My Rating: 8 of 10

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Summary

Automatic customers (subscribers) increase the value of your largest asset, increases the LTV of a customer, smooth out demand, they’re free market research, and you get paid automatically.

There are 9 automatic customer models:

1. The Membership Website Model
2. The All-You-Can-Eat Library Model
3. The Private Club Model
4. The Front-Of-The-Line Model
5. The Consumables Model
6. The Surprise Box Model
7. The Simplifier Model
8. The Network Model
9. The Peace-Of-Mind Model

Notes

WhatsApp won the $19 billion lottery not because its technology was better, or its people were any more caring, or its advertising was funnier. WhatsApp won, in large part, because it made its customers automatic. It chose the right business model for success by asking users to subscribe to its service.

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Said another way, a security company with 100% monitoring revenue (the subscription aspect of such a business) is almost three times more valuable than a security business of the same size that has 100% installation revenue.

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we decided to offer the identical packages of information to a subscriber base of customers. Instead of doing custom proposals, we created a brochure about our offering and a standard proposal. Instead of getting paid 60 days after the project was complete, we charged up front for an annual subscription to our research.

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Amazon Prime subscribers pay Amazon $99 a year in return for goodies like free streaming of thousands of movies and TV shows and free two-day shipping on most Amazon purchases. According to a 2013 report released by Consumer Intelligence Research Partners, there are now approximately 16 million subscribers to Amazon Prime.

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Given the positive impact Prime seems to have on customers’ buying behavior, some analysts have argued that Amazon should drop the fee for subscribing to Prime in order to grow the program even faster. But that thinking misses a key element of Amazon’s strategy. When you pay $99 per year to become a member, you want to “get your money’s worth.”

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Suddenly you start checking Amazon’s pricing on annuity stream adjacent to your main business, you sorts of products, from paper towels to sneakers, with hopes of “making back” what you invested in the membership. Given Amazon’s aggressive pricing and seemingly endless product selection, you can almost always find what you’re looking for at a price that’s lower than what you could find elsewhere. When you factor in free shipping, it becomes an easy decision to buy from Amazon.

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Walmart gained insight on subscribers not only through their purchases but also via a product-rating system on the Goodies website that let subscribers review the items they had sampled. Goodies then rewarded reviewers for their contributions with loyalty points they could earn through rating, writing a review, or uploading a photo. If subscribers earned enough points, they could trade them in to get their next month’s box free.

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Like Apple and Amazon, cable TV giant Time Warner Cable recently launched a subscription service, called SignatureHome, that provides special access to its service staff. For $199 per month, subscribers receive a television package and Internet access, a specially trained technician to customize all their devices, and a team of “personal solutions advisers” who are available anytime by online chat and phone. Subscribers also get special access to scheduled service calls at preferred times. If Time Warner Cable has to send a technician to a SignatureHome subscriber’s house, he or she will wear specially designed booties to keep the customer’s floors tidy—a small touch designed to make SignatureHome subscribers feel valued.

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The folks in Redmond don’t want you buying Office at Staples anymore; today, they want to sell you a subscription to Office 365. Microsoft’s aggressive push into cloud computing has been accelerated by Google Apps, another office productivity suite that is available to businesses exclusively through subscription.

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In my experience, the most common methodology used to value a small to mid-size business is called discounted cash flow. This methodology forecasts your future stream of profits and then “discounts” it back to what your future profit is worth to an investor in today’s dollars given the time value of money. This investment theory may sound like MBA talk, but discounted cash flow valuation is something you have likely applied in your own personal life without knowing it. For example, what would you pay today for an investment that you hope will be worth $100 one year from now? You would likely “discount” the $100 by your expectation for a return on investment. If you expect to earn a 7% return on your money each year, you’d pay $93.46 ($100 divided by 1.07) today for an investment you expect to be worth $100 in 12 months.

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Therefore, to improve the value of a traditional business, the two most important levers you have are (1) how much profit you expect to make in the future and (2) the reliability of those estimates.

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2. The $29 Sale vs. the $4,524 Sale The most obvious benefit of the subscription model is that it increases the lifetime value of a customer. When you sell a customer a subscription, that one sale can create a long-term relationship thanks to the magic of recurring revenue. Let’s look at an example of a typical flower store. Like many traditional businesses, the average flower store starts each month with no revenue, so they constantly have to find ways to stimulate demand. They pay for expensive retail space so they can grab your attention the day before your wedding anniversary. They buy advertising around key holidays like Mother’s Day and Valentine’s Day so you’ll buy your flowers from them and not from the guy down the street. If they guess wrong on how many customers they will win on a given holiday, their inventory rots within a week. Compare that model to H.Bloom, a flower company whose founders, Bryan Burkhart and Sonu Panda, say they want to become the “NetFlix of flowers.”2 H.Bloom provides fresh-cut flowers to businesses like hotels, restaurants, and spas. Unlike traditional flower stores that have to stimulate new demand each month, it sells subscriptions to a weekly, biweekly, or monthly fresh flower delivery. Because H.Bloom doesn’t need to be physically in front of potential customers, instead of paying $150 per square foot for prime retail space in Manhattan, it pays less than $30 per square foot for space on the third floor of a 100-year-old building in an industrial area of the city. The traditional flower store sells a one-shot bouquet to a customer they may never see again, but at H.Bloom, a hotel can sign up for a weekly delivery of the basic $29 bouquet. If H.Bloom keeps the subscriber happy for three years (its monthly churn rate is less than 2%), that one $29 sale will end up creating a customer that is worth $4,524 ($29 × 156 weeks).

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Your typical bricks-and-mortar flower store, for example, has to throw out between 30% and 50% of its flowers each month because they rot. At H.Bloom, the spoilage rate is just 2% per month.3

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You could go the traditional route of commissioning a six-figure, statistically valid telephone survey or a five-figure batch of focus groups. Alternatively, you could launch a subscription offering and get paid while you do market research. A subscription business gives you a direct relationship with your customers and an ability to track their preferences in real time. It’s why Walmart launched Goodies Co. and how Netflix knows what television series to produce or acquire next. Take a look at subscription-based ContractorSelling.com,

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For $20 a month, Conscious Box offers a monthly selection of hand-picked, natural, GMO-free goods to try. Conscious Box asks subscribers what they think of the products in each box—and rewards them when they respond. Each product review earns 10 points, and 100 points earns the subscriber $1 to use in Conscious Box’s online store.

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In summary, the membership website establishes a commercial relationship with a subscriber. While that customer can be lucrative on his own, most membership website operators use the subscription relationship as a platform to cross-sell additional things.

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By early 2014, Thriveworks was collecting several million dollars of annual revenue and had offices in 11 locations in the United States. Like many of the subscription models in this book, the $99 subscription Thriveworks customers pay each year accounts for only about 20% of the company’s revenue. The other 80% comes from payments collected by Thriveworks’ counselors from customers and their insurance companies for their appointments.

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Marc Lore and Vinit Bharara started Diapers.com in 2005 to give sleep-deprived parents an easy way to schedule recurring shipments of diapers, wipes, and all the other consumables you need to care for a baby. Unlike Dollar Shave Club, Diapers.com wasn’t shy about revealing the original supplier of the diapers. The company was offering the same Huggies Little Snugglers and Pampers Swaddlers that moms could buy from Amazon. The business grew quickly and caught the attention of

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The second form of subscription-based e-commerce that companies leverage is the surprise box model. This model involves shipping a curated package of goodies to your subscribers each month. As the name suggests, part of the fun for the customer is discovering a new set of products each month. For example, if you’re an endurance sports nut, you can get a JackedPack full of a new batch of sports gels and workout supplements delivered monthly. If you need to spice up your love life, you can subscribe to SpicySubscriptions.com and get a box full of new lovemaking paraphernalia each month. And if you need to upgrade your style, you can subscribe to StitchFix and receive five new clothing items and accessories per month based on your preferences. Such boxes are typically built around a theme users feel passionate about. These days, there are few things many people feel more fanatical about than the family dog. According to fad watcher TrendHunter.com, one of the fastest-growing trends in United States is the humanization of pets.1 Which is something Henrik Werdelin, Carly Strife, and Matt Meeker are exploiting in their company BarkBox.

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In return for a $20-a-month subscription, BarkBox will send you a curated box of treats, toys, and accessories for your dog. The company describes its target market as “dog parents,” not simply dog owners. “Owners own their pet,” says Matt Meeker, one of the founders of BarkBox. “Dog parents: it’s a member of the family.”2 There are obviously a lot of dog parents in the world because between 2012 and 2013 BarkBox grew tenfold. By April 2014 nearly 200,000 subscribers were forking over about $20 a month in the name of their dog. BarkBox articulates the surprise box promise on its website: “Each month is thoughtfully crafted together and each item unique from anything we’ll ever send in a later box—variety is the spice of life, no?”3 The Curator A big part of the value these subscription companies provide is curation, which has become increasingly important as Google has made choice infinite. Today, virtually any product is an Internet search away, but there is no safeguard to ensure you are buying a good-quality product from a reputable supplier. In the case of BarkBox, at least part of the value proposition is that it screens out bad products that are not fit for your pet. All its dog treats come from suppliers based in the United States or Canada; none of the products include rawhide or anything processed with formaldehyde.4

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business, I expected her to say that finding subscribers was the toughest challenge. In fact, the most difficult part of the business, she said, was working with her chocolate makers to fulfill large orders. When you have thousands of subscribers, it can be difficult to find specialty chocolate makers willing to offer the bulk discount Kava needs for the Standard Cocoa business model to make sense. Specialty manufacturers of chocolate—or virtually any other craft product—by definition do not enjoy economies of scale. Just one order from Standard Cocoa could suck up manufacturing capacity for a craft chocolate maker for a month. Kava tries to make the case that by being featured in a Standard Cocoa box, the company’s chocolate is going to reach thousands of potential customers, representing a significant marketing opportunity for them. But that can be a difficult case to make to someone working from a facility that looks more like your mom’s kitchen than a Lindt factory. To make the surprise box model work, you need a large and varied network of manufacturers who are willing to give you a deep discount for a onetime order and who have the capacity to fulfill. Unlike Standard Cocoa, BarkBox offers unique products each month that are not necessarily craft or specialty, which leaves them open to placing an order with a large supplier that is able to fulfill a 200,000-unit purchase. The Trojan Horse

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According to Greek mythology, the city of Troy was fought over by the Greeks and the Trojans. Legend has it that after a ten-year stalemate, the Greeks came up with an ingenious plan. They built a large wooden horse and hid an elite fighting force inside. The Greeks then left town, giving the impression they had retreated. Assuming victory, the Trojans pulled the horse into the center of the walled city as a trophy of their victory. That night, the men hiding inside the horse crept out and opened the gates of the city to the rest of the Greek forces, which had returned under cover of night. The Greeks ambushed the sleeping Trojans and decisively took the city of Troy. Many surprise box subscriptions are a Trojan horse. Companies give you various samples of products each month for a small price, but their bigger goal, disguised by the subscription, is actually to create a robust e-commerce site for their products. Let’s take a closer look at Conscious Box. For around $20 a month, you can subscribe to receive a sample box of all-natural, non-GMO products like snacks, cosmetics, and non-toxic cleaners. Ninety percent of Conscious Box customers are women, half are mothers, and all care deeply about discovering all-natural product alternatives. Unlike BarkBox, which supplies subscribers with full-size packages of dog toys and treats, Conscious Box is focused on providing samples of products it gets free from the its suppliers (who typically have a sampling budget). If you discover something you like in your monthly Conscious Box, you are encouraged to rate the product on the Conscious Box website. You get 10 points per product rating, and for every 100 points you earn, you get a dollar to spend in the Conscious Box online store. Between 5% and 20% of Conscious Box subscribers rate a product in their box each month, developing

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a cache of valuable points to spend in the Conscious Box store. Conscious Box doesn’t give you a dollar off your next subscription for writing product reviews. The points go toward a purchase in the online store, because the company wants you to get in the habit of buying the full-size version of whatever you like from that monthly sampler box. The Conscious Box rating system is an elegant way to convert subscribers into online shoppers. Conscious Box launched in 2012. Two years later, it was up to 30,000 subscribers. When I spoke with CEO Patrick Kelly, he told me Conscious Box’s first goal was to build its subscriber base, but now that it has a large pool of subscribers, it is moving more aggressively into encouraging subscribers to buy full-size versions of the samples. As of April 2014, about 10% of Conscious Box revenue was coming from subscribers buying full-size versions of products at the Conscious Box online store. The Blessing (and Curse) of Data Data becomes both a blessing and a curse for companies like Conscious Box. Its sophisticated rating platform gives Conscious Box and its product suppliers tons of customer data. The challenge is that once customers take the time to tell you want they want, they expect you to use that information to improve the subscriber experience. If you tell Conscious Box you’re allergic to wheat, for example, then you damn well expect the company not to include a whole-wheat granola bar in your monthly box. To solve this challenge, Conscious Box offers three versions of its box: classic, gluten-free, and vegan. Reacting to all of that customer data creates a logistics and shipping challenge. It’s one thing to know what your customer wants, but it’s a bigger challenge to ensure you have just enough product to ship out in each box and on time. That logistical challenge is one of the biggest reasons companies turn to e-commerce subscription platforms like Cratejoy, according to founder Amir Elaguizy. Cratejoy makes sure all your customer payments are collected on…

NOTE: Fit note gather the data but then deliver predicament

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Zipcar also matched the fleet in each zone with the usage pattern of subscribers in the area. Boston’s Back Bay users often took their cars to Cape Cod for the weekend, so Zipcar made sure its vehicles were larger and more comfortable. Harvard Square subscribers were mostly students who wanted small cars for quick trips. Once the fleet matched the demographics of a zone, Zipcar blitzed the neighborhood with advertising to sign up subscribers and build density. The immediate experience of users in the zone was positive, and they told their friends. Zipcar used this density model to scale up the company. Once it achieved success in its original founding markets, it was able to expand, which further increased the value proposition for Zipcar members. Today, a Boston-based subscriber can not only find a car in her neighborhood, she can just as easily hop out of a train in Baltimore or a plane in Bristol, UK, and find a Zipcar. Thanks to leveraging the network model, Griffiths had built the company up to more than $100 million in revenue and 760,000 subscribers when Avis Budget Group acquired it in 2013 for $491 million.6

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World of Warcraft grew subscribers exponentially, from 1.5 million in 2005 to 12 million in 2010 before it started to stumble. Some subscribers perceived Warcraft to be losing its edge and not keeping up with competitive offerings from other games. They left in droves; between Q1 2012 and Q2 2012, World of Warcraft lost more than a million subscribers.

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Most people think insurers profit simply by charging more for premiums than they actually pay out in claims. While this underwriting profit is important, the real money is made from something called float. Underwriting profit is the difference between premiums generated and claims paid, while float is the money you make investing the cash people pay in insurance premiums before they make a claim.

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collected $240 ($20 × 12). You could keep the $240 in your pocket or invest it. Big insurance companies would invest this “float” in the stock market, but you might decide to invest the $240 back into your business and buy a new sign for your van. Let’s imagine the same scenario plays out for four more years: you collect $240 each year and invest it in your business and your customer never made a claim. Now you’ve collected a total of $1,200. In the sixth year, your customer calls and asks you to come and repair his roof, which has been damaged in a storm. It costs you $800 to make the repair. The customer is happy because he just got his roof repaired without paying for a service call. You’re satisfied because you’ve earned an underwriting profit of $400 ($1,200−$800). But your true return is much greater because you have had $1,200 of your customer’s money—interest free—to invest in your business. You have taken on a risk in guaranteeing your customer’s roof replacement and need to be paid for placing that bet. The repair job could have cost you $3,000, and then you would have taken an underwriting loss of $1,800 ($1,200−$3,000). Calculating your risk is the primary challenge

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In a subscription business, any decision you make affects your entire base of subscribers all at once. Sending a single e-mail can trigger an avalanche of cancellations. Rather than collecting a few invoices, you have to figure out how to charge potentially thousands of credit cards a month, each with its own expiration date and credit limit. While gathering more customer data is great, your subscription business may collect so much data that you have to figure out which bits of information are critical and which are just noise. It’s a ball of complexity that will challenge you intellectually.

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According to Generally Accepted Accounting Principles (GAAP), a subscription is recognized on the P&L in equal installments over the life of the subscription. So instead of seeing $25,000 in revenue from a client in the months in which we made the sale and did the work, we were showing $2,500 of a client’s $30,000-per-year subscription each month.

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Knowing they could buy our services on a one-shot basis, our customers cooled to the subscription model, and we ended up shutting down the subscription altogether. It felt good to see the numbers turn from red to black on our P&L. Little did I know; what felt good was also dead wrong.

NOTE: amazing insight here. what felt good was also dead wrong. just because it “feels” right doesn’t mean it is right. it’s just comfortable. don’t mistake comfortable with right.

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In a subscription business, understanding your financial performance requires a new set of operating statistics. The foundation of your subscription business is built on your monthly recurring revenue (MRR). This is the recurring revenue listed on your company’s P&L every month. When a customer subscribes to a membership website for $99 per year, the company gets to recognize that revenue on its P&L at the MRR rate of $8.25 ($99 divided by 12). The next number you need to understand is the lifetime value (LTV) of a subscriber. LTV is calculated by multiplying your MRR by the number of months your customer stays with you, less the cost of serving them during the life of the subscription. To keep things simple, let’s imagine you don’t have client managers serving subscribers, so we’ll assume the cost to service subscribers is zero. If your average subscriber stays with you for 30 months, then the LTV of a subscriber is 30 × $8.25 = $247.50.

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The next data point you need to assess the health of your subscription business is your customer acquisition cost (CAC). This is the amount of money you spend on sales and marketing to win a new subscriber. If your company’s total expenditure on sales and marketing last month was $2,000 and you acquired 25 subscribers, your CAC would be $80 during that period ($2,000 divided by 25).

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Based on his experience running companies, and after evaluating hundreds of others for his venture fund, Skok has found that in order to be a viable subscription business over the long term, a company needs to have an LTV:CAC ratio of at least 3:1. He has seen some of the most successful subscription businesses achieve an LTV:CAC ratio as high as 8:1. To return to our hypothetical example of a membership website with an LTV of $247.50 and a CAC of $80, it has achieved an LTV:CAC ratio of just over 3:1 ($247.50 divided by 80). Per Skok’s estimation, this is a viable business model. There may be many reasons to build subscriptions into your business.

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Arguably the most important factor contributing to the viability of your subscription business is the rate at which customers quit subscribing; this is known as your churn rate. To calculate your MRR churn rate, take your MRR at the beginning of the month and divide it by the amount of lost MRR in the month.

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When we signed up for HubSpot at SellabilityScore.com, there was a lot of work to do. We had to import all of our logos and images to the site, pick a standard font, and create a variety of template pages. It took a few weeks and probably 20 or 30 calls to HubSpot support to get it done. We were also assigned a consultant to help us get started and an account manager to go to with questions. This process is called onboarding, and getting it right can have a big effect on reducing the churn rate of your customers, which is why companies like HubSpot invest handsomely in onboarding. HubSpot considers its support department and consultants as part of its cost of goods sold (COGS); in total, this cost makes up around 17% of MRR.1 So for every $100 of MRR they have, they get $83 of gross profit

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To begin to calculate its LTV:CAC, you take MRR × margin and divide it by the churn rate. Here’s the math: $429 × 83% (0.83) = $356.07 divided by 3.5% (0.035) = $10,074 Back in Q1 2011, HubSpot was in trouble. Its LTV:CAC ratio was a low 1.67 ($10,074 divided by $6,025). When you look below the surface, HubSpot faced many challenges. Because of the complexity of what it sells, HubSpot can’t rely on a website to sign people up. It needs salespeople to work the phones and explain the HubSpot value proposition. Since salespeople are expensive, its CAC is relatively high. It was also losing 3.5% of MRR per month, which amounts to almost half its revenue each year.

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What changed in a year to move HubSpot from an unsustainable subscription business to a viable one? At first glance, its Q1 2012 results look pretty similar, with the gross margin percentage still running in the low eighties. Its CAC was still north of $6,000 in Q1 2012—even a touch higher. But along with a slightly higher CAC, it had a 36% higher MRR. And the most dramatic improvement was the churn rate, which was cut almost in half, from 3.5% down to 2%, through better onboarding of new customers and targeting of larger businesses, among other tactics we’ll talk about in the section on lowering churn in chapter 15.

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The more aggressively you grow, the more of your cash gets sucked up in acquiring customers, which is why the number of months it takes you to recover the costs of winning a subscriber matters.

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In layman’s terms, the CAC payback period measures how many months it takes you to make back the cost of acquiring a customer.

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For SMB (Small & Medium Business) customers with higher churn rates and thus shorter monetization windows, CAC Payback Periods of 6–18 months are typically needed, whereas enterprise businesses with high up sells and long retention periods may be able to subsidize payback periods of 24–36 months. A CAC Payback Period of 36+ months is typically a cause for concern and suggests you may want to slam on the brakes until you can improve sales efficiency, whereas a Payback Period of under 6 months means you should invest more money immediately and step on the gas.

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Cash Source 1: Rob Peter to Pay Paul You can use cash from nonrecurring sources of your business to build your subscription offering. With this model, you take the profits from your traditional business, and instead of putting them in your pocket, you reinvest them into building your subscription offering. Pursuing this strategy usually takes longer than raising a

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In order to evaluate the impact of this strategy, I came up with a metric I call CUF:CAC, where CUF stands for cash up front, the amount of money your subscriber pays when he signs up for your subscription. CAC is your customer acquisition cost.

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In summary, your LTV:CAC determines whether or not a guy like David Skok, or the thousands of other venture capitalists in the country, will want to invest in your business, while your CUF:CAC ratio will determine how much of an investor’s money you’ll need, and how much of your equity you will have to give up in the process.

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Think “10 times” whenever there is an easy way for your customer to get your product or service without committing to a subscription.

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I asked Mike McDerment, the cofounder and CEO of FreshBooks, why its pricing plans are not featured prominently on its pricing tab. While he would not reveal all of his trade secrets, he did say the company tests thousands of possible combinations of conversion funnels at FreshBooks, which leaves me to draw the conclusion that getting people signed up for a free trial is the most important first step in converting a user into a paid customer. Zendesk, the customer support software that has grown from

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Throughout the free-trial process, Zendesk’s focus was not on getting me to buy the product, it was on getting me to use it—a simple but important distinction. Zendesk knows that once you use its product, there’s a greater chance of your becoming a subscriber.

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One of the Blue Dolphin’s products was a newsletter called Women’s Living, which boasted 1.7 million subscribers. Women’s Living aggregated content from 60 magazines, including popular titles like Family Circle and more esoteric publications like Yoga Journal. The editors of Women’s Living started out spreading the content from the 60 magazines equally to ensure that all of them were covered in a balanced way. Then the Blue Dolphin team decided to run an experiment, giving a cohort of customers articles from only the 10 best-converting magazines in the first 10 days of a Women’s Living subscriber’s relationship. To a traditional editor, the idea of blowing all your best content in the first 10 days was an anathema, but to a subscription marketer like Nicholas, it made sense. One year later, when Nicholas and his team compared the lifetime value of the subscribers who had been given the very best content in the first 10 days of their subscription to the subscribers who had received a more balanced package of content from all 60 titles, the subscribers who received the “greatest hits” in the first 10 days were three times more valuable than the control group of customers. In other words, when Blue Dolphin packed a ton of value into the first 10 days of the relationship with a subscriber, it was able to triple the lifetime value of the average customer.

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Therefore, your biggest competitor for your subscription business is not the rival service; it is your customer’s inertia in not using your service. For a subscription to stick, customers need to change their behavior and actually use the service.

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etc.), who embed a piece of HTML code into their websites that allows them to offer our tools to their clients. If we can get new subscribers to successfully embed the code in their site and generate at least five reports in the first 90 days, they are much less likely to leave than if it takes more than 90 days to get them successfully using our tools. Therefore, when we test onboarding tactics, we measure the effects the changes have on our 90-day markers. We have to wait for years to see the actual effect of an onboarding tactic on the lifetime value of a customer, but it takes only three months to see if the things we’re trying have a positive effect on

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Goodman elaborates on Constant Contact’s learning: “In the end, the way you work the funnel . . . is all about making sure that when someone tries or buys your product, they have a wow experience. They get quickly to an understanding and an outcome that blows them away.”

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businesses. “Charging up front actually reduces churn at the one-year point,” said Skok. “The fact that you have charged up front means the customer invests more time to get to know your service, which makes them stickier in the long term.” Most of the subscription company founders I interviewed for this book echoed Skok’s findings. When customers pay up front, they make a deeper commitment to you and usually end up staying longer as a result. Churn-Lowering Idea 5: Communicate like a

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Think of a new subscriber as a new lover. New lovers have a thirst to understand you intimately. An older subscriber will find your constant communication annoying after a while, whereas a new subscriber welcomes your contacts and takes the time to consume them. After the 90-day mark, the new subscriber settles into the relationship, and over-communication can actually cause churn.

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As with any good relationship, it’s important to keep a degree of spontaneity and surprise in your dealings with your subscribers. Lovers appreciate a small gift at an unexpected moment more than a big gift on their birthday. Often employees will appreciate a small but unexpected thank-you present more than a predictable annual bonus.

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BarkBox’s communications director, Chris O’Brien, tells a story of a subscriber who had lost one of her two dogs to old age. Both the dog parent and the remaining dog were heartbroken. When the BarkBox customer service team was alerted to the situation, it put together a special box of treats and toys for the dog who had lost its playmate.

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Logo churn is the cardinal sin of any subscription company. It means that a company, or an individual in a business-to-consumer situation, has stopped doing business with you altogether. It means that you have to remove that company’s logo from the list of happy customers on your website.

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With a subscription to One Wipe Charlies, there is no longer a need to march down to the grocery store to buy the embarrassingly large 20-pack of dry, irritating toilet paper; Dollar Shave Club will send you a sleek pack of One Wipe Charlies in the mail. The company later also launched Dr. Carver’s Easy Shave Butter. Now it has three shots at keeping you as a customer even if you decide to turn off one of the subscriptions.

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In conclusion, the fastest way to scale your subscription business is to patch the hole in your bucket of customers. The first place to focus is the product or service itself—make sure it is something customers value. Then strive to get your voluntary churn as low as is practical by testing the nine ideas in this chapter.

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