As builders, we naturally expect products we build to perform excellently in the market. Usually, this relates to all the metrics, you and your team had agreed to track to define success for your customers and your business.
However, based on current trends, the success rate of such expectation currently seats at 5%. This is because on a global scale, 95% of early stage startups fail and this is happens for diverse reasons.
How to be in the 5%?
Based on over 15 products I have built so far in my career, I have found that products with a recurring revenue model grow 7X faster and build a whole industry/vertical as a result.
It is not by accident that subscription products drive the revenue at some of the world largest companies today. The product orgs have simply learnt how to build a subscription model, constantly iterate, apply innovation from existing models and verticals, and apply best tactics.
70% of the products I have built are subscription based, have generated billions of $$ in revenue and below I have broken down the 10 high-impact tactics my team has used to grow our subscription businesses in several un-identical markets.
Now that you know you should build a subscription play to your product, you want to focus on this checklist to guide you through building your recurring revenue model.
In this article, I will share with you ;
7 critical factors to help you optimize acquisition, conversion, pricing [strategy / mechanics] , optimization, and growing recurring revenue
How each tactic affects product success.
Implementing these strategies effectively in your business
Make your checkout pages more conversion-friendly - You could attract thousands of new subscribers if your completion rate increased by just 1%. A mobile-friendly layout, look and feel, along with pricing options, all combine to shape the whole checkout experience for your customers.
Go bullish on personalized experiences - From speaking with our customers, I have found that 75% of them are happy to pay a premium price for customizable experiences. By default, our teams give subscribers the flexibility to tailor their subscription by making it possible to have subscription and one-time offerings in the same cart.
As an add-on, you should always bundle service and product offerings. For example - Customer buys a TV and gets 20% off warranty service every month.
Pricing and promotions can unlock LTV - More than anything, you have to get pricing right. And much more than pricing, your fee charging cadence is the largest hidden secret to nailing pricing. What this means is, you can price a product at 10$ and your customer worth 50$ will not pay. Your customer needs you to understand how he wants to pay the 10$ - Step by step, by usage, auto-pay, on demand, etc.
This provides the nuance you need to lower the barrier to entry. You can drill deeper by offering different payment stairs, cross-promoting, and leveraging dynamic paywalls.
Your promotion strategy must be dynamic to reflect customer loyalty, win-back campaigns , gamification and retention — for instance, send welcome gifts, celebrate milestones, or send a free / discounted product on their birthday.
Leverage “Pause” power to drive down cancellations - Speaking to our customers and across several verticals, 60% of them would rather pause their subscriptions than cancel them. However, about 5% of subscription products today build the “pause” functionality into their products. When we build this feature, we discovered our 4-6 month retention cohort improved by 70%. What this means is , our “paused” customers returned easily after their break. Also, our CAC costs reduced as we spent less to re-recruit them to our billing cycle.
Understand your stakeholders and power users - Power users drive some of the most successful companies — people who love the product, are highly engaged, and contribute a ton of value to the product. Knowing who they are is critical and understanding what engages them.
Why? You need to be heavily focused on the productive efforts that drive subscriber revenue, LTV, and growth. To achieve this, create reports—trial performance, plan performance, payments performance, subscriber growth, churn—by cohort to identify not only your power users but also your highest-performing acquisition programs, best offerings, and most adopted areas.
Knowing this, it becomes relatively easier to identify ways to segment offerings and further optimize programs.
Have a communication cadence - Most subscribers loathe subscription services due to being inundated with messages, emails, notifications that confuses their day. So they unsubscribe.
How to fix this – You can still communicate, whilst being the toast of subscribers - Review your send times [ peak/off-peak times], headlines, customize content according to user preferences. More importantly, every communication must be delivering on value. A great hack is to cross-promote to grow per-subscriber revenue.
Payments are more than a transaction, they’re a growth strategy - It is important to A/B test your payment methods. Customers are constantly changing and so are their preferences. You must be nimble to uncover what payment methods are the most preferred by customer type and offer the highest acceptance rates. This will help you drive more revenue and create a better experience for your subscribers.
The customer comes first in the subscription economy, so shift your company's culture to a customer-first mindset.
By adding value throughout the customer's lifecycle, you can shift focus from just one-time transactions to long-term relationships.
Refocus metrics, mental models, and other elements on what will build those relationships and reinforce customer value over the long term.