Building Automatic Continuity Programs To Maximize Company Value

We live in a subscription-based world. I don't know if you've noticed, but everywhere you look, there's a subscription and a subscription and a subscription. If you're considering adding a subscription product to your business, or if you already have one and you want to make sure that you get past the onboarding, how do you actually make sure that you sell? Because it's one of the hardest things to sell. How do you get past subscription fatigue and other ways to get customers in that are unique and powerful? This is the episode for you. Welcome to the Marketing Secrets Podcast. In today's episode, we get to listen to Robert Scrobb as he interviews John Warlow. Now, John Warlow has helped Fortune 500 companies do market research, and he runs a business specifically around increasing the value of businesses as well as installing subscription products. You have any marketing experience in the past with selling a subscription product, you'll know that subscription products are very different beasts than one-time-off products that you can sell once. There's a different curve to it. There's a different strategy, the different organization. But when you do it right, it changes the game. It helps create a higher water level, which raises all boats so that way your revenue has a little bit more month to month that is the same, giving you more peace of mind. Subscription is key. And in this episode, we get to listen to Robert Scrobe as he talks to John Warlow to give us all the details on building automatic continuity programs to maximize company revenue.

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Within an information marketing business, nothing creates peace of mind, security, and growth like automatic monthly continuity programs. Hi, I'm Robert Scrobe, president of the Information Marketing Association and author of the official Get Rich Guide to Information Marketing. Today's program focuses on building these continuity programs within your information marketing business in a way that maximizes the sales value of your company. My guest today is John Warrillow. He is the author of the phenomenal book called Built to Sell and also a brand new book called The Automatic Customer. He is— John is the founder of a subscription-based company called the Value Builder System where advisors help company owners increase the value of their businesses. Before that, he founded Werelow Co., a subscription-based research business dedicated to helping Fortune 500 companies market to small business owners. He's a sought-after speaker, a popular Inc.com columnist, and lives in Toronto, Canada. Welcome, John. So glad to have you on today.

Thanks for having me, Robert.

Now, congratulations on your new book. I was very excited when I saw— I've been a longtime fan of Built to Sell. That's a category where there are kind of a dozen or more books that talk about how to improve the value of your business. But I really thought that the story-based model that you used in that book where you kind of put the reader in this little conference room and followed around this poor company owner and what they did and how they tried to raise money. I thought that was really a fascinating approach.

Oh, that's great. Yeah, the story of Alex Stapleton is a guy a lot like a lot of entrepreneurs where they're making a good living, but it feels a little bit like running on a treadmill. And he's just going from kind of one project to the next. It's the classic sell-do business model. And the story sort of evolves as he learns about the importance of creating a more sellable company because in the beginning it's dependent on him, but by the end he's able to sell the business. And of course that's, you know, it's funny. The book was actually inspired, The Automatic Customer, because I left one major part out of Built to Sell, which was this notion, as you call them, continuity programs. We talk a lot about productization in the book, but it was really this idea of recurring revenue that we talk a little bit about in Built to Sell, but I realized I should have spent a lot more time talking about it. That's what inspired me to write The Automatic Customer.

Well, I certainly enjoyed the book, The Automatic Customer. I recommend both. But what I find fascinating is it's been probably at least 2 years since I read Built to Sell, but I still remember it was a story. And I remember when I put down— when I put that book down, when I finished, I said, yeah, this one's far and away better than all those other books that talk about accounting, cash flow, and the numbers. It was just so— easy to read, and you really help simplify those decisions. So I wanted to commend you on that as we jumped into this automatic customer topic. Oh, great.

Thank you very much.

So I guess why don't we talk about why— so you left out these automatic subscription programs where the customer has preapproved you to get monthly, you to charge them monthly to deliver. And it could be SaaS, Software as a Service, where it's a software company. For us, it could be information products where it's a magazine subscription for $49, or a membership for $99 a month, or even a coaching program for $495, $995, or even up from there. Where the customer has pre-approved the transactions. Now, why, as somebody who is an expert and built a company teaching people how to build companies with the highest value for the company, why are these automatic subscription programs so important to impacting the value of a company?

Well, the problem with being an information marketer is you're only as good as your last product launch. The information marketers I know are very focused on product launch methodologies. It's all about instilling a sense of scarcity, getting people excited about making a purchase, buying a book, buying a course or whatever. As soon as that's over, as soon as you have your launch and you sell your whatever, 1,000, 10,000, 100,000, whatever your goal is in terms of products, you're right back on the hamster wheel. You've now got to come up with another product, another way to create some excitement and some scarcity and so forth. While that model can work and it does work for lots of people, Anthony Robbins got enormously wealthy using that model, it doesn't necessarily create something anyone would buy because information marketing when it's personality-driven, when it's product-driven that is very focused on a single event, there's nothing, there's no continuity. And of course, acquirers, people who buy companies want the revenue after you, the celebrity, leave. They want to be able to monetize your audience with you not in the picture anymore. And so for that to be worthwhile, for them to make any money as an acquirer, and for them to turn to pay you a great deal of money to buy your business, they've got to see some recurring revenue.

I think that's brilliant. And you hit it right on the head about you're only as good as your last product launch. I wrote that down for sure. And I think that one of the reasons why— because I got to tell you, in 2007, probably from 2004 to 2007 and '08, continuity was what it was all about. That's what everybody was focused on. But then these subscription models started kind of hitting a rough spot. And then right about that time, the product launch model kind of surged in popularity. I think a lot because the automatic continuities weren't as effective. You talk a lot about the book. Chapter 14 is named The Psychology of Selling a Subscription. How is selling a subscription different than selling a product or having some sort of launch?

It's a lot harder to begin with because as you rightly point out, it is a long-term relationship rather than a one-time relationship. You think about it, you go to the bar, you meet someone, you have a good time, you have a fling. There's no commitment to one another, you leave. That's the typical transactional sort of relationship, a product launch style business. Whereas what we're proposing or what you're proposing when you're proposing someone subscribe over the long term is akin to a marriage. So both parties are making a commitment to one another. The customer is making a commitment to you to say I'm not going to be promiscuous. I'm going to be loyal to this, your product. But in return you've got to create value for them over the long term. So it's akin to a marriage.

And that makes it tough It's funny you mentioned your dating comment where you have a fling and I often talk about information marketers who don't have a continuity program or really just have a series of one-night stands. One of the things that I find is that just like— all right, so to use the dating analogy and the one-night stand, there's a lot more to marriage than just the sex. And there's a whole other relationship going on. And I think it's very similar thinking to a subscription or membership. There's a whole lot more to the relationship than just the exchange of product. There is a trust. There is a faith, a personal bond that is really far greater than just, I give you this, you allow me to ding your credit card once a month. I think that's the piece that you actually get into in quite a few subscription selling ideas. I think that's the piece that most folks trying to sell these subscription programs miss.

Yeah, I think you're absolutely right. Spontaneity in terms of rewards is much more powerful than rewards that are always going to be there. You've heard all the psychology that says spontaneous or incremental or surprising rewards create much more loyal, more motivated employees and so forth. And so, you know, there's a good example of that in the book. We talk about the company, subscription company BarkBox, which sends a monthly box of dog treats to its subscribers. Every box is different and it's a surprise to get it. They have 3 people dedicated full-time doing nothing but serving up what they call happiness bombs. And basically what a happiness bomb is, is going through their database identifying one of their customers who needs to be cheered up. They've lost a dog, or a dog has fallen ill, or been hit by a car, whatever. And that group of individuals go about their way to try to figure out a way to make that customer happy. And send them a spontaneous gift or spontaneous phone call or whatever. 3 full-time staff dedicated to that at BarkBox.

And so that always— so you get— it's like you get a— you're delighting your customer.

They look—

you know, when they get this package, they can't wait to tear it open to see what they got.

Right. I mean, which is going to be more powerful? You know, a dozen roses spontaneously brought home one evening for your spouse, or doing the same thing on Valentine's Day? Way more impactful doing it when they're not expecting it. That's just one of many little things that keep customers loyal. Amazon, you may have read Robert, in the book has filed for a patent. I think they've actually gotten preliminary agreement to or received a patent on what they call anticipatory shipping. And what that is, is they actually put, you know, they figure out what their customers like. They figure out based on what you buy and what you bought in the past, what your preferences are. And they actually put those products on the truck anticipating you ordering them. And at the end of the day, they actually sometimes ship them to their loyal Amazon Prime subscribers because they're trying to create this relationship which is based on spontaneity.

Yeah, that's what's so dangerous about Amazon is not just that they're cheap, but that they're also smart.

And watching.

Yeah.

And so, you know, and I think that's, you know, where Walmart has focused all of their talent on wringing all the cost out of the supply chain and trying to sell for ever more cheaper pricing. Amazon is doing a whole lot in trying to understand their customer and also like this whole relationship piece. And one of the things that you point out in the book are the— it's one thing to talk about the amount of revenue that Amazon generates from what is now a $99 a year Prime membership. I think you said it's billions of dollars, but I think it's more important, it's the amount, the customer value when that customer makes the commitment to be Prime, it totally transforms the value of that customer to Amazon.

And that is, for an information marketer, the hidden benefits, probably more so than the revenue, and the value of your company. It is the secret hidden Trojan horse benefit of creating a continuity product is because you get permission to communicate with those subscribers that you don't have necessarily if they purchase a one-time information product. And once you've created that continuity-based relationship, it's going to change their behavior forever. If you look, and statistically speaking, if you look at Amazon Prime subscribers, of which there are now 40 million worldwide. It's a $4 billion business for Amazon. If you look at those subscribers, on average they spend more than $1,500 a year with Amazon compared to a non-Prime customer who also buys from Amazon. They pay less than $500 a year with Amazon or buy less than $500 a year of products from Amazon. So Prime subscriber is 3 times more valuable to Amazon because they buy 3 times the number of products and services from Amazon.

And John, you don't have the opportunity to know this because we just met, but my background is in the association industry. I've been working with nonprofit trade associations for 20 years and started— discovered this whole world of information marketing about 10 years ago. Then we created the association back in, oh geez, I guess 2005. But when working with nonprofits, I really in the associations I worked with, I refused to even acknowledge nonmembers. Look, you've got to join in order to come to the meeting. You've got to join to buy anything. Lots of people wanted, "Oh no, you've got to sell to the nonmember." serve them because then you'll make them want to be a part of it. It's like, no, no, no, no. The value, once they make that choice that what I have over on this side of the gate is worth entering the gate to get, then the value of that customer, that member to the association is completely transcendent. It's not so much in the association world, sure they'll buy more,, but really it's more about the relationship that's formed. If I can get them to join, then I've got on average with my clients maybe a 95% renewal rate. So if I get them to join once, they're not just buying a one-off annual meeting registration. I now have them for 10 years.

You bet. You bet. When people pay, they pay attention, right? Funny story about that, Robert. If you want to hear sort of a story from the old days, do you remember back in the, let me think, early '80s, you would get those sort of direct mail packages from magazines trying to get you to subscribe to a magazine? I mean, we've all seen them, right? To get information products. Well, I grew up with a father who was a magazine publisher. Hours and hours and hours across the dinner table from my dad hearing these war stories about trying to get people to subscribe to magazines in the early '80s. And so one time, my dad would talk about control groups and direct mail packages that worked and some that didn't. He'd go on describing this entire kind of labyrinth of different control packs. So one time I just turned to him and said, Dad, I mean, if your magazine is so great, why don't you just send them the magazine? And he's like, "Yeah, yeah, shut up kid. We've already tried that.

It doesn't work." Yeah, sampling doesn't work.

To your point, it's much easier to describe all the benefits both kind of practical as well as intangible in a marketing piece than just giving them one sort of sample, letting them in your case come to an event without being a member Maybe that event is just a little bit off or not exactly the perfect event for them, etc. I'm a huge believer when it comes to continuity programs, you need to give customers the ultimatum. You either subscribe, become a member, whatever the lingo is in your industry, or we can't do business. And that's I think where you see the rubber meet the road and you start to get more traction for people when you give them that ultimatum.

You talk in the book, you present 7 subscription selling ideas that kind of models folks that you've seen successful in selling these automatic monthly programs. And of course, within this discussion, there's nowhere near enough time to go through it. Certainly recommend getting the book, The Automatic Customer. By John Warrillow. John, within one you have give them a freemium option. How have you seen that work well in selling subscription programs?

Well, I mean, basically in the freemium option you've got a light, if you will, version of what you've produced, a scaled-back or a sampling where they can use that, but really the meat is behind the curtain, behind the paywall. So a good example of that would be simply having a free opt-in for a website, a blog, a Facebook account, etc. Where they make some sort of notional commitment to you. It's free, and then trying to convert them on into the paid piece on the other side. Through the book I did lots of research with information products, and I discovered that the typical conversion rate for those sort of freemium offers is usually between 3% and 30%. Why such a big range? Well, it depends how many subscription, how many offers you make those opt-ins. So if you've got a database of let's say 10,000 subscribers who have opted into your free offering, again, whatever that free thing is, we find that between 3% and 30% of those people will at some point in the year buy something. And where you sit on the 3% to 30% conversion rate relates to how many offers you make them, how many products you try to sell them. So if you've got one subscription paid subscription, you're likely to fall on the very low end of the conversion rate, probably closer to 3%. Whereas if you've got 5 different subscription offers, 3 online courses, 2 books, an audio seminar, whatever, you're likely to get much higher up into the teens and low 20% conversion rate if your list is quality, because you're giving them lots of offers.

Yeah, and I would only— the only thing I would change is that you can actually push that up. When you started talking about conversion, I went ahead, I actually happen to have a lead-to-conversion ROI report here on my desk for a client that I'm working with, and he's getting about 55% of his leads converting into paid customers. With that, probably about 50% within the first year with 1.3%, you know, 12 months plus. But so it can be a little bit higher than the 30%, but I absolutely agree the reason why it is higher to your point is this information marketer has about 8 different products that they offer and, you know, as the customers offered one front-end product and invited to come to a couple of webinars and things like that to hear about it. And then when they don't buy it, about 21 days into the sequence there's another product and then there's another one. So there's kind of this parade of different products that are offered to these leads, all providing them value like you said with the freemium by giving them webinars, giving them training, giving them white papers, giving them information and then inviting them to take the next step to invest in the program. Very, very smart.

Great.

And then also the other thing that we, that you'll see a lot is in our world that you talk about in your book is offering a trial. Can you talk a little bit about what you've seen work in that area? Sure.

So, you know, if you're going to provide an alternative, if you're going to say to somebody, look, you know, We cannot do business unless you subscribe, unless you become a member. Then it may become necessary to give them some sort of trial. So in the software world, we've all used trial-based software, finite amount of time. They tend to work well in situations where you've got something that you really need people to experience. They don't necessarily lend themselves well to describing through written copy or audio You really have to get customers to actually start to absorb and to partially onboard, if you will, and make an investment. I mean, not in the information world, but certainly in a kind of subscription-based vein. A good example of that would be a place called Osler Ski Hill or Ski Club based just north of Toronto. In Toronto, we have 6 million people and no skiing. We are like one of the only places in the world that has private ski clubs, because there would be just hour-long lineups to get up the ski lift. So Osler charges $60,000 initiation to become a member, to give you the right to pay another $5,000 a year to use their ski hill. But those are big numbers. And so to get people to kind of really experience what Osler is like, and how it is different than the other local ski hills, is they get you to do a trial membership and then convert you on the back end. So you can't go to Osler in perpetuity and just pay. At the end of the year you've had your trial. You then get the ultimatum. You've either got to become a member and write your check for $60,000 or move on.

And of course in the information marketing world, free trials are a very common way of having folks get started because the gross margin, the cost of the products that we're shipping out are so low that, you know, for us to fulfill a month or two as a free trial isn't all that expensive and gives us an easy kind of a low bar for a customer to jump over in order to become a new customer.

Now— Free trials work really well. If the customer has to sort of what I call onboard, or has to start configuring what you do, or absorbing what you do to really get it. Again, to go back to an offline example, Oster Ski Club, when you go up throughout the year, you start to make friends. Your kids become part of the racing program. You're sort of bedded in at that point. Their conversion rates on free trials are like over 90% because you've changed your behavior. So my only word of caution on offering a free trial is that you really need to have some hooks to get them to actually start changing their behavior. And then once they do that, then you'll find conversion rates very high. If it's just, hey, read this article as a sampling, they can ignore that. But if there's some way they can configure it to customize for them, go through a tool which forces them to upload some information about themselves, that's where you start to get higher conversion rates because they've made sort of an investment in the onboarding process.

Yeah, and I definitely want to ask you about that because the things that you talk about on onboarding are very, very rare and particularly smart. First, I want to ask you about subscription fatigue. It seems to be kind of a new phenomenon that as more and more folks have discovered the power of selling programs through subscription, that a lot of us now have these subscriptions. So can you talk a little bit about what you've seen in subscription fatigue? Sure.

Well, there was a day when you'd get your credit card and you might have 5 or 6 big charges on it. Maybe your utility bill, maybe your cable bill, and that was it. Nowadays, most of us look at our credit card charge, there's just hundreds or lots of small little incremental monthly bills. So a lot of us now subscribe to Netflix as an example. A lot of the software we buy, whether it's Salesforce.com or Microsoft Office 365, are on a subscription. A lot of us are now subscribing to these box-of-the-month clubs or consumables like Dollar Shave Club Book Club, Birchbox, you know, in and of themselves small little charges. And what's even more interesting is lately there have been, even in the last 30 days, big Fortune 500 companies have jumped on the subscription model bandwagon. YouTube just announced they're going to launch this week, just announced they're going to launch a subscription offering, an ad-free version for folks who want to watch YouTube without ads. Starbucks last month announced that they were going to do a special coffee program on subscription. AMC Theater want to get people back in the theater to give you an all-you-can-watch movie subscription. So increasingly, this so-called subscription fatigue is starting to hit where collectively all of those little $10, $20, $30, $50 a month charges are now ending up being a really big nut every month. Our bar as consumers has started to go up. We've all had that experience not only of having more charges collect to be a big charge at the end of the month on our credit card, but also you try to decipher or cancel a subscription that either they make it hard to opt out, or on the credit card it's showing up as some weird company name you've never heard of, somebody's holding company, you have no way to attribute it back to a service that you subscribe to. So all these things are elevating our subscription fatigue and making it harder. The bar is higher for us to sell a subscription these days than it was even say a year ago.

And I can still remember, it's been a long time ago, but the first time I got a credit card invoice that the listing of the charges went on to the second page. Now I was like, wow, this is terrible. This is a 2-page credit card statement. And now I don't think I've gotten one that's less than 4 or 5 pages today.

They send me mine in a big binder. It's, you know—

just kidding. I think it's vital to understand that subscriptions are harder to sell than a product, just because you're selling a relationship versus just kind of this one-off thing, this one-off experience. And now in particular, they're harder still because your customer, whether they are new to you or new to your universe or not, they already have all these different subscription programs that they're paying. I would also probably say that when we— information marketers kind of started first getting into this whole world of monthly continuity, probably 2003, 2004 when we were kind of starting to do this online. And instead of having an annual coaching program, we would have a monthly program or instead of an annual membership, we'd have a monthly one. Back at that time, you had to explain to customers what it was and how it worked. Now it's actually a little easier in a sense that they kind of recognize, oh, okay, yeah, this is one of those monthly things. And so while there is some fatigue, I think there's also some recognition which makes it a little bit easier to sell as well. John, any advice for kind of overcoming that bar for that subscription fatigue, or anything that you've seen folks do to kind of alleviate that problem in particular?

Well, number one, recognize that it's worth getting over that, because no pain, no gain. The value of having a subscriber far exceeds, exponentially exceeds the value of having a one-off customer. So although it is harder, I don't want people to listen to this and go, oh well, continuity programs are not worth it. They very much are for the reasons we've already stated. So stick to it, one. Two, I think what you really want to think about is this idea of 10x versus 10%. And what I mean by that is try to develop a 10x value proposition that makes it 10 times more valuable to subscribe than to simply buy on a one-off basis. Because nobody is going to subscribe to your product or service to save 10%. So if the CD package, one-time purchase that you sold 5 years ago was $1,000, no one is going to subscribe to save 10% on that. Really, what you've got to try to envision, I think, is a value proposition that is 10 times that of just a one-off purchase. A good example of that is an information marketer based in California called New Masters Academy. I wrote about them as well. They have got a— basically an online learning library. If you're interested in learning how to do various forms of art. So if you are into pottery and you want to do more and better pottery, or if you like to learn how to do watercolor painting, you can subscribe to New Masters. Well, the competition for New Masters is the kind of community college live training workshop where you might spend $600 or $800 to go to a physical face-to-face training session. And so for the subscriber, they pay $29.95 subscribe to New Masters, you could see how the customer might make the case that by subscribing to New Masters, it's kind of 10x the value than going to a single workshop. I think with Netflix as an example, hundreds of thousands of hours worth of content for $10 a month, I mean that's a really strong value proposition. So I think you just want to go into this subscription or continuity offering idea with this kind of 10x hat on.

Yeah, I couldn't agree more. You know, bringing a huge breakthrough that's going to really help them, that really helps transcend anything that they've seen before, I think is essential to being able to have a fast growth company. And so I certainly, I love the analogy of a 10 times solution versus a 10% better. Now one of the things that was very rare that I have not seen, like this whole subscription thing and membership has been around in the association world for decades. And yet you talk about something that I don't see anybody in the association world talking about, and that's what you call onboarding, how the customer experience is handled after you get the customer. And so often we think of, okay, we've made a sale and now we can move on and deliver. And you found that the folks that are successful in making these programs work have a strategy for immediately after the customer makes that purchase and get them into the program.

You bet. If you plot on a graph the churn rates of your subscribers, you will be able to see specifically that the people who have a favorable impression of you in the first 90 days, that 90-day onboarding window, if you're able to change their behavior, get them to interact with you, feel good about you in the first 90 days, their likelihood to churn drops off. Churn meaning stop subscribing, drops off a cliff. They will be subscribers for a very long time statistically. Yet if you do the exact same and you say, okay, we are going to ignore customers for the first 90 days, and then we are going to look at the analytics on our software package or however we kind of monitor people who subscribe to us and realize, "Oh geez, they didn't actually use the stuff we gave them. We better get on the phone and call them and find out why they are not using this, or send them a bunch of email or video." At that point, there is virtually nothing you can do after the 90-day period that will reengage them as subscribers. Their likelihood to churn is astronomically higher than if in the first 90 days you can get them to interact with you. And so great companies in the subscription base, whether it's Amazon or Netflix, have entire teams, boardrooms full of whiteboards, choreographing, storyboarding the first 90 days of their relationship. They will go to the point of really looking at whether to send that third email at the, at the 6-day mark, and they will statistically validate whether it's better to send it on the 6th day or the 7th day. It has that big an impact for them. And we've all had this in our own relationship. When you subscribe to something, you've gotten so excited about what the value of that subscription offering holds for you. There's a bit of a honeymoon period. But the further you get away from the moment you pulled out your credit card, the more likely you are to lapse back into the old routines, the old habits, and not adopt the product or service you've subscribed to. So again, just imagine one of those huge clocks that count down to the Olympic Games. You've seen them. Stick 90 days on the clock from the moment they subscribe to you, and that's how long you have to get them to opt in, to really onboard, to use your product or service. And if you're successful, they will stay for a very long time.

What I found is that, especially for information products, it's so much easier to sell and get a customer than it is to deliver. Now the customer, chances are, has to do something with the product that you're delivering. If you're providing them how-to information, let's just say a weight loss program, it's so much easier to to buy a weight loss program than it is to actually do a weight loss program. And if you take that analogy to your own business, if you just go and deliver the weight loss, then they're kind of left cold. What I found is that you've got to really— the same sales message that you used to get them to buy, you have to use that and more to get them to implement. Whatever the promise was, whatever the outcomes that they were looking for, you've got to take those same— you can't stop selling just because they gave you the credit card number and said start. That actually begins the sales process where you are, hey, I'm glad you're a customer. We're going to help you achieve this. Outcome that you came to us with, and we're going to make it as easy as possible for you to do so. Now, John, you say 90 days. I'm almost in the 9-day category. You've got to— while they're the most excited, you've got to take that opportunity, turn up the volume, and get them to seize that dream and follow through on that first step that they've taken.

You bet. They're also statistically way more likely to buy a second or third product from you in that onboarding window. If you chart and plot cross-selling, it's off the charts in the first, again, 30, 60, 90 days. Once that window closes, it's virtually impossible to cross-sell them. Because again, at that point they've got a little spot in their brain about what what you mean to them. It is very difficult to dislodge that. But in the onboarding window is where you've got the opportunity to change their behavior, where you've got the opportunity to cross-sell them. And think of it in an information product context, you might think of the actual product sale as the beginning and the end of the sales cycle. Whereas I would argue to your point, Robert, you've got sort of a sales window. And where you've got to, you do have to get their credit card at some point and create a commercial relationship. But there's a whole lot of selling that goes on before they whip out their credit card. And then during the first 30 or 60 days you're still selling. And so it's a mistake to say, "Whew, got the credit card, move on." That's where you're going to get huge churn. Whereas if the credit card is just one additional step, layer of commitment, but it's in a continuum of getting their additional commitment. And it lasts for a period of time as opposed to a single event.

What I've found is you get them refocused on the outcome that they came. Help kind of teach them what they need to be successful. Maybe even tell them some stories of other successful successful clients and what the outcomes that they have gotten. And then if there's any sort of success thresholds where we do a little— sometimes we'll do a little certification program where complete— watch these 4 videos and answer these 5 questions and you'll get a little award, a little recognition. Rather than, because sometimes these implementing what you're teaching could be really a lifetime pursuit, and it just feels so overwhelming. But if we can break it down and make the first couple of steps, the first couple of wins really short, a short window. One of my clients, Michael Rosbrock, has a referral letter that he gives to his new clients, and he says, you know, send this referral letter to 50 people. And by the way, send the referral letter to us as well. So now he can communicate with the new clients that haven't sent— so if he hasn't gotten the referral letter, he knows that new customer hasn't yet sent it out yet. And so since that's the first thing they're supposed to do, he knows he can communicate about nothing other than getting the referral letter out. Hey, look, this guy sent out the referral letter and got 8 clients. This guy sent the referral letter and got 2, and the success story is about that one thing. And then when he does get the referral letter, he can write them a little note, hey, saw your referral letter, congratulations on getting that done, keep me abreast of the results. So that there's this one little thing that they have to do in order to feel good about themselves and experience what this program's all about.

Great example.

I call them onboarding markers. You know that medical doctors have markers for various ailments, so if you suffer from heart disease. It's called the silent killer because you don't know if you've got clogged arteries, but there are markers. There's like your cholesterol rate, etc. Subscription company offers— companies also need markers because there are markers that are predictors of churn, and they are the fact that they're not adopting. So in your example there with the 50 letters, it's the fact that the guy hasn't sent the letter out would be a marker of churn. Flag saying, hey, this guy is likely to churn because. In our case, I run this company called valuebuildersystem.com where we license this technology on a subscription basis to advisors. One of our markers is that if you don't embed— we give our advisors some embed code, HTML embed code that they then embed in their website to allow them to run basically the platform, run the questionnaire that we offer. If they don't embed in the first 60 days, there's like a 911 siren that goes off in our office to say, this guy is not embedding properly. He's not onboarding. Let's get on the phone with him. Let's figure out what's gone wrong. Because somewhere along the way, we dropped the ball. And so you need those markers if you're going to have a subscription offering.

Well, I know time is short, but I definitely wanted— one of the other things that you get into in your book that is really sparse in the information marketing world is numbers. One of the realities of selling subscription programs is that rather than getting a large amount of money on day one, the money trickles in. What's good is that the customers you get today are on top of the customers you got yesterday. Grows as it trickles, but there can be some cash flow impacts. And one of the neat things that you get into is— are really some details about cash and how that works. Can you just, you know, briefly describe that to kind of tease folks to let them know what they're going to find in the book?

Sure. I mean, the most important ratio that some shipping company offer— company operators are looking at on their dashboard daily is their LTV to CAC ratio. It, it means your lifetime value of a subscriber compared with the cost it takes you to acquire a single subscriber. And most professional investors investing in buying businesses are looking for a minimum of a 3:1 LTV to CAC ratio. The other number that's really important is your months to recover CAC, the how long it takes you to recover the costs to market and sell to a subscriber. So for example, if it costs— if Microsoft has to invest $500 through SEO, SEM, and radio advertising to get you to subscribe to Microsoft Office 365, and they charge you let's say $10 a month for that, well, it's going to take them many, many months, $10 times 12,— whatever, 5 years to recover the costs of that marketing. So you're looking to measure your number of months to recover CAC is another key metric to look at.

And you know what, we threw those— we threw that out very, very quickly, but I think it's explained in a lot of detail in the book. And yeah, just because I'm a CPA doesn't mean that I'm the only one interested in this stuff. Really, it's important to know these numbers because they give you a lot of information beyond what a financial report would say. I thought it was fascinating, the 3:1 lifetime value of a member versus the acquisition cost. It's a very valuable tool. If it costs you $100 to get a new member, then your lifetime value better be $300 on average including the free trials, including everything else. So I think that's a very smart way of knowing whether or not you should scale up your— I've talked to a lot of people that are scaling up trying to get a whole bunch of new members into a membership program that's not working because the members are leaving faster than they're getting them. So what a nice little tool to understand with that 3:1. And John, that's the first— I know you quoted somebody else, but that was the first time I had seen it was in your Automatic Customer book. So certainly a lot of great smart things. I've been in this continuity world for a lot more than 10 years, and I learned a lot by reading your book, and I certainly recommend it to everybody who's interested in building this aspect of their business. For the security, the value of their business, and the really long-term peace of mind. Great work. Thank you very much for coming on today.

Thanks again, Robert. Thank you for listening to the Magnetic Marketing Podcast with Dan Kennedy. If you love hearing in on these lost Dan Kennedy talks and speeches and calls, then please let someone else know about this podcast. That's how you can help it to grow. And the more it grows, the more free Dan Kennedy we can bring to you. Also, Dan would love to give you the most incredible free gift ever designed to help you make maximum money in minimum time. And this free gift comes with almost $20,000 in pure money-making information for free, just for saying maybe. You can get this gift from Dan right now at noBSletter.com. Not only do you get the $20,000 gift, you also get a subscription to 2 marketing newsletters will be hand-delivered by the mailman to your mailbox each and every month. One from Dan Kennedy and one from me, Russell Brunson. To get this gift and your subscription, go to NoBSLetter.com right now.