, you can leverage that data to infer patterns of other buyers and what their interests might be. Let’s say you’ve got a group of customers who buy a specific type of product. Well, if somebody else comes in, that matches that segment, then you know that you can probably, or you should probably promote that product to that customer. And then, also identifying, are there new services that are consistently requested, or things that you can add, that would add revenue to that customer, to that purchase, to accelerate or increase LTV. Lots of talking here.
Alycia Simpson:
For programs, doubling down on what works, and then refine. Because it’s not a one size fits all for programs. If you have different buyers, they come to you from different places, they like different things, they have different habits, et cetera. So it’s really finding the programs that are going to speak to people in how they want to be spoken to. And that’s why segmentation is such a big point. So much like the packaging point I just mentioned, for me, I’m also looking at the most used features or areas of the platform, then leveraging those insights for strategic upsells.
Alycia Simpson:
And also looking at that for any impacts to pricing changes, et cetera. Taking all of that into account. And then looking at what content drives most. Pipeline, wine deals, programs, et cetera. We use Salesforce, so I pull all of this VR CRM, so then I can identify those highest performing programs, and then overlay all that ICP data so that I can find new areas for promotion, and where to really put our money and our time so that we can have the biggest impact.
Alycia Simpson:
One of those areas for biggest impact, I think, is onboarding. I think it’s something that is often overlooked. I think I skipped a whole section here, so I’ll go back. For engagement programs, this is really systematic engagement to drive loyalty. The number one metric for your existing customer base, aside from LTV for you, is really loyalty. I heard somebody at one point say, you’re really optimizing for a loyalty metric. What you’re looking to do is find ways to systematically engage so that you consistently drive value throughout that entire lifecycle.
Alycia Simpson:
Communications are a big way to do this. So you can use your email programs or in-app programs, et cetera, to glean additional information about your subscriber or your customer, and then leverage that to then drive further engagement down the funnel. My last role before I came to Recurly was customer marketing. So some of the things that I did, there were social promotions, virtual events, of course. And these were all geared towards existing customers, but a lot of these work for prospecting as well. Customer advisory board is a big way to leverage existing customers and then do more. Workshops, communities, what you’re really looking to do with your existing customer base is drive advocacy.
Alycia Simpson:
Now, back to that onboarding point. Onboarding is one of those big ways that you can do this. I recently heard this quote, and it was from a previous event we did, “You don’t need subscribers to buy today, you need them to buy tomorrow.” And that’s so true. Any repeat business, it’s not about today, I need you to stay for the longterm. That’s why I’m really hammering home on this driving engagement and loyalty. Because it’s really how you do that.
Alycia Simpson:
There’s a couple of ways you could do that, and then I’m going to get into this checklist that’s up here. You can drive subscribers to… Let’s say somebody fills out your form, you can drive them to a fast follow landing page, that then gathers that additional information directly upon signup. Or you can build it into your onboarding flow. So you’re asking more information, as you’re giving information or helpful tips for how to do something. You can also use surveys. There’s a lot we don’t know about our subscriber or customer bases. And I don’t have any hesitation about asking, basically. It’s like, “Don’t be shy. You don’t know what you don’t know. And the worst thing somebody can say is nothing. So, no big deal. No skin off your teeth.” As my dad would say.
Alycia Simpson:
So let’s talk about the onboarding journey. I created this checklist, as a quick hit for how to create an onboarding journey. Now that you have all of this data, and you got your cohort analysis, et cetera, now you’ve got all of these ways to segment your customers. Via these cohorts, you’re going to figure out what you want to drive. How are you driving acquisition, satisfaction and retention in the least amount of time possible? So you’re identifying customer segments, and you’re going to tailor the journey to them.
Alycia Simpson:
Because you want to speak to them in the ways that they want to be spoken to and deliver the messaging that you should be delivering, then you want to map out your key touch points and the actions that drive time to value. So I just mentioned, how and what amount of time do you need to drive value? For us, let’s say, for example, we need to do to four key actions within 30 days. I’m going to build this onboarding flow, so that you complete those actions in that amount of time so that you can say, “Oh, wow. That’s really powerful. Now I can do that more.” Whatever that is for you, work to define that.
Alycia Simpson:
One call out here, and it’s the fourth point, is to build out the journey in a document first. When I was in customer marketing, I would go through and I would create entire drips in Marketo, or whatever system we were using. But then, I would need to move emails around or add in different steps or do things. It’s so much simpler to create a Google Sheet or spreadsheet or whatever, and map out your touch points than doing it in a system and then having to do all of that. And this includes all of your corresponding how-to content, you can identify if you need to create any new content, or videos or whatever, any complimentary content that you can weave in for those upsells and cross-sells, all of that. Do all of that in a doc first and then put it into your program.
Alycia Simpson:
Now that you’ve got your document fleshed out, and you know how you’re talking to people, and when, then you want to decide on your timeline. When are you launching? I suggest immediately. As soon as someone fills out a form or makes that purchase, send that first email, there’s no reason to wait. In Demand Generation and sales, the faster the time to follow up, the higher the rate of conversion. It just helps you build that relationship faster and upfront. So the faster the better, I think. And then, you’re going to put this into practice. So build it in all your various channels.
Alycia Simpson:
And of course, if you’ve got that segment of data, you used the different channels across the board, but then if there’s specific customer segments that maybe, they’re more about an app, maybe they really want social, maybe your just email comms is where it’s at for you. Then make sure you’re leveraging those channels that make sense. And then track and measure everything so that you know the impact of all of these efforts.
Alycia Simpson:
I can’t see. Is there one more point on this slide? Nope, that’s the last point. So one more note, or a couple notes for me here. Now that you have all of this data on your customers, and you’re creating this journey, and you’re doing all this, I mentioned tagging your content before. I would do the same thing with all of your customer data. Use your CRM or whatever you’re using, and create a tagging structure so you can programmatically engage your customers at the right time with the right content to drive loyalty, and LTV.
Alycia Simpson:
And just like you would for, well, like I do for new business, I would also create some kind of a scoring model, or lifecycle model, or something that lets you know, when someone is ready for that next action.
Alycia Simpson:
I don’t know exactly what that looks like for you, but for us, it’s like there are certain triggers, or a certain level of engagement that someone might be doing. That means that they’re ready for the next message, basically. And then you can extend all of your onboarding journeys that you’ve built, to really create them into an entire engagement drip that follows the customer lifecycle. This would cover and include those upsell, cross-sell opportunities, any key milestones, et cetera. So you’re really following them the entire time, they’re a customer of yours, and not just cutting off at 30 days. Because then you drop off, and then you’ve stopped building that relationship at that point. This is a high-level SaaS example. On the next slide, there we go.
Kathy Greenler Sexton:
I got you.
Alycia Simpson:
So this first box is an example of tailoring to the key features or actions that I want someone to take to engage to drive that stickiness. Then the next one is created to align with someone’s goals, and how we’re going to help them achieve that faster by doing X, Y, Z in the product that I’m including somehow tos. Then this last one is a little bit more behavior-based. I’m tracking my customer data, so I know who’s doing what and who hasn’t done what. If I’m noticing that they haven’t done an action, I’ve split them into a different path. Now I know I’m following up with them to say, “Hey, you haven’t done this thing. Here’s why you should do it. Do you need help? Let’s talk.” Or “Here’s a reminder asset of how to do X, Y, Z.” And then the last point is just the last email in this pseudo drip. Enter.
Kathy Greenler Sexton:
Oh, okay.
Alycia Simpson:
There we go.
Kathy Greenler Sexton:
I’m not following your directions very well.
Alycia Simpson:
I know. Well, there’s a lot of talking. I mentioned earlier, the fast follow the landing page. This next example on the next slide is one from PupBox. Once you complete your signup, they do a fast follow to have you fill out more information on your puppy. So they can then tailor the products as your puppy grows based on where your puppy is at in their lifecycle. This has actually helped them really drive LTV, and they’ve also decreased churn because they were having some… People were churning after a year, but now people stay because they’re getting products that are relevant to their dog much further on, because of a lot of their onboarding efforts. So props to them for everything that they’re doing. I was really impressed when I was reading about their use case.
Alycia Simpson:
Now I want to pivot and talk a little bit about some tactics. And I’m leaning into the upsell, cross-sell. I mentioned before, tagging content. I want to dig into that a little bit here. This is, again, tagging by your content, your products, your areas of your product, by persona, interest, value, topic, et cetera. Anything that you think is going to be relevant for your business, because this helps you understand, again, that relevant content so that you can recommend based on interest. Then with all this tagging, you can create, or dynamically pull these offers in for promotion, and communications, ads, et cetera. Put samples in boxes based on what you’ve identified that person would be interested in.
Alycia Simpson:
You can go a step further and create personalized experiences with something like a content hub or creating bespoke product offerings that feature some other suggested items that other customers, similar to that customer, may have liked. And then you can find new avenues to promote complimentary products based on all those insights. And then I created a couple of really high-level examples of integrating LTV and ICP for upsells and cross-sells.
Alycia Simpson:
We talked about creating personas. This is Freddie, the CFO. We’ve built our buyer persona. Now that we have our buyer’s persona, we can create content that’s specific to what Freddie would care about. And then, we also know where Freddie is hanging out and how Freddie wants to be talked to. So we’re marketing to them where they are, with tailored offers. So numbers based. Here’s an ad that’s based on numbers and something that’s probably highly relevant to Freddie the CFO.
Alycia Simpson:
The second example is Maggie the social media maven. Maggie, she came to us from social. This is where she engages, this is typically where she will buy more products, et cetera. So we promote complimentary offers to what Maggie likes. Maggie also likes traveling outdoors things. So we’ve got some compression socks, some sanitizer, and a nice travel gift box. And since she’s active on social, we would optimize for the existing channels, but then also find new channels that we could advertise to Maggie on. Depending on Maggie’s demographics, maybe TikTok is something we would want to expand to. These types of insights are helpful.
Alycia Simpson:
This is the last point. I’ve talked a lot at you. And then we want to get to any questions we might have. But I do want to spend a couple minutes on retention because retention is the other half of acquisition, and it’s really the key to sustainable growth. Everybody talks about retention all the time. It’s critical.
Alycia Simpson:
First and foremost, segmentation. We’ll hammer home on it because it’s really key to success. Instead of throwing the kitchen sink at all your subscribers to bring down your overall average churn, segment your audiences just like you would for your acquisition and engagement program so you can create personalized experiences that really deliver results.
Alycia Simpson:
For example, your subscriber cliff. You should know what your subscriber cliff is overall, but then look by different customer segments so that you can have a deeper understanding about when they’re churning. And then the why. Are there similar pain points? Is it a price increase? Do they’ll come from a specific intro offer that they’re canceling after? And then figure out how to back out those insights to improve your retention via your acquisition and engagement efforts.
Alycia Simpson:
Channels. Same points as before, but be more intentional with efforts based on the most effective channels for communication. Identify all your channels and then figure out how to use each channel and for what type of communication. Not all communications are equal. Email is better for some things than an [APQ 00:48:25]. You could even go Snail Mail if it strikes your fancy depending on who your audience is. But knowing those things can be really powerful.
Alycia Simpson:
Programs. Winbacks. We measure Winbacks the same way as we do acquisition programs by efficacy and by segment. So, pull reports for your Winback programs and identify the most successful programs overall, and then by segment, so you can find patterns and figure out what to use and what to stop using, and for whom.
Alycia Simpson:
And then tactics. Dunning is a big one. Recurly does dynamic dunning and I want to spend a minute talking about what that actually means. Dunning schedules are not one and done. Static dunning takes reasons and buckets them into these large buckets and sends out blanket messaging to everyone who has some kind of a failed transaction based on that reason, or renewal, et cetera. And it’s usually done in a regular cadence. So there’s not a lot of variance within that. And it treats everyone the same regardless of their price point, their tenure, et cetera. So dynamically creating your dunning programs with your segmentation in mind varies those retry schedules by individual reason, specific subscriber data, and you’re ultimately able to create more optimal, a personalized dunning schedule.
Alycia Simpson:
Recurly does this through machine learning. And it drives big results. So love to talk to you more about that as well. That’s been 51 minutes. So wrap up. Recurring billing is unique. High-level recap, use cohorts for a deeper understanding of your customer base. There are a ton of metrics that you’re already using, just start looking at them a little bit deeper, and you’ll be able to glean more insights that will help you drive more impact.
Alycia Simpson:
Segmenting is the most impactful way to deliver consistent value, hands down. Focus your efforts for ICP, so that you’re delivering the highest LTV and ROI. Optimize for CAC to LTV with all of your acquisition efforts. And don’t forget that optimizing for LTV includes all of your reducing failed transactions and really focusing on that retention effort. That was a lot.
Kathy Greenler Sexton:
It was a lot.
Alycia Simpson:
It was a lot.
Kathy Greenler Sexton:
It’s good, though. Really good. Everybody, I’ve been seeing a few questions in the chat and Q&A. If you have any others, by all means, please put them in there. First of all, Alicia, thank you. This was a great, great session. Really meaty and good information. I do have a question which goes back to the calculations. This is from somebody Zooming in. Do you have a recommendation on how many months somebody should put into that linear calculation for an annual subscription versus a monthly subscription.
Alycia Simpson:
I know we used six months here, I like to look back at least a quarter, preferably a year back. For our business, I look a year back unless there’s been some big process change. So my recommendation would be a minimum of three, but preferably six if it’s for an annual subscription. If it’s for something more, go back as far as you can. If you’re a SaaS business, I would go back much further.
Kathy Greenler Sexton:
Good advice. With the dynamic dunning. I have a question here. Hey, Marco. I see your question over here. I’ve got a lot of different questions. So if you can start by typing in the question, maybe we can get to what you need. But let me get to some of these other questions right here. Dynamic dunning. I love the alliteration of that, dynamic dunning.
Alycia Simpson:
I didn’t make it up.
Kathy Greenler Sexton:
… is it focused on just the retry re-presentment, or is it also including communication? Somebody asked for clarification on that.
Alycia Simpson:
Dynamic dunning also includes the actual communication itself. And it’s part of the whole revenue recovery engine that really does… It’s like a two-pronged approach. It’s both proactive and reactive. So there are some things that are like account updater, and things that happened beforehand, and then dynamic dunning is what’s done to optimize recovery once the transaction has failed.
Kathy Greenler Sexton:
Good. I think that covers actually several questions that all came in at once. [inaudible 00:53:33]. Another question here. I believe this is on our cohort analysis. Can you touch on how you use the start and end date again, for the subscription length calculation? You mentioned the month and year to create the cohort, but how do you include ending the subscription in that projection?
Alycia Simpson:
I think if I’m understanding the question, I am looking on an annual basis for that. So if I’m starting at one month and date, then I’m looking out 12 months, so that end date would be the 12 months. Again, if that’s not right for your business, you can do… Daily might be crazy, but daily, weekly, monthly. If it’s multi-year, annually, et cetera. There’s a lot of variants for what you can do there but I use year. Hope that answers your question, Melody.
Kathy Greenler Sexton:
Melody, if you have a follow-up question, let me know, I’m reading. We’ve got chat and Q&A going, so I’ve come in here. This is a great question, Marco. And I hope I cover it right. And we can always follow up with you because I know we’re running out of time here. So this question is, you have the experience in SaaS, and so is it easier because it’s SaaS to structure the free trial and the customer acquisition to get to that aha moment that you talked about? But how does all this translate into consumer product goods? Is everything we talked about a transferable across what I call the different business models in the subscription industry? And if so, are there any differences that we might need to think about for people in the Zoom?
Alycia Simpson:
Yeah, good question. I think it does transfer. Like I mentioned those automatic reports and things that happen in Recurly, trials is one of those things that’s also included. So Recurly automatically generates reports, and it doesn’t matter what industry you’re in for trials, promotions, et cetera so that you can see who’s converting, what that offer was. There’s just a lot more information that you have. I think all the things that I’ve talked about for SaaS are really across the vertical. If you’re doing free trials, if you’re doing promotions, coupons, discounts, any of that, all of that should be, and could be measured the same way.
Alycia Simpson:
It’s just that maybe you’re using a promo code, instead of a seven-day, 30-day free trial. So it’s just, what you’re measuring might change, but the actual measurement itself doesn’t really change.
Kathy Greenler Sexton:
Cohort analysis can be used in so many ways in a recurring revenue business. It’s a really good thing to get your arms around and really learn how to do it, whether you’re doing it in Excel, Google Sheets, or you have a platform that can create some of the reports. So I can’t emphasize that enough for everybody on today’s Zoom. We are running out of time. Alicia, I have one last question. As we leave today, if there’s one thing to focus on with this data, what would you recommend people focus on?
Alycia Simpson:
Yeah, 100%. I’m all about personalization. I know it’s SaaS, but it’s still a repeat business. And my goal is to create value at every touch point. For me to do that, the best way for me to achieve that goal is really through segmentation. It allows me to talk to people in the way they want to be talked to through the communication methods that they are most likely to respond to. It’s really talking to them how they want to be talked to where they’re at. So segmentation, I think is the number one tip that I would take out of this.
Alycia Simpson:
Once you’ve nailed your reporting and just continuing to segment data, so you can create new, more personalized ways to engage with your existing subscriber base, and then apply those looking outward for Acquisition efforts.
Kathy Greenler Sexton:
Great advice. Alicia, thank you so much for today’s insight and lesson. It’s really good information. Thank you.
