The automatic customer: creating a subscription business in any industry… by John Warrilow, who has also written the book Built to Sell and is the founder of the Value Builder System, a company that helps owners increase the value of their business.
The basic premise of the book is that ‘subscribers are better than customers’. If you don’t have subscribers, each month your sales-counter resets at zero, and you’re stressed about building your book of business all over again. With subscribers, you have better visibility and can build a more sellable business. In fact, if you compare two businesses with the same revenue and profitability but one has subscribers – or ‘automatic customers’ – and the other doesn’t, the first one can sell for 3 to 5 times more! Over the past couple of decades, the author has been helping companies sell for top dollar, and has experienced the benefits of building a subscription business both through them but also first-hand as a business owner himself.
In his book, he details how to shift your mindset from selling to customers towards building a business with repeatable sales, and showcases each of 9 subscription models he has identified.
First, you have the membership website, which is ideal for people that have a certain expertise or passion. All you need is a niche group willing to pay for high-quality content. For example, you can create an insider’s travel guide to your country, revealing great local spots and other secrets. Or you can share your industry expertise to help others succeed, perhaps with a detailed guide and advice on how to build a successful restaurant business. Once you build a following, you can further build trust by selling a small ticket item. And eventually, you can monetize your members by selling them bigger-ticket items such participation at an event like a conference.
Then there’s the ‘all you can eat’ library model. If you can create content consistently or already have a sizeable library, it may be challenging to sell it a-la-carte. Instead, you can often extract more value through a lower-priced subscription model. Think about this: if you had to pull out your credit card each time you wanted to watch a movie on Netflix, you’d probably consume much less…
Other subscription models include:
The ‘private club’ model, where you provide exclusive access to certain events, and participation can be a matter of status.
The ‘front of the line’ model, where some customers are free, but others are willing to pay a recurring fee for faster access or service.
The ‘consumables’ model, which applies to products that need to be regularly replenished – think Dollar Shave Club, Diapers.com and all the sock ordering services.
The ‘surprise box’ model, where you ship a package of goodies to your customers every month.
The ‘simplifier’ model, where you provide services that simplify your customers’ lives. There are many things that we’d rather not deal with – like losing our keys or having to replace those pesky gas alarm batteries.
The ‘network’ model, which applies to businesses whose value increases as more users are added to their platform, and the users themselves are doing all the marketing in order to improve the value of the platform for themselves.
And finally, the ‘peace of mind’ model, which is effectively: buying insurance for anything that can go wrong, such as having your pet go missing, or have your personal identity compromised.
Knowing these models doesn’t mean that you should pick one and shift your business in that direction. It’s not necessarily about becoming a subscription model but rather expanding into one, and hopefully deriving an increasing portion of your revenues from that side of the business over time. The author claims that we can create a lucrative subscription model in pretty much any industry – let’s prove him right!