The Automatic Customer: Creating a Subscription Business in Any Industry - PCC - ebook
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The lifeblood of your business is repeat customers. But customers can be fickle, markets shift, and competitors are ruthless. So how do you ensure a steady flow of repeat business? The secret—no matter what industry you’re in—is finding and keeping automatic customers. These days virtually anything you need can be purchased through a subscription, with more convenience than ever before. Far beyond Spotify, Netflix, and New York Times subscriptions, you can sign up for weekly or monthly supplies of everything from groceries (AmazonFresh) to cosmetics (Birchbox) to razor blades (Dollar Shave Club). According to John Warrillow, this emerging subscription economy offers huge opportunities to companies that know how to turn customers into subscribers. Automatic customers are the key to increasing cash flow, igniting growth, and boosting the value of your company. Consider Whatsapp, the internet-based messaging service that was purchased by Facebook for $19 billion. While other services bombarded users with invasive ads in order to fund a free messaging platform, Whatsapp offered a refreshingly private tool on a subscription platform, charging just $1 per year. Their business model enabled the kind of service that customers wanted and ensured automatic customers for years to come. As Warrillow shows, subscriptions aren’t limited to technology or media businesses. Companies in nearly any industry, from start-ups to the Fortune 500, from home contractors to florists, can build subscriptions into their business. Warrillow provides the essential blueprint for winning automatic customers with one of the nine subscription business models, including: The Membership Website Model: Companies like The Wood Whisperer Guild, ContractorSelling.com, and DanceStudioOwner.com offer access to highly specialized, high quality information, recognizing that people will pay for good content. This model can work for any business with a tightly defined niche market and insider information. The Simplifier Model: Companies like Mosquito Squad (pest control) and Hassle Free Homes (home maintenance) take a recurring task off your to-do list. Any business serving busy consumers can adopt this model not only to create a recurring revenue stream, but also to take advantage of the opportunity to cross-sell or bundle their services. The Surprise Box Model: Companies like BarkBox (dog treats) and Standard Cocoa (craft chocolate) send their subscribers curated packages of goodies each month. If you can handle the logistics of shipping, giving customers joy in something new can translate to sales on your larger e-commerce site. This book also shows you how to master the psychology of selling subscriptions and how to reduce churn and provides a road map for the essential statistics you need to measure the health of your subscription business. Whether you want to transform your entire business into a recurring revenue engine or just pick up an extra 5 percent of sales growth, The Automatic Customer will be your secret weapon.

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Table of Contents

Part 0: Introduction

Part 1: The advantages of automatic customers

Part 2: The nine subscription business models

Biz Models 1 Membership website

Biz Models 2 All-you-can-eat library

Biz Models 3 Private club

Biz Models 4 Front-of-the-line

Biz Models 5 Consumables

Biz Models 6 Surprise box

Biz Models 7 Simplifier

Biz Models 8 Network

Biz Models 9 Peace-of-mind

Part 3: How to build your subscription business

Step 1 Know your maths

Step 2 Manage for cash flow

Step 3 Understand the psychology

Step 4 Scale up intelligently

Landmarks

Table of Contents

Cover

Part 0

Introduction

The more recurring revenue you can build into your business, the more your business is worth. If you can develop your business model so buying from you becomes automatic – so you bring in sales without having to resell the customer every month – you're in a much stronger position.

That's why Amazon (Amazon Prime and Kindle Unlimited), Apple (Joint Venture and iTunes) and pretty much every promising Silicon Valley startup which launches today is hard at work developing and offering subscription-based products and services. Subscribers are better than customers and when you have subscribers, you can project your future revenues with a reasonable degree of certainty.

If you're smart, you'll find a way to add a subscription offering to what you already offer your customers.

Key Thoughts
"Whether you like it or not, you are now competing in the new subscription economy, and it's up to you to decide if you're playing defense or offense. Are you willing to watch your business be cannibalized by someone else's subscription business? Or are you ready to win some automatic customers of your own?" — John Warrillow

"The biggest factor in driving up the sellability of your company is the degree to which your company can run without you, the owner. That's a head scratcher for a lot of owners who are the best salespeople in their business. The secret is to build recurring revenue that brings in sales without having to resell the customer each month. Recurring revenue makes your business a lot more valuable and less stressful to run." — John Warrillow

Part 1

The advantages of automatic customers

Big companies like Amazon and Apple are busy transforming themselves into subscription businesses because they understand that subscribers are better than customers. Research shows quite definitively when people invest in a subscription, they're motivated to buy more to "get their money's worth." That's a great dynamic to have working in your favor.

Subscription based business models are currently undergoing a major renaissance thanks to four factors:

1The current generation of consumers value access more than assets. Thanks to their mobile, tech savvy lifestyles, they would rather rent than be burdened by ownership.

2The more reliable Internet access has become, the more jobs we have become willing to outsource to the Cloud. We do more online than ever before.

3More businesses sell direct to customers online than ever before which gives them more data about what customers really want. That data has become a valuable asset in and of itself.

4The cost of merchandising products digitally today is so low companies can carry products which appeal to only a small sliver of customers. That allows customers to express their individuality – which they do with a subscription.

Key Thoughts
"Subscriptions are the best damn business model in the world … it's got great predictability for planning, which helps you as an entrepreneur sleep at night." — Mike McDerment, CEO, FreshBooks.com

"Virtually every business – from a start-up to a Fortune 500 company, from a home contractor to a manufacturer – can create at least some recurring revenue if it is willing to jettison the old way of doing things to pioneer a new business model." — John Warrillow