Episode Transcript
[00:00:00] Speaker A: Foreign.
Let's kick it off. So, hi, everybody, this is Jay Nathan here with another episode of Subscription Heroes podcast and very special guest with me today, Robbie Baxter, good friend of, I don't know, we've known each other for maybe a couple years now, Robbie.
[00:00:20] Speaker B: Yeah, been a few years. Yeah.
[00:00:23] Speaker A: Yeah. And Robbie's got an amazing background. I think everybody who listens to this podcast is really going to enjoy this conversation because Robbie is probably one of the few people in the world, I would guess. Robbie, who has been consulting with some of the biggest name brands on the planet about their subscription programs for what, two decades now? Two decades plus.
[00:00:46] Speaker B: Yeah. I got the gray hair to prove it. Yeah, it's been quite a while.
[00:00:51] Speaker A: Your hair looks lovely. Just for the record, for those listening, tell us a little bit about how you got into this space, because I know you've been at it for a while, you've been independent for a while, but then you're working with some of the most amazing brands out there, which we'll talk about a little bit as we go along here. But how did you even get into this line of work?
[00:01:10] Speaker B: Yeah, so if you go way back, I was a strategy consultant for a big consulting firm focused on what they called marketing intensive companies, so consumer products, retail and media, which of course are, you know, three industries that are very much in the subscription world today. And then from there, after business school, I did product management for what today we would call SaaS, company software as a service. So I've always been sort of interested in businesses and sort of gravitated toward businesses that live or die based on loyalty. Right. On recurring relationships, trust, loyalty. And I started consulting after several years of working in product management, I got laid off while I was on maternity leave. Which is something that happens, it still happens today. It's still legal. And I said, I'm going to figure out something where I have control over my career. And that is, you know, big enough to be interesting and meaty for a career, but also narrow enough that I could credibly become an expert. And I just gravitated toward subscription. My fifth client as a consultant was, was Netflix.
And I, I just fell in love with the business model. I loved their focus on their customer experience, which I really hadn't heard many companies talk about. I loved how disciplined they were about their offers. I. I'd worked with a lot of companies, you know, in my consulting days that had, you know, a different promotion for every day of the week, and I liked how, how structured they were about really understanding their metrics and the way they were educating the public markets on the power of subscription. And, you know, I started getting calls from other companies who were interested in subscription, who had heard that I'd done some work with Netflix and I knew something also about SaaS, and I started writing about it, I started speaking more about it, and a lot of people thought that, that this was not relevant to them. So those first years were really hard because people said, you know, subscription may work for newspapers, but it doesn't work for us. Or subscriptions may work for hbo, but it doesn't work for us. Or even HBO would say, well, yeah, subscriptions work for the cable company. But actually what we're doing is we're developing relationships with the cable company, not with consumers directly. So what you're doing isn't relevant for us. And I just felt like, gosh, people are missing out on this amazing opportunity to have, you know, more profitable revenue, deeper relationships, better predictability of cash flow. And I, I just kept pushing it. And so finally I wrote a book because I was like, okay, I'm going to just explain what I see, what I believe, like a manifesto. And this was, you know, the book came out in 2015, and I'm going to just say, this is what I see, this is what I know. This is how it might work for your organization, even if you don't see it yet. And then my thought was, if. If people looked at the book and they liked what they read, maybe they'd want to talk to me, I could help them. And if they thought it was all crazy, then we could save each other a lot of time and heartache. Right? So it was like a one pound business card. And that was kind of where I started and how I really went deep into this whole concept of membership as a core fundamental principle that leads to subscription.
[00:04:27] Speaker A: That is amazing. I mean, this was 20 years ago. You were well ahead of your time, you were well ahead of our times. But look at how. I mean, what does Wayne Gretzky say? Like, I don't skate to where the puck is. I skate to where it's going to be like, you did that. How did you. Like, how did you have the forethought to really. Did you know that the subscription business model was going to take hold the way it did? Did you have that intuition or did you just like this niche and you said, I'm going to focus on it because it's something I can grasp onto, and I know that the people who like me are really going to like me, and I'M okay with those who don't think is relevant to them. Don't like me or don't need my services.
[00:05:03] Speaker B: Yeah, I mean I think at the beginning there was a part of me that had a little bit of self doubt because I was thinking this is so obvious to me. And yet really smart people who I admire are telling me it's not relevant to them.
And I can try to explain what I, what I believe or how they could try it or what it might lead to.
And I got pushback. And so I think the thing that was really helpful to me was to say, you know, even if 99 out of a hundred people disagree or aren't interested, the one that is interested is going to get a big payoff and I can help them with that. And so I truly saw this as being there, even if it's just a small. You know, as an independent consultant, you don't need to have a thousand clients, but you just need a few. Just a few who understand. And so I wouldn't say that I saw that it was going to be a huge thing, but I saw that it could be a huge thing. And the more I played with the ideas, you know, like I play this game with friends, like, okay, how would you apply subscription to a fleet of fishing boats? How would you apply subscriptions to the Republican party? Right. How would you apply subscriptions to like we would just pick to bicycles, to dental. You know, I worked with a dental pain management company early on. I worked with the association of bicycle Manufacturers, specialty bicycle parts and retail. And just thinking like who is it for? And all the principles that now I teach you apply those principles and you start to see an opportunity for a better business model.
[00:06:44] Speaker A: What's the most interesting industry you've seen use? Subscription.
[00:06:48] Speaker B: Oh gosh.
[00:06:48] Speaker A: Methodology. Putting you on the spot here.
[00:06:51] Speaker B: Yeah, no, this, I love to think about this. So for me right now what is most exciting is healthcare.
And the reason. So I've worked with Kerbo which is weight loss for kids. It's part of now. It was acquired by Weight Watchers midi, which is menopause healthcare around menopause. Basically subscription around chronic health issues is very popular right now. And there's 30 Madison is kind of going after one space at a time Hims and hers noom for weight loss. I mean there's a lot of companies that are basically taking a chronic health issue that, that maybe isn't going to kill you, but that causes you a lot of frustration and discomfort and say we're going to solve that. Ongoing problem. Because health care right now is so bloated and so old fashioned. Right. They're focused on fixing you if you're broken. Right. Maximizing your minutes alive, even if they're not good minutes. And what most people want as a forever promise is I want to maximize my healthy minutes. Or I think it's Peter Attia who calls it your health span. Yeah, right. I want that, I want to sign up and I just want you to say, do these things, eat these, you know, take these supplements, do these exercises, come to these classes, eat these meals and you will maximize your healthy lifespan. And so that for me is an area which is both for fraught with challenges and has probably the biggest upside of any space. Because, you know, honestly, if I could sell you a pill that was going to guarantee you to live to 105 completely healthy and then you were going to drop dead, I mean, I don't think there's a limit on what I could charge for that.
[00:08:32] Speaker A: Totally. I'd take that pill in a heartbeat.
[00:08:33] Speaker B: Right, right.
[00:08:34] Speaker A: Because the alternative is pretty hard.
That's right. I said the alternative is pretty hard. Like working out, eating well, like that. That, that all stinks.
[00:08:43] Speaker B: Oh, and also, you know, working out, eating well and then you still get sick. Right. I mean, we all know people who have been so careful.
[00:08:51] Speaker A: Totally.
[00:08:52] Speaker B: And have had bad outcomes. So yeah. I mean, there is room there for flipping the script and instead of fixing people when they're broken, really optimizing around a more appealing promise.
[00:09:04] Speaker A: So it's, it always feels like a little bit of unbundling of healthcare. And you see that in E commerce and retail a lot too. Right. You have the big Amazon, Walmart, the big E commerce stores, and then you've got these D2C brands that are starting to peel apart the big marketplaces. So do you. So it sounds like you see both of it in your work, both of those kind of models.
[00:09:29] Speaker B: Yeah. So right now, if you're, for those of you who are like deep into the subscription space, you know that bundling is a buzzword right now. Like bundle everything that your consumer needs and that'll keep them, that'll attract new people, it'll keep your longtime people. But many subscription businesses started with unbundling, saying you don't have to buy everything that you don't need. We're just going to do the one thing you care about really, really well. And then not only that, but we're going to rebundle in a way that makes sense for you. And I think a really great Example of this that a lot of people are familiar with is the automotive industry, right? Where it used to be. Pretty much you can buy a car, you can lease a car, you can get a cab, you can rent a car, right? Those are the four ways of bundling. Get me from here to there, but with a car, right? Get me from here to there with a car, right? And there's trade offs, right? If I own the car, right, I can use it anytime, but I also have to store it somewhere. I have to take care of it, right. I have great flexibility. I can customize the car, I can paint it a color I like. It can be an expression of who I am. I lose some of those benefits taking a taxi, but I have greater flexibility. But, but there's still gaps, right? Taxis aren't always where you need them. You know, the cars are sometimes kind of sketchy, blah, blah, blah. So then that leaves room for Uber, right? And, and Lyft. But it also leaves room which is an unbundling and a rebundling. You've got a different set of benefits which are better optimized around a particular sub segment of consumer. But you also see it with Volvo, Porsche, Cadillac. A lot of the car brands have come up with their own subscriptions, right, where you can subscribe. Like the Volvo subscription is more or less, it feels like a lease, but it's truly all bundled in with the same price every month. And it includes everything that you care about. The Porsche one is access to a fleet of cars. And what's interesting there is, they're saying, okay, there's a subset of people that have needs that include getting from here to there, but maybe other criteria are less or more important to them. How can I rethink that? The offering around a different promise and that's what, what kind of creates opportunity. Same thing in the, in the clothing space, right. I, I have to look professional. I do a lot of speaking. I go out and meet with clients. I don't like to shop, right. If, if I could, you know, back to this, take a pill. If I could take a pill and the clothing fairy would just go in my closet and get me exactly what I need and I'd pay a fixed price every month. I wouldn't care what the price is, honestly. Right. I'd be, I'd be so excited. And so companies like Nuuly, like Rent the Runway have to a lesser extent Stitch Fix, which does not want to be called a subscription business. So we're respecting that.
[00:12:11] Speaker A: Oh, interesting.
[00:12:12] Speaker B: They are solving that problem of I don't need the coolest, hippest clothes. I'm not shopping in that way. I want the clothes that are appropriate for me and I want to look a certain way and I want as little effort as possible to be involved in achieving that goal.
[00:12:26] Speaker A: It reminds me of an area that you and I both, I think, spend a lot of time in, which is customer success, which is really thinking about the outcome that you want, not the inputs to get the outcome right. And that doesn't matter. I mean, we tend to use those words, customer success in B2B SaaS a lot. Maybe not as much elsewhere yet, although it's catching on more and more. But what you're describing sounds like the perfect articulation of customer success for an individual consumer. Maybe it's consumer success. Give me the outcome, don't make me worry with all the inputs. Yeah, how does that relate? No, go ahead. Sorry.
[00:13:04] Speaker B: Yeah, I was going to say I totally agree with you about this is coming for consumer, this idea of optimizing for outcomes as opposed to inputs, which is kind of the heart I just created. I just actually just updated. I have a LinkedIn learning course on customer success and I created it seven years ago and we just redid it. And when I did it seven years ago, I was like, you probably haven't heard of this, it's a crazy thing called customer success. But some companies are creating this function in their organizations and now it's like, you probably know about customer success and you're excited to be part of it. So that's changed a lot. And I do think the next wave is for consumer companies to really focus on outcomes and to think about post sales, communication and support as being more of a profit center, less of a cost center if you want to be sort of mercenary about it, but really about. We always say the moment of transaction is the starting line, not the finish line in the membership economy. And so that means, you know, if I buy this blouse but I don't know how to wear it, what to match it with, how to keep it clean and fresh. Right. It doesn't matter how good a shirt it is and how stupid I am, I'm not getting the value I paid for. I'm not going to go back to that store or support that manufacturer again.
[00:14:21] Speaker A: Yeah, absolutely. There's so much that has to happen outside of the product. I think about that a lot, especially I think you mentioned something really interesting there, which is not to go too deep down the customer success rabbit hole, but it all ties together with products especially in the B2B SaaS world because what we're talking about is customer success at scale. When you're talking about consumer success, you have to do that at scale. You can't afford to pick up the phone and call each individual consumer who just bought an outfit and doesn't know how to wear it or match it. Right. Although I think Stitch Fix does some level of that maybe, or some of these companies do. But how do we scale these things? What mindset do have you seen work in product development engineering teams to really scale how we look at customer outcomes there as opposed to band aiding that with humans? This is an area that I'm particularly passionate about.
[00:15:20] Speaker B: Yeah, it's such an important area and I wish more companies thought about it like that. The way I advise, like when I'm working with a company on this, like a, you know, with a customer success team, the first people who identify the problem is usually the customer success team because they're actually having conversations with customers after they bought the product or after they signed the contract. So they see a problem, they solve it in a bespoke manual way, right. Then they do it a second time, a third time, a fourth time. Then they, what they need to do is there needs to be a system to raise that to the level of consciousness. And then there's a couple of things that happen first within the customer success team, right? The people that are working directly with, usually it's the high end customers recognize this issue and are solving it in a nice way. Somehow that gets passed over to, you know, a more sophisticated customer success team would have different segments of their market. Right. And if you're a valuable customer, you get dedicated service and if you're a small business, you might get a lighter touch. So you start to create like how do we give the lighter touch the same information and support that we're giving our bespoke clients, right. So you might say, well, we're going to send them emails, we're going to create templates, we're going to create how tos, right? So that's the second step. Communication. Marketing is cheap relative to direct communication. And then the third area, and you can even take that communication, which is cheap to marcom right before the moment of transaction. Because sometimes the problem is somebody buys a product or subscribes to a product expecting it to do something that it doesn't really do well or they're expecting it to be easy, right? Sign up for this weight loss program and you will immediately lose weight. And you're like, wait, nobody Told me that I was going to have to actually change my eating habits and my exercise patterns. That's way harder, you know. And so then you say, well, maybe the website homepage says it's not for everyone, it's really hard, but it is going to work if you're committed. Right. And then people self select. So starts with customer success team, expands to the low touch Customer success team expands to the marketing team who can start to improve the quality of the leads that they're bringing in. And then I think the last step, and probably the most expensive one besides customer success is product, which is you actually build it into the product. Right. First you build it in with messaging in the product, like, oh, if you're here, you probably are wondering about this. We don't do that yet. And then ultimately you update or upgrade the product itself so that it solves the problems that the customer success team identified.
[00:18:00] Speaker A: I love that framework Success team, low touch marketing type touch, then marketing into the top of the funnel and then product. I think what we're talking about here is like codifying best practices and making the product the best at helping the customer do what the customer success team first identified. All those steps in the past, and you said it's the most expensive, but once you figure out what those things are, it's also the most scalable from a profitability standpoint. Right? Say more.
[00:18:35] Speaker B: Yeah, and I think that the, the reason I said it's the most expensive is it's the hardest. If once you invest in product, it's like you're doing it. I always say, you know, marketing kind of works with. Marketing works with paper clips and, and chewing gum. Right. You can just send out a message, but once you code it in, once you build it out and you've sent it out, you've shipped it. Right. It's hard. It's much harder to change it. And I know that there's, you know, cases where, you know, you're using it live and you can make constant updates. And some companies are able to do that, but for many organizations, you know, that is. Right. That's the least malleable. So you just want to know what you're doing. And I think, you know, I spoke, I'm sure, you know, I spoke a few years ago at, I think it was at the Gainsight Pulse conference. And one of the things that we talked about, I think I did his talk and then I was also on a panel. We were talking about what would the world look like if customer success was closer to product. Oh, right. What would a world look like if customer success was part of the product team? And I know there's all kinds of issues around, should customer success be under pre sales or post sales? Should it be part of the sales organization or sort of part of the account management? Post sales, part of the organization. But you think about truly being customer centric, right? If you're truly customer centric, then the customer success team should be at the center. But at most companies, the product team is at the center.
Just an interesting, interesting thing to think about.
[00:20:04] Speaker A: Yeah, it really is. And you know, at the end of the day, when you think about an outcome, when you think about how your customer thinks about their outcome, they don't think about your departments, right? They don't think about the separation between product development, engineering and design, and customer success and implementation. Like they just want the problem solved. Right. They don't, they don't necessarily care. So I always say, I actually made a comment like this on LinkedIn today to somebody's post. The modern department structure of an organization is a disaster for the customer experience in most cases and for predictable revenue generation as well. Because people get hung up on their own metrics and they don't look at the big picture anymore. They don't collaborate.
[00:20:44] Speaker B: Yeah, yeah, that's so true.
[00:20:47] Speaker A: And once you do build something into the product to the gross margin on something that's built into the product, if you get it right to your point, it's not as malleable. You got to get it right. But once you do, your gross margin is 65, 75, 85% as opposed to what is your gross margin on a human interaction? Very low in theory.
[00:21:07] Speaker B: Right, Exactly. And you're, you're always, you're always trying to, you know, there's that, the acquisition side of the business, we're trying to bring in new customers. But the real magic in any kind of subscription business, right, is in retention. And you're just looking to plug up holes, right? And some of the holes can be plugged by bringing the right people in in the first place, but some of them can be plugged by, you know, getting rid of friction points that drive somebody to say, you know, this is too hard, or this isn't working well enough for me. There, there's a big gap here that I have to find a second solution for. And those are the kinds of things that make people leave. And, you know, I had a conversation with a client this morning and they were really disappointed with the numbers. They had a very big decline.
They're a pretty Seasonal business and a lot of customers canceled at the end of the summer. And I said to them, yeah, that's disappointing, I know, but the really important thing is that you guys make sure you understand at a kind of granular level. What are the reasons these different segments left, right. Some of them never planned to stay. They just joined for the summer. Some of them involuntary churn, which I know we'll get to in this conversation. And some of them because of a problem that happened during, you know, once they were onboarded. Right. And so like it's a failure to launch. It's a, you know, I went to use the product and it didn't work as promised. I've used it up and it's no longer valuable to me. Like some of those reasons are acceptable, some of them are unacceptable. And you got to pick the ones that are at that intersection of biggest impact, you know, kind of most scalable and most realistic to actually fix. Like, is this something that I can fix and is the impact worth the investment?
[00:22:50] Speaker A: Yeah, that's right. It's like a, there's a two by two matrix there that you can look at to say impact versus effort.
[00:22:57] Speaker B: Yeah.
[00:22:58] Speaker A: Because you know, you have to balance it. I think one of the things that I really like how you explain that, like do you constrain who you bring in to make sure they're the ideal customer for what you're, what you have today or do you incrementally. Ideally you do both, right? Incrementally fix the problems that cause churn in every segment that you have of your customer base. But nobody likes to constrain who they bring in as a customer, especially in B2B SaaS, especially right now.
[00:23:28] Speaker B: Okay, but here's the thing, here's the example, right? And I used this example before and if you've heard it from me, you can just cut me off if I walk into McDonald's dressed up in a gown with my husband in a tuxedo and I say, show me to your finest table. Money is no object. It's our 25th wedding anniversary, right. They are not going to scramble and run down the street and buy some caviar for me, right? They're going to say, hopefully if they're nice and customer centric, they're going to say, you know what? This is a fast food chain and if you want to celebrate your anniversary at a fast food chain, we are delighted to have you and we will celebrate you. And you know, we might even give you, you know, a happy meal at no charge. But, but you know, there is a little French bistro right down the road and that might be a better fit for you, right? And that does a bunch of things because if, if they said welcome, of course we serve special occasion anniversaries, right. I'm just going to be disappointed at every turn, right. I'd be like, these kids are running around, it's so noisy. The bathroom didn't have a candle, right. You know, I don't want a hamburger, I want a steak. And so when you let people in that you know, you can't perfectly serve, you're. You're doing a couple of things. One is there's a decent chance that they don't like it and they leave. And when they leave, they tell people that it's not good. Yeah. Two, if you struggle and struggle and struggle to make it work for them for that one outlier customer, which is what I see all the time in B2B, right? We got this outlier and usually it's because it's a very big company. Like I worked with a B2B company that was in the banking space, right. And in my opinion they were truly optimized for banks from like number 15 in size to number 200 in size. That was their sweet spot. But bank number two or bank number one, I don't remember where they were. But one of the really, really big banks came calling, came calling and they were like, we gotta do that. But that bank, what they wanted was, was so different than what banks 15 to 200 needed, right? Banks 15 to 200 were like, we'll just take an off the shelf solution for these problems that we have. Bank number one was like, no, no, no, we need a custom solution. We need our language and everything. We need you to adjust your training to fit our training schedule and approach. And suddenly like you're being sort of dragged by the tail into all these things that you don't do well. All of your resources are going to this one client and that is at the expense of the clients that you should be serving well. Right. And so it really, you get short term revenue. Right. That's great. And your board is probably really proud and excited that you got this big fish and you can put their logo front and center on the homepage, but it's going to create nothing but problems for the coming year.
[00:26:13] Speaker A: Maybe longer.
[00:26:14] Speaker B: Maybe longer. Fair enough.
[00:26:16] Speaker A: So. So as you just described, there is a, especially in B2B SaaS where you have lots of funding behind these companies is almost an intractable problem. Almost. Unless you have a Very strong CEO or executive team or a board who's willing to say, hey, look, we were willing to forego that because that's not our target market. I've been in this situation multiple times, one very notable time, and it is difficult to turn down that kind of revenue, that kind of opportunity. What do you have? Like, have you coached people on how to handle this situation before?
[00:26:55] Speaker B: Yeah. So, yes. And I've worked with a lot of B2B startup. I'm in Silicon Valley. There's a lot of these kinds of companies here. And, you know, first thing is before the company even starts, when you're talking to a founder, you say you got to set expectations with your board from the beginning. We're going to be really disciplined. This is our niche. We're going to focus on it. Is that okay with that? Me and then reminding them that means that sometimes there might be an opportunity to do a big custom project or work with a company outside of our area.
We are not going to change our strategy for a single opportunity. Is that okay? So that's the first thing. And then when it comes up, you can refer back to that. Right. And what is hard is when you haven't thought about it in advance, so you don't have a plan to respond, I think. And it's useful to have case studies and examples that you bring, like if you're the CRO or you're, you know, the head of customer success, and you're like, oh my God, I see this monster coming down the sales pike and customer success is not going to be able to handle this because we're not set up for it. We're going to need to dedicate one person or a team and they're going to have to get trained and it's going to be different. And that means we're pulling them, our best people, off of our bread and butter customers. The more vividly you can paint that picture, the better. But I think the bigger point is when you're being hired into an organization, ask them about it. Ask them how focused they are on a customer segment. And I know this is wisdom that lots of people have shared, which is if a company tells you that everybody could be their customer, they don't know who their customer is, and you should turn the other direction.
[00:28:35] Speaker A: Totally agree with that. Totally agree with that. I would even say setting expectations with the board. Maybe if you're the CEO, set expectations while you're fundraising. This is who we're focused on. Can you back me up? When the big fish come calling it's hard to do.
[00:28:52] Speaker B: Yeah, yeah, that's great. I mean, because you want to do it as early as you can. And back to the Netflix story, which I know is, you know, consumer, not, not B2B. But one thing that I think they did phenomenally well is that when they were raising money, when they went public and were talking to the public markets, they said, we know our customer, we have one offer. It's a two week free trial. That's the only offer we do. The reason we only do that is because our data is crystal clear. And so we can tell because nothing else changes. We can really do testing and learning very rapidly that a company that has a hundred different promotions can't do. And so that's part of our secret sauce. We're not going to change that. We're never, you know, like I remember when I was working at Netflix, we would have prospects that would come like I was doing B2B partnerships that would come and say, you know, we would like to offer, you know, a link for people to subscribe to your service. We'll cover the cost and we want you to give them a month long free trial instead of a two week free trial because we want it to be special. And Netflix said, no, no, we don't care if you're paying for the free trial. We won't do it because that leads to customers who aren't as good as the customers we're getting. We know that two week free trial works best. That's all we do. And for many, many years, they offered one thing, a two week free trial. And that was the only thing.
[00:30:13] Speaker A: That's amazing. You must have been working with Netflix when they were doing DVDs this then still. Is that accurate?
[00:30:19] Speaker B: Yeah. Oh yeah. I was working with them right at the time.
[00:30:21] Speaker A: Cool.
[00:30:22] Speaker B: So my first meetings with them since 2000, one of the things that they were really excited about at that moment was we have just established a national footprint, we're able to do TV advertising. So the way they started was they were on both coasts, right? The United States, West Coast, east coast, and that was because they had to have a distribution center that could deliver on their promise of three day turnaround. Right. So for those of you who don't remember three DVDs out at a time, right? What you do is you'd make a list of all the movies you wanted to watch on the Netflix app and then they'd send you the first three that they had in stock to your home in these cool little envelopes. And then as you Returned them. If you put one in the mail on a Tuesday, they would get you one by a Friday, the new one. So you'd always have three out. And so they could only market in places where they were confident that they could do the three day free turnaround. So I think the last places were like Alaska, Hawaii, PO Boxes for the military. Right. Where your address is somewhere in Texas, but you're actually, you know, in Guam. Deployed.
[00:31:31] Speaker A: Right.
[00:31:31] Speaker B: They couldn't get it. They couldn't physically get it. Three day shipping to Guam, even though that was officially, you know, a U.S. postal Service. So, you know, that kind of stuff required tremendous discipline. And that was very early. I mean, the other interesting thing about that story was they were the small player, right? They were the upstart. Blockbuster was there when I was working with them. Walmart tried to enter the subscription DVD space and it seemed like it was a much better option because with Netflix you had to ship and you had to wait for it to ship back. But Walmart was within 10 miles of like, you know, there's a Walmart within 10 miles of 90% of Americans. Right. So you could just drop it off there, pick it up there.
[00:32:12] Speaker A: Exactly, that's right. I was actually just listening to a book. I was going to look at what it's called right now. It's about the Amazon and Walmart. It's called Winter Sells All. Have you heard about this book?
I think Netflix ended up buying that business from Walmart.
[00:32:26] Speaker B: Yeah, they almost handed it over. Walmart pretty much went to them and said, we'd like you to take it over.
[00:32:31] Speaker A: They couldn't figure out how to do it?
[00:32:33] Speaker B: No.
[00:32:33] Speaker A: So interesting. I want to get back to one other thing you were, you were saying earlier, which I think is a really, really important thing that I'd like our listeners of this podcast to really think about deeply. You're talking about data, you're talking about insights, really understanding and knowing the truth, whether it's churn or whether it's that two week trial period that we know works best because we have data to prove it. I see a lot in earlier stage companies, a lot of knee jerk assumptions about what's working and what's not. Just because a data point pops up over here or something happens over here that sort of, you can almost see it play out in real time. It's psychology playing out in real time. Confirmation bias. I want this to be true. I saw one data point over here. It's true. Right? The thing I want to happen is indeed happening. And I know that without this shadow of a doubt now. So what role does truth seeking play? This is such a loaded question, but what role does truth seeking play in running a good business?
[00:33:34] Speaker B: Yeah, I don't think truth matters. I'm just kidding.
Truth, it doesn't play a role. It's all about the lies.
Don't quite imagine.
So I think a couple of things. When you're starting out right, there is a lot to be said for going with your instinct, right? Especially we know founders, they're like, I just know that this is the feature that everybody wants. I know that this, you know, I've worked in this space for a long time. I know this is what our customers were asking for. I'm confident enough to put my own career on the line, to borrow money from family and friends and start and that. I admire that a tremendous amount. And, you know, intuition, they call it intuition, but it's really based on a lot of data that you've internalized, but what ends up happening after that. And people always, you know, talk about, you know, better than your customers, right? Like they say, you know, Steve Jobs, you know, the customers were saying they wanted this. They didn't even know they wanted an ipod, right? They didn't even know what that was. And he knew. But I do think that when you're trying to make a change.
So like, back to this example, this company I was working with this morning, right? They want to change what they offer for free as a result of some behavior that they've seen on their website, right? People coming and leaving before they get to the page that talks about the product features, right? And so we talked about. He said, what is the hypothesis that's driving it? And he said, one, people think it's too good to be true, and so we don't seem credible. And two, it's taking too long. Our sales cycle is too long. And we think that if we offered a free trial, it would shorten our sales cycle, right? So I'm like, okay, those are two hypotheses. We're going to write these down and we're going to say, okay, what's the test that would tell us if it's true? Well, too good to be true. So we're going to do a survey or we're going to do qualitative interviews, and we're going to ask people why they came to the site and didn't call, you know, talk to a salesperson, you know, set up a meeting, right? Is it because it was too good to be true and you didn't Even want to try, right? Let's say 10% did that. Well, if we can get that number 10 down to 5%, this is success, right? We know that it's taking five or six months of them being on the website before they call and actually schedule an appointment. Can we lower that to three months? Right. And so then you start to learn. And then to codify that learning, one, like kind of say, okay, we've. We've learned this. And that way next summer, when somebody else comes up with the same idea to have a free trial or whatever the case may be, lower the price, offer a discount at the end of the year. Cause we know there's end of the year money. You say, you know what? We tried that. Here's how we tried it. Here's the test we did, and we're confident in our answer. I think that's what's hard. And I think of the learning and the leverage learning, I think, is when you're a person in power and you're like, if I gave you money and I said, okay, here's money to go expand, can you spend it all next month? You'd probably say, no, because I want to do some tests first, and I want to be confident before I spend. Right. But then there's leverage, which is I am 100% confident that I know how to spend the money if my boss would only give it to me, but I don't have any leverage to get them to give me the money. Right. And leverage might be, you know, I'm the CEO's daughter, leverage might be hopefully better. I have evidence that my approach has worked in a small experiment that my boss or my leadership team or my board sees as credible. So you need leverage, right? What's the leverage? What is it that it would take? So if I say to you I want $10 million to go build this new set of features for my product, because I know there's this customer segment that wants it, right? If I ask you that, and you're the CEO, you're going to say, what evidence do you have? Like, is it existing customers that are going to buy it? Is it new customers that are not interested because we lack these features? Who is it and what evidence do you have? And once I get that, then I have the leverage to actually come back to you and make a compelling case on why I deserve that money more than my colleagues over in customer success or marketing or sales.
[00:37:36] Speaker A: Yeah, exactly. Right. Because everybody thinks they have a great idea for how to drive the business forward. What you just described is something we all learned in grade school called the scientific method.
[00:37:47] Speaker B: Right.
[00:37:48] Speaker A: Some people are wired to do that naturally. Probably more your engineers, maybe your product managers. Other people are not. But that strategy applies no matter what part of the business you're in, Especially if you're in marketing, especially if you're in customer success and you believe that there's an opportunity to drive retention up. I see it all the time. Like, we think throwing body, let's go hire some more customer success people. Or some more marketing people will drive retention. We'll drive leads. Well, okay, but like, what is the specific way you're going to do that? What do you think? And to your point, what data do you have? What evidence?
[00:38:24] Speaker B: And sales, too. I want to just say that it's hard with sales because the way I think about it, sales is compensated for what they do today. Right. They don't care at all about, is this going to be a good client in four years. Like, I probably won't be here in four years.
[00:38:41] Speaker A: Right, right.
[00:38:42] Speaker B: You know, and I'm paid very, very clearly. I'm paid on what I do this quarter. Right. So it doesn't matter if it's a great investment in a relationship for next year. Right. If I'm in marketing, I'm looking further out into the future. If I'm engineering. Right. I have. I'm somewhere in between. But each of these groups has their own kind of rhythm and their own cadence. And so that's just what you're gonna expect. Salespeople are gonna say, I need, you know, I think that marketing should drop what they're doing right now and, and create a really awesome presentation for this specific customer that does not fit in our target market but has a lot of money and is ready to buy right now. Right. This happens all the time. Right. Sales comes and they say, you know, with that banking example, number one bank in the country, I got a meeting with them on Tuesday. I need everybody to drop what they're doing and create a new deck. Right. And by the way, what's going to come next time is I need everybody in product to drop what they're doing and create a new set of functionality for this, you know, big outlier. And so everybody, they do what they're compensated for. People do what, you know, people, what. What's measured is what matters. People do what they're paid to do. And so, you know, I think looking at the, the leaders, the CEOs, and the entrepreneurs that are listening to this, make sure your team is aligned in terms of their Metrics and their incentives. It's good to have, you know, just like in a, in a, in a court of law, right. You want to have people where your only job is represent the accused or where your only job is prosecute. Not everybody is supposed to be the judge, right? You know, we do want people. You know, salespeople make the best case for short term revenue. That's their job. Engineers make the best case for long term investment in infrastructure. Every engineer wants to do the infrastructure project, right?
[00:40:29] Speaker A: That's right.
[00:40:29] Speaker B: To make it easier for the future. Right. And you're, you're in sales and you're like, but I can't sell, sell infrastructure.
[00:40:35] Speaker A: That's right. And so that's where leadership comes in. Right. I mean that, that is what the executive team's role is. That's what the CEO's role is, depending on the size of the company. Like, we have to always remember. And I think it's probably safe to say, I know in B2B SaaS, which is where I've spent most of my time, It's a people business. 75, 80% of the cost of a SaaS company is the people. Right? It's a people business, not a technology business. And I think the same is true on the B2C consumer services side as well. I know we're running low on time here. One more line of thinking. We'll run through it real quickly here. You did a Great post on LinkedIn just today. You talked about the biggest trends to look out for. We've talked about bundling, we've talked about retention, we talked a little bit about acquisition. But talk to me about this notion of community in a subscription business. What does it mean? I know you covered it in your book, by the way. Say the name of your book so people, so people know it can go get it.
[00:41:32] Speaker B: Yeah. So I've written two books. I wrote the Membership Economy, which is the one, that was my £1 business card. And I wrote the Forever Transaction, which is much more of a blueprint for, for companies that are trying to build these principles into the fabric of their business. And I try to post almost every day on LinkedIn about these kinds of questions around how do you build a lasting business? How do you maximize recurring revenue? And I think when it comes to community, not every business needs community, but community can be a powerful sticky feature. Think of it that way, as a feature of your overall offering when you have something that's educational. People come for the course, but they stay to talk to other people who are on that learning journey. This is true of everybody from YPO Young Presidents Organization to, you know, the Blanchard companies, the Ken Blanchard companies, been a client or ddi. These are, you know, companies that make great leadership training. You go for the training, but then you want to work with people who have also been trained. So what I think the problem is with community in subscriptions is that people, they understand the power of it if it's a good community, but they underestimate the investment in building good community. So to build a good community, it's like growing a tree, right? Once the tree is big, you barely pay attention to it and the birds and the rain and that just takes care of the tree. But in the beginning, you protect it from the squirrels and you water it every day and you feed it all these nutritional things. And so that's what you have to do with your community, meaning you have to have moderators, you have to populate it with starter content. You have to go behind the scenes and talk to people that are members in your community and say, hey, would you please post that? And then to the other person, hey, can you please comment on the thing that the other guy just posted to start to build the community? If you have a live event, right, you might have to let all of your existing customers come for free so that a few people are paying, even though officially it is a paid event, so that there's somebody there when they arrive at the party. So I guess community is something that a lot of organizations are using because it is the stickiest of features and once you have it built, it's almost self sustaining. But don't underestimate the investment that you have to make for it to work.
[00:43:53] Speaker A: Well, I just realized where we first met is when I was with a community software company. I'm almost sure of it now. This is where we first crossed paths. But beautiful insights and so much here for people to take. I mean, I think that the biggest thing is, one of the bigger things that we talked about was just this whole idea of hypothesis. What's your test to validate? And then having that evidence to go make your case, to make an investment in a certain outcome that you're looking for. So I think people are getting a lot out of this discussion. Robby, thank you for taking the time to do it. I know it took us a while to get this set up. Where can people find you? I know obviously LinkedIn. You should follow Robby on LinkedIn if you don't. But where else would it make sense for them to connect with you?
[00:44:39] Speaker B: I'm easy to find. RobbieKilman Baxter.com is where I am. And you know, you can learn about my books there. You can learn about my consulting, my coaching. And on LinkedIn I post every day about almost always about subscription membership, loyalty, retention, loyalty, you know, ethics, all things related to how you build long and trusted relationship.
[00:45:03] Speaker A: Awesome.
