The Good, The Bad, The Ugly About Subscriptions & Memberships

Welcome to Million Dollar Grit, the podcast that dives deep into the world of entrepreneurship, where tenacity meets strategy and dreams meet reality. My name is Julie, and I explore the raw, often overlooked truths of what it takes to succeed in business and in life. It's not just about the glossy success stories. It's about the grit it takes to get there.

Hey everyone, Julie here. And today I want to talk about subscriptions and memberships. Now, if you've been following me for any length of time, you know that I rag on this type of product all the time, and there's a really good reason why. And yet I know that there is a place in the online world for subscriptions and memberships. So I'm gonna go into sort of my thought process, especially around 2024, what I see when I'm coaching people who have subscriptions and memberships, and of course what we're doing inside of Funnel Gorgeous. All right, so let's back up a little bit. A couple of years ago, one of the internet marketers in this space, many of you know him, Stu McLaren, great guy, love him. He is the founder of like WishList Member and Searchie, and he had a course called Tribe, which I think he changed to Membership Experience. Anyway, he's the membership guy, right? And so a lot of people got really interested in memberships and He's a great instructor, but I think what happened that was, there was a lot of disillusionment in the industry because people had this idea that memberships, you know, you get that monthly recurring revenue and every month you get new members and then your revenue stacks over time. And then the number that people seem to ignore or not think about is churn, which is how many people leave the membership. And I want to tell you a story. Back in 20— early 2017, I changed one of my offers into a membership offer. So I was a part of that sort of like hubbub where I was like, yeah, this is amazing. And so I had an offer, it was called Create Your Laptop Life. It was a $1,500 offer, and we had been using a webinar to application funnel, and we had made a tremendous amount of money, about $96,000 in one month running on these ads. And for whatever reason, we stopped it. You know, if it's, if it's not broken, don't fix it. But, uh, that's what I did. And we decided to change it to a membership model, and we thought, man, this is going to be amazing. The price point will be lower, it'll be easier for people to get in, then they'll stay. And we didn't understand churn. And after the first month, we had actually a fantastic churn rate. We only had— I think we had 90% of people continue and like 10% of people bail. In the SaaS world, a 10% churn isn't fantastic, but in the membership world, we're looking anywhere from 10 to 15% churn. So we were right, like we were on the low end, and it was a a higher ticket membership. It was $97 a month. So this was actually not bad, but I was butthurt, you guys. And this is something that I have seen play out over and over and over again. People psychologically can't handle churn. It's stressful to see people cancel, cancel, cancel. And so one of the big things that I learned from this was that A lot of times people, they get, you know, excited about the idea of monthly recurring revenue. They do not understand churn. Even if they understand churn, they don't adequately prepare their psychology, like their psyche, for the cancellations, and then they get disillusioned. So I often steer people away from memberships for that reason, but for another reason too, and that is that a lot of people really should just be doing a course and it doesn't need to actually be a membership or a subscription. And it's, it's partly because people get excited or attached to certain types of containers, like I want it to be monthly recurring, but the content itself doesn't actually need to be a true membership. And so I have steered people away, say, why are you going to fight churn? Why are you going to, you know, fight lower conversions? Just make this a course. Okay, so that's kind of like the backstory. That said, there are clients in my personal Digital Insiders mastermind that run memberships and subscriptions. Funnel Gorgeous has, um, some continuity products. And so I'm here to tell you that if you decide that the content that you actually are going to deliver to the world needs to be in a monthly recurring revenue container, then I wanna help you figure out how to make the best of it. And I wanna give you some big sister advice. All right, so what kinds of content do really well for subscriptions and memberships? Things that change frequently, you know, so people who are doing Facebook ads or, you know, some, something that is like changing rapidly, a monthly sort of program works well because you can constantly change up the content. Similarly for people who are in the AI space, which is rapidly changing. So if the content is rapidly changing or the content needs to be consumed regularly, think about this with just like food. You know, you have to eat every single day. You can't stock up on eating on Monday and then not eat again till Friday. So there are things that we do in life and in our business that are ongoing. And so ongoing things, whether they're meal plans or accountability, things like this, they do need that ongoing component. Same with, you know, coaching. Coaching is an ongoing component. And so there are times when your content, your coaching, whatever it is, it really is ongoing and it's consumed every single month or every single week, and it makes most sense. Now, I've been using the word subscription and membership pretty interchangeably, and subscriptions are more about the deliverable, like what gets dropped to the customer each month, and memberships have a subscription component because there's usually something dropped, but then memberships also have a community aspect to them. And so if you have a deliverable without a community, we tend to call it a subscription. If you have a deliverable with a community, we tend to call it a membership. Also, there's a lot of, you know, people normally think subscriptions are a little bit lower ticket, memberships might be a little bit more mid to high ticket. Okay, so next month, if you're listening to this podcast in real time, next Monday, April 22nd, 2024, at I think 2:00 PM, I'm doing a workshop called Subscription Mode. You can go to subscriptionmode.com and purchase an early bird ticket. If you're listening to this after that date, you can go to subscriptionmode.com and grab the replay. We are going to take you behind the scenes of the good, the bad, the ugly about subscriptions. Now, inside of Funnel Gorgeous, we have a subscription product called Metrics Muse, and every month we're delivering one spreadsheet. You can go to metricsmuse.com. We decided the container for this was appropriately a subscription because we had a bajillion spreadsheets that we have built and that we continue to build, and we knew that if we gave them all in one sitting, most of them wouldn't get used. And so if people join, then every month they get a new spreadsheet that they can easily consume and use in their business. We really didn't want to go ahead and put a community aspect to it because we already have communities. And so this is a true subscription model. It's a $12 a month subscription on the monthly plan. If it's annual, it's $97. We also have a second tier and there's strategies for tiers and We use the second tier for a group license for people who want to use these spreadsheets with their clients. And so the beautiful part about this is not that the conversion is so amazing, because conversions typically on subscription products are lower, but it's that idea of slowly stacking revenue. So you have, you know, let's say $700 a month in subscriptions, and then the next month you have 720, assuming of course that your new member acquisition is beating out your churn rate. And so we know churn very well because we run SaaS and, uh, software as a service. So we understand how churn rate works, and our churn rate for our SaaS product is more around 4 to 5%, which is kind of the standard for SaaS products. But we understand that we have to reduce churn and we have to get new customers in order to slowly get that revenue up. The thing is that psychologically we are prepared and most people who do subscriptions are not psychologically prepared. So, um, for example, I have a client and she has a membership and psychologically she doesn't like her membership. Why? Because she does a big launch and she has, you know, a lot of people people join the membership, and then for the rest of the year she watches people leave. And it's just— it's like a hit to the psyche. I don't know how else to say it. And people think they can handle it, and then they get in such a bad mood, even if the churn rate is right in the pocket of where it should be. And so the only solution, you know, obviously you can reduce churn, but only to a certain degree. People are kind of people, right? So you have to acquire new customers. But because conversion rates tend to be a little bit on the lower side, you do have to definitely think hard and, and long about how you're going to get new customers. And so she, you know, was telling me, you know, I just, I, I keep thinking, should I just cancel my membership? Should I just not do it? And I'm like, oh my gosh, I've heard this tape before. But this particular client is very, very strategic in her brain, and she understands math. And she's like, you know what, even if I launch once a year and then I watch people leave all year, and then I launch the next year my income is slowly going up on the membership, even though it's so psychologically painful. And that is— now that I'm 11 minutes into this podcast, that is the biggest piece of advice I can give you, is that if you are going to do a membership or a subscription, do it for the long haul. Because what we're noticing is that year over year your income slowly creeps up. Now, it's not like ginormous. I mean, unless you have some amazing acquisition channel and some amazing reducing churn, then you could see that income go up more significantly, more quickly. But if you are average, like most of us are, right, you have average churn rate, you have average acquisition rates, you are going to see the growth long term when those yearly renewals come up, when that yearly launch comes around. But it's going to feel psychologically like a slog to you as you see those cancellations come in all year. If you're prepared for this, if you think with numbers, if you think with math, subscriptions can be amazing, especially if they are built to scale, really important. People build memberships all the time that don't really scale, right? And then they get burned out or they're not prepared for the content creation each month, or it really should have been a course. But if you can build a subscription or membership that is built to scale, that is sustainable long-term in the content creation side and on the customer consumption side, and you can adequately prepare your psyche for a little bit harder acquisition on the front end and that slog of churn that is just unavoidable, you could build a long-term money-making machine. And so as I sit here and I sort of pontificate about memberships and subscriptions, and I think about all the people that I have said, hey, don't do a membership, just make it a course, I stand by that. For almost all the cases because really a membership wasn't the right container. But I also wanna acknowledge that there are times when the membership and the subscription is the right container. And when it is and you have those things in place, you can set yourself up for a long-term revenue stream in your life and business that will actually make a difference. So as we have, we launched Metrics Muse, which is like a true subscription over in Funnel Gorgeous in January. We had a good launch. We had a great conversion rate on our warm traffic. Cold traffic, it's average turn average, right? You know, we're not, we're not beating everybody by a million. But what is interesting is that even though it's a $12 a month subscription, the average cart value of someone coming in is actually higher. And why? We have annual plans, we have a group license option, and we also have an order bump, which is an amazing strategy that I'm going to explain in full on Monday the 22nd. If you go to subscriptionmode.com and about 70 to 80% of people are taking our order bump. So even though it's $12 a month, when we get a new customer, we're getting anywhere from $48 all the way up to $133 when people buy. And so it is proving to be, even though we've got the churn and the acquisition to contend with, it's proving to be a profitable revenue stream for us. And the kicker is that psychologically we are prepared for churn, and psychologically we are prepared for the long haul where we actually see that revenue truly grow over time. Anyway, I hope this was helpful. I hope you enjoyed it. As always, if you like this podcast, please leave a review. I'll talk to you soon.

And there you have it, folks. Another dose of Million Dollar Grit. I hope today's episode has left you feeling inspired, equipped, and ready to face your own entrepreneurial journey with resolve. Remember, until next time, embrace the struggle, harness your grit, and keep pushing forward. You're stronger than any challenge you face. I'm Julie Chenell, and this has been Million Dollar Grit.