Summary: Ecommerce Evolved - Chapter 2: Recurring Income Core (3)
Summary: Ecommerce Evolved - Chapter 2: Recurring Income Core
This post is the 3rd of a series of posts I'm writing to summarize the book Ecommerce Evolved by Tanner Larsson, available on Amazon:
https://www.amazon.com/Ecommerce-Evo...9352160&sr=8-1
Here are links to the other posts:
Introduction
Chapter 1: Funnel-Based Ecommerce
Chapter 2: Recurring Income Core (this post)
Chapter 3: Think Before You Sell
Chapter 4: Conversion Tricks, Sales Boosts, and Profit Maximizers
(Disclaimer: These are my personal notes so I've paraphrased quite heavily in some places. If you like what you read, please buy the book to get the complete information in its original glory.)
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Chapter 2: Recurring Income Core (RIC)
This should be the focal point of your business. Your company will stabilize, cash flow will improve, and profits will compound month after month.
The author has 3 main ecom brands all 100% focused on recurring income. All sales of physical products ultimately lead to getting people to join subscription programs. 65% of profits comes from recurring income.
There IS a continuity plan that will work for your business, no matter what kind of product you sell.
Types of RICs:
Consumable Subscriptions -> Products like toilet paper, diapers, food, supplements - after a customer makes first purchase, offer to deliver more every month automatically for cheaper pricing.
Subscription Box -> A collection of physical products shipped to customers on a regular basis. Examples: Wine/Cheese of the month (anything ending with "of the month"); "BarkBox" = dog treat + toy + other dog products in a box shipped monthly; "Birchbox" = deluxe markeup and beauty samples for $10/month, and if a customer likes one of the samples they get a discount on the full-sized item.
Digital -> For example membership sites offering access to videos, written content, or community forum. Needs to be relevant to your niche.
Newsletters (Physical/Digital) -> Information/news on a passionate niche, billed monthly/quarterly. Can market your products in them as well.
Buyer's Clubs -> Elite customer level someone can join for a monthly/quarterly/annual fee in exchange for free shipping or flat-rate discount, e.g. Amazon Prime.
Associations -> e.g. If you sell products to pit bull owners, you could create the American Pit Bull Owners Association. Charge membership fee for perks such as access to private forum, periodic newsletter, and membership card.
Micro Continuity -> Set at <$10/month. $4.95 works well. Can be a digital newsletter or small subscription box. Encourages impulse purchases and most customers won't bother to cancel such a small charge.
Combined Recurring Income Cores -> Combinations of the above types. e.g. Buyer's club + subscription box: A customer that joins your subscription box also gets free shipping or 10% discount on every order. e.g. Association + newsletter for higher fee.
3 Styles of RICs:
1)Subscription -> Consumable auto-ship programs, subscription boxes, and newsletters. Provides revenue, but does nothing to foster brand loyalty or build a loyal following.
2)Membership -> Associations, buyer's clubs, digital memberships. Through the content you deliver, you are providing personality, intrinsic value, and a sense of belonging that builds your brand and makes it harder for members to cancel. Has higher retention rate than subscriptions.
3)Hybrid -> Mix the 2 styles above to create more money and loyal customers while generating longer retention rates and more satisfied customers, e.g. by mixing physical subscriptions with digital memberships - subscription box + monthly newsletter + access to online community + buyer's club.
Frequencies for RICs:
Monthly, quarterly and annual billing frequencies are most common. Monthly billing provides the most predictable cash flow so is recommend. If you offer options of larger time increments (e.g. annual), make sure it's cheaper than the combined monthly total.
Implementing RICs:
Initial conversion rate may not be great - anywhere above 10% would be pretty good - but the recurring charges will add up and compound every single month. Optimizing can eventually get you to 30% - optimizing beyond that would likely result in diminishing returns.
Technology Required by RICs:
Most of the major ecom platforms have either built-in functionalities or add-on apps available to handle recurring billing, trial offers, upgrades, cancellations, pausing/restarting, and fulfillment management.
2 Way to Sell Your RICs:
1)Upsells -> Should be part of your default upsell funnel, and should also be built into your stand-alone sales funnels as an upsell. No matter what product customers purchase, the 1st or 2nd upsell should be your RIC.
2)Trials -> A discount trial lowers the cost of the 1st month so the customer can test the waters before committing (e.g. $1 trial for 1st month). Can include the trial offer in your store as a product, or send an autoresponder email promo campaign stating you're running a special.
Multiple Continuity Streams:
Create one RIC, and then if more levels with different price points make sense for your business, add them. E.g. 1: Subscription boxes of different sizes that let customers spend more money to get more stuff. E.g. 2: A $29/month RIC + $3.95/month micro continuity association - try to get customers to move from one to both.
RIC Retention Management:
Even a 5% increase in retention rate can lead to 25-95% increase in profits. Use the 10x rule: Always provide 10 times the perceived (NOT actual) value of what you charge. Hybrid RICs that combine physical products with information (newsletter, buyer's club, whatever) will increase perceived value without increasing actual spend by much.
3 Retention Metrics for RICs:
1)Churn Rate -> % of customers that cancel their subscriptions in a given time period.
2)Customer Count Retention -> Number of customers that still remain in the subscription program after a certain amount of time, e.g. over the past year xxx customers enrolled and xx are still subscribed after one year.
3)Average Subscription Revenue Per Customer -> How much on average your customer spends before they cancel their subscription. Tells you how much money you can afford to spend to keep customers and still be profitable.
RIC Drop-Off Points:
A billing period in your RIC where an abnormally high number of people cancel.
To determine drop-off points, make a chart/graph that depicts the churn rate for customers at each billing point (e.g. each month for monthly billing). Calculate the average churn rate (for monthly billing, add all churn rates and divide by 12) - any month with a churn rate higher than this average constitutes a drop-off point.
Figure out WHY customers are dropping off at those points and fix them!
To find out the WHY, call up customers or use online surveys.
Some ways to fix drop-offs: Use a retention booster such as a bonus or incentive. E.g. If a drop-off point is month 3, tell customers about the booster towards the end of month 2, and deliver it after they are charged in month 3. If it's a subscription of products, swap out the product for that month for another product. Send a thank you email before the drop-off point to make members feel appreciated and offer them a gift. Offer an upgrade to annual payment at a discount. For digital memberships, offer a lifetime upgrade at one-off pricing.
Make RIC Cancellations Simple but Not Painless:
Don't offer a one-click cancel link - make them call support. The extra effort will deter customers from cancelling, and you can ask them why and get a chance to fix things or even offer them an incentive for them to stay.
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Next: Chapter 3: Think Before You Sell
This is GOLD, thanks!
gold post. suprised so little comment
is there any digital products website or network that mainly focus on recurring income affilaite products we can find to promote?
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