Female Speaker: So, for our next session, we’re excited to share the latest trends on subscription marketing. And to bring that to the stage, we’ve asked Ray Schneeberger and Ken Mahony to share some insights, so please help me welcome them.
Ray: Good afternoon, everyone. My name is Ray Schneeberger. I’m vice president of sales at Digital Media Solutions. Digital Media Solutions provides people-based digital performance marketing solutions for our clients. Essentially, what that means is we draw a straight line from the clients’ ad spin right to our line. So, we are 100 percent accountable for that engagement.
And I’m here today to represent the subscription side of the business at DMS, which is a passion of mine. I hope that that comes through today in this presentation to you. I’m looking forward to having a conversation. And allow me to introduce Ken Mahony. Ken.
Ken: Hello, everyone. I’m Ken Mahony. I’ve got over 30 years of experience in the direct-to-consumer subscription marketing space. I’ve worked with many iconic brands, including Disney Book Club, Dr. Seuss Book Club, when I was at Scholastic at Home, and then at Guthy-Renker, Proactiv, Meaningful Beauty with Cindy Crawford, and a lot of other significant brands there. So, within those brands, some of those have grown to be billion-dollar brands, exclusively through the direct-to-consumer subscription marketing model. So, it’s very possible to build a significant brand with a very strong brand following through direct-to-consumer. So, we’ll be talking some more about that.
Ray: So, just real quick. The subscription marketing landscape in our subhead of winning the war on loyalty, the reason those are out there in subheads, there, is subscription marketing, when executed properly and using best practices, will bring loyalty to the market of today. So, that’s the premise of the conversation.
We’re going to take you through a little journey, and talk about today’s modern consumer. Maybe take a step back in history, bring you forward to today, take a look at the landscape going forward, and hear from Ken’s deep expertise in this subscription landscape.
So, today’s modern consumer. This image here, capturing someone on their phone, that while they’re shopping and maybe comparison shopping is what’s happening today. Now, took some looks at some statistics for this presentation, and I’m just going to read these, so I can keep them straight. But worldwide, mobile phone user penetration is expected to reach 63 percent this year. And USA mobile phone internet users, in three short years, 2022, is going to reach 275 million. And, quick calculation, that’s probably 80 percent of the country, are going to be accessing the internet through their mobile phone. So, where are we spending our times? On that device.
Obviously, access is key, as I just demonstrated there. Values and concepts are absolutely changing in pretty quick fashion. What I mean by that is – I try to put some real-life pieces into this presentation, by talking about my own experiences. And talking with peers of my age, that have kids, maybe 16 to 22, I’m a little bit astounded, sometimes, when some of them tell me, “You know, my kid’s not even interested in getting a driver’s license or owning a car.” And while that may not be the norm – I can think back to when I was a kid, couldn’t wait until I got to be 16 – but today, that seems to happen more than I ever imagined. And why is that?
Ownership of things, like cars, are changing the world. And it’s pretty dramatic. It’s not just in car ownership, but if you take a look at the urban landscape, or home ownership, there are a lot of changes going on in consumer purchase behavior.
And then, what’s coupling all of that? Technology. Technology has reduced barriers to entry, provided frictionless opportunities for many companies to get started in the subscription marketplace, and we’ll talk a little bit more about that. But it is the gamechanger, in my humble opinion. Technology is allowing companies, that are mom and pop startups, to get into the subscription game. Whether that they have the cash to really invest in the market model is to be seen, but it’s amazing, the amount of businesses that have generated, or have started from just the technology improvements over the past 18, 24, 36 months.
Ken, any thoughts to add to that?
Ken: Yeah. So, the image we have here is the way many people are shopping, today. Right? You go into a store, retail store, you’ve got your phone, you’re looking at that, you immediately Google or do a search on that particular product, and you’re looking to see, “Am I getting the right price? Is this the best value that I can get?” So on and so forth.
So, everything we’re doing is turning into a commodity as marketers. Right? So, our big challenge is that technology’s turning all of our brands into commodities, and the consumer can just go around and search, and say, “Well, this looks similar to that. I’ll just order that.” And one of the big benefits of a subscription-based model is you capture that consumer, and you build that brand loyalty with the consumer. Because you’re interacting with them one-on-one, as opposed to them going into the retail store with their phone, and then you’re just another commodity for them.
So, what we’re trying to do is regain the conversation with our customers, get that direct relationship, so they can understand the value that our brands bring.
If we’re not establishing the relationship, we can be darn sure that Amazon is not doing that for us. Right? Amazon is just going to represent whichever brand is giving Amazon the most money. So, if you want to own that relationship with your consumer, the best way to do that is to have that direct relationship, one-to-one, and the best way to continue that relationship and to be able to afford that relationship is through a subscription model.
So, like I said, neither Amazon, nor their algorithm, is ever going to be loyal to you. They’re just designed to trigger the most revenue for Amazon.
Ray: So, we’re setting up, here, to talk a little bit about the modern consumer. We’ll move over – if I can get the clicker to work. And so, a couple movie references in this presentation, which I’m a movie buff, so Perfect Storm is the first one, here.
But take you back in a quick history of time, here. Actually, subscription started in the 1950s. It was called continuity, back then. But if we fast forward to the ‘90s, a fellow named Jeff Bezos in ’94 started Amazon in his garage. And, in my opinion, what he did was teach us all in this thing called the internet that it was okay to put a credit card into your computer and buy something. A book, to start with. Okay?
You fast forward in time, and look at what happened in ’97. Netflick comes into play. Netflix, excuse me. Spotify in 2008. Birchbox in 2010. Dollar Shave Club in 2013. And I’m just naming some of the highly recognized brands. There’s hundreds of others that came along.
And you think about what is happening there, from the Perfect Storm reference, is that these companies just mentioned, let’s take Dollar Shave, for instance, was started in 2013, sold recently for one billion dollars by Unilever. Unilever comes along, and sees what’s happening in this changing landscape with consumer purchase behavior and subscriptions catching fire, and rather than try to grow that organically, they go out and acquire Dollar Shave.
Repeat that for, I think it was May of this year, Harry’s, which started five years ago, Harry’s Shave Club, similar model, started five years ago, and they sold to Edgewell Personal Care, Schick Razors. Same situation that I just described with Unilever. And what they did is acquire that for $1.4 billion.
So, there are some significant changes. When companies are hitting homeruns in the subscription marketplace, CPG companies want to get into this space and make their presence known, come by with some big paychecks.
Ken: Right. So, what the big CPG companies are recognizing, is that loyalty that the direct-to-consumer businesses are building, and they’re capturing an audience and keeping that audience in their own ecosystem. So, they’re not going into the supermarket, or going into a retail store, and shopping all the different razors. They’re becoming brand loyal right away. And they’ve disrupted the model with cheaper razors, but also captured that audience and have that ongoing relationship. So, your next set of product arrives just when you need it.
Ray: I was just going to interject there, and say that they offer the convenience of having it delivered to your home. If you take a look at one of our most precious resources, I’m sure everyone in this room can identify with, is time. If you don’t have to get in your car and go somewhere, but it’s going to be delivered to your door in the cadence that you want, and the price point’s there, you’re going to be a loyal subscriber.
Ken: I remember in the ‘90s, when Amazon came out, thinking that Bezos was crazy. He’s never going to make any money selling books to people from home. He couldn’t afford the postage. I was in publishing at the time. I’m like, he’s losing – I’d do the math, and calculate. He’s losing $3 in every shipment! This is crazy!
Little did I know that world domination was, in fact, a viable business strategy. And it’s being executed very, very well.
Ken: So, I’ve been involved in subscription marketing for a long time. At Guthy-Renker, over 25 years of subscription marketing there. And the reasons that Guthy-Renker started doing the direct-to-consumer subscription model back then are the same that people are doing it now. Branching companies want to have that direct relationship to the customer. Direct-to-consumer and subscription gives you a higher lifetime value with your customer, so more revenue, more profit from those customers, which gives you more money to spend on advertising to tell your brand story.
So, you can actually get your unique selling proposition out in a broader way that helps you to build that brand loyalty. Again, Proactiv was 100 percent built off of direct-to-consumer subscription-based marketing. It turned out to be a billion dollar plus brand.
The big change in the market, as we’re looking over here, is that back then, we believed if you were going to do a direct-to-consumer business, it had to be – What’s my word? Scarcity. So, scarcity was one of the most important things. You couldn’t get that product anywhere else.
But now, with the advent of the internet, and the changes that have taken place, scarcity’s not that important. Now, I’ve proven that with a couple different brands that we’ve launched, that are in multi channels. So, they’re a direct-to-consumer business, but they’re also at retail. They’re also on QVC. They’re also on Amazon. So, it’s really interacting with the customer wherever they want to interact with you becomes the new business model.
But direct-to-consumer, the subscription part of it, is an important piece to play within that. And why is that? As Ray said before, the consumers are looking for the convenience and flexibility. We got taught, then, that it’s easy to get something delivered to your door, and get it as you need it, when you want it, and get exactly what you want. So, it’s the convenience. It’s the flexibility. It’s the customization that makes all of this work.
Ray: I think, for now, one of the call out here, obviously, a lot of for-profit companies on that slide, but the bottom left you’ll see Save the Children. Non-profits have discovered that the sustaining donation, which is a subscription, if you will, maybe a little bit different terminology there, but someone who is willing to give to a non-profit, charged with the convenience of their card, because they believe in the mission, and that mission is reinforcing the value proposition with the consumer through a nice drip campaign an education campaign – It’s really come of age.
Non-profits, in general, used to use direct mail as their primary channel. They’re starting to migrate over into the online space. Why? They need to get younger. Direct mail is a great media. No problem. That channel works. But in addition, they’re probably missing out on a younger generation. And one of the problems that a lot of marketers have had through time, that I’ve experienced with, is that the audience is always older than they think.
And what’s happening now, is with non-profits, the ability to go online, and put a banner ad out there, and generate a subscriber, what they’re finding is they’re getting a younger audience. Increasing the longevity and the lifetime value of that customer.
So, that kind of sums up this next slide, which is, whatever the need, there seems to be a subscription to satisfy it. I mean, it’s incredible today. It’s autos to zoo memberships. So, autos, I don’t know how many people are familiar with automobile subscriptions, but it’s out there. And a dozen automobile manufacturers are out there testing subscription marketing.
I trace back and say subscription, lease, loan to a bank, what’s the difference? It’s kind of the same model, but what it is, it’s presented in a little bit more of an appealing way. I am sure when leasing first came out, it was met by a lot of head scratching. Consumers – Bring you back in time, consumers will say, “You’re going to lease a car? Hang on a second. I’m financing it, or I’m getting it – I own this car. And after three years I’ve got to give the car back? What’s up with that?”
I’m sure that was an education curve the consumer had to go through, but today some 30+ percent of the cars on the market are sold through a leasing option. Maybe consumers like it for the convenience, and three years later they’ve got a new car. And if that fits their budget –
So, when you hear that, it’s very similar to subscriptions. Right now, lots of automobile manufacturers are out there pushing subscription.
Ken: I’ve also seen insurance – I don’t know if anybody’s in the insurance industry, here, but there’s insurance programs out there, now, where you just activate the insurance when you’re going to drive your car. So, you’re only paying your insurance when you’re actually using a car. So, when you put into the garage, I’m not paying. When I’m going to take a trip, I’ve got to pay. The challenge there, obviously, is going to be if you forget to click it before you drive, then you’re driving without insurance, but – They’re trying to make it as flexible as you can. So, everyone’s adjusting their business model to meet that consumer need, which is built off of flexibility, today.
Ray: So, what does that mean? How does that put us today? So, it’s coming of age. It’s certainly, maybe still the tip of the iceberg, a little bit further down, but what this comes down to, what I believe is the heart of the subscription economy, if we can coin that term, is that customers are happier subscribing to something, because they’re going to get it when they want it, versus the burden of ownership.
I mean, if you think about, hey, I’m an old album guy. I’ve got lots of old albums, and listen to vinyl when I can, because I like the sound, but I did have CDs, and I also have Spotify, today, because I can make a playlist. It is so convenient. It’s reasonable at $10, $11 a month, and I don’t own stuff stuck in a wall. I can just go on my phone, and I’ve got what I want to hear.
So, entire businesses today can build a subscription model like that. So, Spotify is one. But the last bullet there talks about subscription being offered in conjunction with a pay-per-product offering. So, if you think about Amazon, you can buy anything there, but you also have a lot of people subscribed to Amazon Prime. Free shipping, and all the other ancillary benefits that Amazon brings.
Costco’s another one that comes to mind. In Costco, I’ve seen stories about them, where they may lose out on their roasted chicken they’re selling, just to get you in the store, but where they’re making money is on the subscription to the membership. And that’s – It’s a subscription. A lot of companies are adapting this, right now, I think, and you’re going to see a hockey stick growth continue for the next several years. Ken, what are your thoughts on coming of age?
Ken: Again, to be successful, here, the key is to always keep the consumer’s need as the center of your focus. Subscriptions represent simplicity to the consumer. I can get what I want, when I want it, in the configuration, in the interval, so on and so forth – that I want. So, they give the consumer complete control, but they don’t also have to think about it all the time. If it’s coming too fast, I can slow it down. If it’s coming too slow, I can speed it up. If I use four of the five products, I can kick one of them out.
So, all of that has to be viewed, and you have to create your programs around the simplicity, and the needs of the consumer. Same thing with sustained donors. They have a cause they believe in. They don’t have to remember for the NPR fundraising challenge, where I get none of my news for a week because they’re doing fundraising. They can just put it on sustained donor, and they’re paying. And if enough people do that, then they don’t need to do as many fundraising opportunities that are interrupting your service.
So, people are getting used to the fact that a sustained donor, an ongoing donor, is a good way to go. I don’t have to keep remembering it. You don’t have to keep reminding me about it.
And when done properly, sustained subscription marketing allows you to build the brand profitably from day one. As I mentioned before, Proactiv was built entirely off of subscription marketing. It’s a major international brand. Billion dollar a year brand. And driven by a direct-to-consumer subscription-based model.
So, you can create a standalone business with subscription-based businesses, or you can integrate it into a multichannel strategy.
Ray: Thanks, Ken. So, what’s this all mean? What is the ecosystem look like in subscription? So, we had some good discussions internally, the marketing team putting this together. They came back and said, “Ray, what you just presented as the subscription ecosystem is so complicated that I don’t think it’s going to translate well into a slide.”
So, we kind of took this and made it a little bit simpler to understand, but if you talk about the proverbial onion and peeling back the layers? It’s the subscription model. Everybody here understands Netflix. You buy and consume the product. You pay your $12, $11, whatever it is, a month, and if you don’t like the service anymore because you’re not consuming it, you cancel.
What goes on behind the scenes in subscription marketing, and the intricacies between media order capture, and customer management, warehouse, reporting all of this back and tying it out, shipping products, customer service – It’s involved, and you need some deep expertise in understanding the intricacies, and how it all works. I think, out of this slide, my takeaway is, again, and will always be the focus here, is the far right, the customer.
If all those pieces in that ecosystem are not working in tandem, you’re going to tick that customer off, and you’re going to lose them.
So, I know, Ken, with your financial and operational side, you got some comments, here.
Ken: It sounds strange, but in many respects, getting the order is the simplest thing to do. Getting a good creative, getting a good unique selling proposition out in front of the customer, figuring out what the benefits are of your program, and getting that customer to respond, is often very easy.
Once we have the order, then you’ve got to manage all the details of the backroom. And that includes whether it’s the communication stream, the messaging stream, both the content and the cadence of those messages, managing the inventory in the warehouse, including allowing customers to customize intervals, product, so on and so forth, when there is a physical product. And managing the payments.
So, credit card payment and recycling is really, really important in a subscription marketing, right? Because you’re, it’s a card on file. You need to be able to continuously bill the customer, when you’re going to continuously ship them. So, what do I have here, Ray?
Ray: Looks like a picture of your family, Ken.
Ken: Is that – At my house, this is the family credit card. I was actually able to get a picture of my family on the Visa card, and when the kids started to drive, they would get a family card. What I found out very soon after giving each of my kids a family card, is that they lost the card a lot, or they had the cards stolen a lot, or – The number was compromised.
So, we wound up having to recycle our credit cards quite a bit. Up to six times a year. So, if you were on a subscription plan, with a family card, that family card didn’t work the next time Proactiv tried to ship you your next product. So, that would interrupt the cycle of this convenience and simplicity. Right?
So, knowing how to manage the credit card systems, and recycle the credit cards, and get the latest credit card information is a really important part of a subscription-based marketing program. I’ve recovered all, my three kids, all three of the family cards have now been recaptured by me. They’re all out of the house, and on their own. It was a very, very frightful day for my daughter when she had to have her card cut up. I think she cried for an hour.
Ken: But to be successful in this environment, you need to be able to do all of this, but also, what we did put on here, is we had the order capture and the customer – A key benefit of subscription marketing is you now have the customer. You know what they’re liking. You know what they’re buying. You can sell them more. So, the customer file part of the subscription model is a really, really important part of it.
So, I know you. I have a relationship with you. I know you’re a good customer. What else are you willing to buy? Right? And then, we can create products and services that go along with that, again, increasing the lifetime value. It’s a lot less expensive to sell something else to your existing customer, than to go out and buy a new customer. And the subscription market helps you to put that customer in your own ecosystem, and control that relationship a lot more.
Ray: Ah, the up sale, right?
Ken: Yes. Up sale and cross sale.
Ray: So, part of the reason I was here today is my passion for subscription, and talking to you about it, and all that’s involved. But why Ken’s here is CMO, and the credentials he brings along, and – So, this is all him. So, Ken, take it away.
Ken: I got enough time.
Ken: So, one of the things I love about the direct-to-consumer subscription-based marketing is that every marketing idea can be expressed financially. And I’ll say it again. I started to find this before I moved to market. Every marketing idea can be expressed financially. I know how much I can afford to spend to acquire a customer based on the lifetime revenue stream I’m going to get from that customer.
That lifetime revenue stream is larger than if I’m selling a one-off product. Right? So, that opens up my world of how much media I can buy, and how much I can afford to acquire this customer. All right? So, you know whether your campaigns are working really early on. The other thing direct-to-consumer subscription marketing does is it allows you to AB test, whether it’s creative, or messaging, or offer, price, product configuration –
You find all that out early on in the process, and before you roll it out into a mass consumer environment, you’ve already figured out what’s the right offer. Is it supposed to go into retail and say, “My price point’s going to be $39.95.” You find that that didn’t work, but you’ve already established that price point, right? So, this allows you to test small, expand as you have your success, and it gives you that direct relationship with your customer. That’s really, really important.
And in a world of changing social algorithms, and search, this is – First-party data is marketing gold. So, I know who you are. I know where you are. I know what you’ve been interested in. I know what else I can offer you, and how I can retarget you.
In addition, it helps us understand the customer more. It helps us understand the segmentation more. But it also lets us control that conversation. Right? So, again, we’re not in that early slide, where the customer’s in the store, and they’re looking at your brand, and they’re looking to see, “What else can I get that’s similar?” Right? We get a chance to tell a more complete story about our brand. We get to go deeper into the origin, and the product developer story. And it allows us to capture that customer, and create some brand loyalty.
So, brand loyalty’s really key. And that’s one of the things, I think, is really starting to wane. When I watch what happens on Amazon, if you have a partner with Amazon, it doesn’t take them long before they create a knock-off product. And when somebody searches for your brand, they offer up the Amazon version of it for 50 percent off. And then all of a sudden, your market share is declining, because you became too reliant on Amazon and Amazon’s relationship with the customer.
So, Amazon, again, doesn’t care about you. They care about Amazon, and how they can create that one-to-one relationship with the customer. They’re doing the subscription marketing model incredibly well, but they’re using all of our brands to do it.
And, as I’ve said before, subscription marketing also lends itself well to a multichannel marketing strategy today. As the saying goes, “A rising tide lifts all boats.” Subscription marketing allows you to get your name out there, build your brand, and also raise all of your other channels.
A company I’m very familiar with partnered with a new rising cosmetics company, and they created a direct response model around this new rising company. And within two years of the initial direct-to-consumer product launch, all of their channels were rising exponentially, and they sold the business for $1.2 billion. They were a small business. Turned on direct-to-consumer with subscription marketing, allowing us to spend more to get the word out there, tell a deeper story, build the brand equity – Took off like fire. Gas on a fire. And those are the types of things that can happen in this world with subscription marketing.
So, as a former CMO, I’d say our No. 1 reason that I love subscription marketing, is it creates a long-term, predictable revenue stream that provides stability and growth for creating measurable brand loyalty and awareness.
Ray: So, two comments from me. 1) When I talk to a client that we’re discussing subscription, and its model, and we get a little bit into the P&L – I’m not a real heavy math guy, but I understand P&L well enough to talk to it. And I used to always say, “Hey, it’s a math problem.” Cost of goods, advertising costs, gets factored into your introductory price. As you go through time, and people are trued out, they’re generating you monthly revenue. And at the end of the day, where are you breaking even and where are you making a profit?
So, it’s a math problem. But Ken, I think you said it best. I’m going to go back and say that every marketing idea can be expressed financially. I think that’s a little better way to say it than, “Hey, it’s a math problem.” But so, I’m going to go with that from here on in. But –
The other thing is, what subscription marketing is doing today is allowing companies to reinvent themselves, or burst into the scene with a brand new concept.
So, we took you on a little bit of journey, here, for today’s modern consumer, as well as a little bit of the past history in subscription. So, what’s on the horizon? So, a couple of eye-popping stats, in my opinion, here, is 70 percent of organizations have deployed or are considering a subscription service. 75 percent of organizations selling direct-to-consumer will offer some sort of subscription service by 2023. And they’re doing that because it’s all about meeting a need.
So, I mentioned earlier about my proclivity here to have a couple of movie references. One of my favorite, all-time’s Field of Dreams, “Build it and they will come,” right? So, here I am. “Build it and they will come.” In subscription, it’s pretty, pretty much that case. Companies that are building a –
For instance, telemedicine is starting to become hot as a trend. And why is that? Consumers are seeing the need of – Maybe it’s a mom with a child with a cold, and another child who’s well? Now, they’ve got to go to the doctor, and spend half a day out of work. Bring the child that’s well into the doctor’s office that’s full of other sick children. Or they can pay a monthly fee and do a telemedicine call to that doctor, explain what the child’s experiencing, the doctor prescribes some OJ and what have you, and they’re back in work, or the child’s home with the caregiver, and things are happening in that fashion.
So, there’s some really amazing things going on that are going to grow this business. That’s just one. I talked earlier about automobiles, but let’s take the toothbrush. How long has that been around? Well, Quip is a company, burst onto the scene just a few years ago, and is out there, big-time. It’s an electric toothbrush, and they’ve just done quite well for themselves.
So, it doesn’t have to be something brand new. It’s existing. But the technology, and the ability to deliver, and then have superior customer service by keeping the customer first, is really winning that loyalty for them.
Ken: And part of it’s education. So, what Quip is doing, is they’re saying, “You’re not changing your toothbrush often enough.” I know I wasn’t. What they decided is – The American Dental Association recommends every 30 days or something like that. They just send you a new toothbrush head every 30 days. So, that’s your reminder that the healthy thing to do is to change my toothbrush head every 30 days. They are broadening the market, because most of us were keeping our toothbrushes for probably six months. Three to six months, right? We weren’t doing fast enough –
They’re not inventing a new product. They’re just changing the way we use an existing product. And creating value out of that. So –
Ray: And along those same lines, I mention auto before, and I just think it’s an area that’s going to explode. About a dozen automobile manufacturers, now, are out there offering subscriptions to a car. They tend to be in the high end of the marketplace. Porsche, Volvo, Cadillac was out, came back in – Mercedes-Benz – Again, and I made mention of it before, subscription versus lease, what’s the difference?
Well, the spin on this is that the manufacturers, now, are offering an all-inclusive price. You go on your phone; you choose the car. They deliver the car to you, concierge service. You pay an agreed-upon fee. Let’s say it averages – It’s a little pricy at $800, so let’s say $1,200, depending on the brand, but in that one payment price, you’re getting everything. The only thing you have to do is put gas in. That’s your expense. Insurance, maintenance, all those other services are covered by the automobile manufacturer.
They’re doing this because of maybe reduced sales, recognizing this trend we’re seeing in subscriptions, giving the consumer an opportunity to flip that car in a month. Not stuck in a 3-year lease with their Camry, but a month later, they might be able to move into another car. It’s pretty amazing. And it’s test walking in a lot of areas. I don’t think it’s going away. It’s probably going to evolve, just as everything does over time.
Ken: Right, so – From toothbrushes, and toothbrush heads, to Mercedes-Benz. I mean, we’re covering the gamut of, there’s almost any product that you are the brand manager of, or one of your clients is selling, can have a good application. You just have to think through it, and figure out, how do we break the cycle? How do we reinvent the model for that particular brand?
And it’s – From a budgeting standpoint, it’s no secret that Americans are in debt. Average American has $6,000 of debt on their credit card. 23 percent of Americans are using their credit card to pay for necessities like rent, utilities, and food. This is according to Experian.
Subscription programs allow you to create monthly payments for customers. Makes it more affordable. Makes it more manageable. Makes it more predictable. So, there’s a big benefit to the customer in that way.
For us, as marketers, as brand owners, it gives us that predictable revenue stream. So, we know how many of our customers are going to be on subscription, and what that cadence of revenue can be.
Ray: So, how do you win the war on loyalty? Or how does the marketer win the war on loyalty? So, a couple of, I think, necessary bullets here. Keeping the pulse on ever-changing consumer purchase behavior, because it’s changing all the time. An organization has to be nimble, flexible, transparent, thorough, consistently problem solve because it’s always going to happen, and you have to repetitively innovate, and you have to be solutions-focused. You have to concentrate on these things.
And to give you a little example, here. Today’s consumer purchase behavior is changing rapidly. And it’s always been that case, but I think it’s kind of at lightning speed today. Take, for example, TikTok. Social media. You have Facebook, and Snapchat, and Instagram. But TikTok came on the scene about two years ago, and this month, early September, TikTok just aligned with the NFL for a multi-mega dollar deal, I’m sure – I haven’t seen any disclosure on that.
But it is a blockbuster deal. And if you’re not keeping an eye on changing purchase behavior, talk about Blockbuster, you know – Excuse me. Netflix comes along, and what happened to Blockbuster? Right, Ken?
Ken: They’re not here anymore.
Ray: You’re exactly right.
Ken: So, how do you win the war? Obviously, it all starts with a compelling offer, and a great creative. You’ve got to capture the customer’s attention. You’ve got to stop the scroll in Facebook or on Instagram. You’ve got to stop it, catch their attention, have a compelling offer, get them to follow up, and continue down the path of purchase. Right?
So, once you’re there, you’ve got to get everything you’re doing through the consumer’s lens. Why is this a benefit to the consumer? Why are they interested? What’s in it for them?
So, initial purchase. Value. Once they’re in, and they’ve got that great value offer that you’ve presented to them, then it’s all about service, and meeting their expectations, or exceeding their expectations. Giving them the flexibility, the level of service they expect, the ability to customize.
On the front end, again, we get to test, test, test, optimize, continue to look for ways to improve, capture more customers, capture better customers. But knowing that as you’re investing in all these customers, you have a lifetime revenue stream that will go on for many, many years.
A brand I worked on at Guthy-Renker, we had not advertised for over 15 years, and it still has a $10 million a year annuity coming in. The customers literally are dying off the file. It’s a cosmetics brand, celebrity-based, and the brand just – Those customers don’t leave. It’s 99.5 percent of the people shipped three months ago, shipped this month, because we’re on 90-day cycles. So, we’re not losing any of these customers. We invested, years ago, in this file, but that’s a gift that keeps giving, right? So, the value of those customers – You really can’t underestimate, but you can calculate it.
Ray: So, talk about long-tail, right?
Ken: Yes, exactly.
Ray: Pretty amazing. Okay. So, getting close to finishing, here. What successful subscription marketing needs, I talked about on the prior slide, what was essential, but – You need experience. You have to have creative that converts. An introductory offer that is going to be compelling, and get the consumer to try, because many brands may not have that highly recognized brand awareness for the average consumers.
So, you’ve got to be able to get an intro offer out there that’s going to resonate, and get the consumer to try the product. And then, you have to have subsequent shipping pricing models that are going to work. Are you offering free shipping throughout the lifetime of that consumer’s journey? That kind of thing.
Ken and I could probably spend another hour on the credit card merchant processing side, best practices, but it’s amazing how much goes on with credit card breakage. If you’re acquiring a customer up front, you’ve invested a lot of dollars in that acquisition. And you’ve got cost of goods going out against it. And then to have it fail because of – Ken’s family card got compromised, or a merchant you saw was compromised, and you’ve got a breakage model, what happens then? So, you’ve got to have some best practices aligned, and technology that’s wrapped around that.
And again, P&L proficiency. It’s all about the P&L. Lots of cogs in this image, that if one of them breaks, the wheel behind it isn’t going to turn, and you’re out of business. So, those marketing needs are absolutely essential. And Ken, maybe some closing thoughts from you?
Ken: Yes, I’ve got 20 years of CMO experience. I’ve just gone DMS. I’m the EDP of subscription marketing, so my role, and the way I spend my time, is to share my decades of experience of building billion-dollar brands in the subscription model with clients to help them navigate that customer journey. The team that I have has hundreds of years of experience, and we understand that backroom in the cogs, as well as the front end of creating those compelling offers, and that amazing creative that gets the customer to click a box, and say yes.
So, we know how to help you acquire the customers, and just as importantly, we know how to get those customers to stay with you for a long time. And we’re happy to share all of that knowledge with you. I’d like to open it up for questions, unless you got anything else?
Ray: Yeah. No, I think we’ve got a couple of minutes. Actually, before we go over to any Q&A, which we’re happy to stay after, if that’s needed, just a couple quick things here. Closing slide there, so – Winning the war, here, is what we’re going to help you do in the subscription marketplace.
Two quick, shameless plugs. Digital Media Solutions is a expo hall welcome reception sponsor, which starts at 4:30 this evening, and runs to 6:30. So, please come by, and say hello, and shake a hand or two. And we have our first ever Bullseye Madness sponsorship that we’re also holding at that same time throughout the Conduct to Convert Show this week. If any of you are at LeadsCon in Vegas, you probably saw Hoops Madness. Lot of fun. Chance to win some prizes, and some great gifts, and meet some folks, which is really the key, here, from either DMS or maybe a long-time associate that you might run into, or some new friend that you may be able to do business with. So, we encourage you to stop by for the Bullseye Madness.
Ken: This is a dart game.
Ray: It’s a dart game, so, and we’ll be safe. So, no worries there. And just wanted to let you know that you guys have been a great, attentive audience. I’ll open the floor to questions. How much time do you have?
Ken: Five minutes.
Audience Member: Is the company Guthy-Renker, or is it Proactiv? I imagine, because those two names are out there, I’m curious how you, and all the different brands that you have.
Ken: So, Guthy-Renker is the company, and a house of brands. Proactiv is one of our – was one of their major brands. So, Guthy-Renker will be the advertising media marketing company, and then we–
Audience Member: So, the subscription-based model resolved each individual brand, kind of like an umbrella, where you’re cross-selling all these products?
Ken: We have the database, so we can cross-sell based on what your needs are, and what your – what we know about you. But the brand would be in the silo of – Proactiv, that would be a separate brand within the Guthy-Renker umbrella or family of brands.
Ray: Anybody else have any other questions? So, if not, we’ll feel free to end there. But Ken, from your standpoint, we talked about a journey here of past, present, and future. You think subscription has longevity?
Ken: It’s got more than longevity. It’s a highly growing area. It’s really, it’s amazing to me. Like I never would have thought that you would create a subscription program around a toothbrush head, but they’ve done so. And they’ve done so incredibly well. So, it’s low-priced products. It’s high-priced products. Means it could be any product. So, it’s really just figuring out what the market need is for your particular brand, or your client’s particular brand, and helping them navigate through that journey.
Ray: So, I’ll close with one last movie reference.
Ken: Any other questions? I mean, let’s –
Ray: I’m going to close with one last movie reference, and say that, “It’s complicated.” It’s not an easy model. But when done properly, executed with best practices, it can be a very profitable business. So, I thank you all for your time today.
Ken: Thanks, guys.