How to Add Monthly Recurring Revenue to Your Business with Subscriptions with Matthew Holman

Welcome back, super stoked that you're tuning into this week's episode. And I cannot wait to dive into today's topic because we're talking about what I consider to be the holy grail in business. And that's the ability to create monthly recurring revenue. Now, if you're riding that roller coaster, emotional roller coaster of where's my next client coming from, will be able to generate enough sales next month to pay the bills to live to be comfortable, then you're going to want to listen to this episode because our guest Matthew Holman is going to share with you how to create that monthly recurring revenue more specifically with a subscription model. Matthew Holman is a marketer technologists that loves e commerce. He works directly with brands to unlock the power of subscriptions and their business. And he gives some really practical tips on how to do that and some really cool ideas of businesses that he's worked with and how they've integrated that into their business. So without further ado, please welcome Matthew to the show.

Kathryn Thompson  00:02

Hey, hey, I am super excited to have Matthew on the show today to talk all things, subscriptions, which I know lots of businesses are looking to integrate into their business. So without further ado, I'm just gonna turn it over to you. So you can share with our listeners who you are and what you do.

00:17

Absolutely, yeah. So my name is Matthew Holman, I run growth at a company called cube pilot, which is a subscription software program. But as part of that a lot of what I do is relates to research and content creation, and education. We work with our merchants directly, as well as it's really just about anybody from a content perspective on helping people understand what what's moving the needle from a revenue perspective, and from a growth perspective for subscription brands.

Kathryn Thompson  00:45

So cool. And when you talk about subscription brands, are there certain types of businesses that are better fit for subscription versus others?

00:57

Yes, and no, I think it's a really interesting idea, like so we work primarily with E commerce companies that are selling product online that are shipping a physical goods. So like something's coming in the mail, so to speak. However, I mean, it's part of like what we do with the subscription prescription content, we do go broader than that. And I think it's an interesting question, because a lot of brands are trying to face they see this recurring revenue opportunity, right, which is predictable. Finance likes it, you can borrow against it, it's really a great thing. So when when you ask like what's better than others, there are some obvious ones like, again, like something that's being used or consumed regularly. But I think they're seeing some interesting innovation around even just digital subscriptions, or service based subscriptions, where, you know, you say, with a video content creation service, you can subscribe for $1,000 a month and get 30 videos, and it doesn't matter what how many, you know, you just pick what you want to get. So there's a lot of opportunity there. And I think it comes down to like, trying to understand what people want and what they're willing to pay for, which is just a broad answer. But it's

Kathryn Thompson  02:00

kind of cool. Yeah, and I think you touched on that with the recurring revenue, right? People want that predictability, that consistent revenue, it helps with financing, it just helps with like, ease of mind knowing what's coming in every month, or at least being able to predict that cash flow coming in. So in terms of getting like started with, like, how do you launch a subscription, then?

02:27

Yeah, I think we kind of like building on that question from but I think if you're if you already have a compelling case, or argument for that, like customers are at that. And so it seems pretty obvious, then it's sometimes simpler to figure out how to offer that if you're wondering whether you should do it or not, I would say you should just kind of come back to trying to ask existing customers or potential buyers, what type of services they're wanting, what types of problems are seeing, it's like a very, and kind of coming up with an MVP, I think a really common mistake that we see is that people get too complicated or too fancy, you know, they want like this, this this thing to happen in month two, and then the different thing happened month three, and then by the time months, six happens, they're like, and you're gonna build an app and all this stuff. And so really just think about the easiest way you can kind of launch that if you're selling on Shopify, or if you're doing e commerce stuff. There's lots of simple apps or add ons that make it really easy to kind of turn that on to get started with that. So I would look for some of the simplest ways to offer your basic value set. And like what, what you want to offer, right? If it's just you want something to be able to show up on a monthly basis. You know, that's there's a little bit of planning and configuring. But but but think about it like that. And then the thing I would always say is to not forget is is data collection. So regardless of going through, you're collecting reasons why people are buying and why people and then the reasons why people are canceling, because that's going to give you a lot of really useful insight to go kind of like next level with it.

Kathryn Thompson  03:55

Yeah. And I wanted to dive into that when it comes to like retention versus like that churn rate or people like canceling. So is there like, a period of time, like, I've heard some statistics like, you know, try to keep people on for like three months, six months, 12 months, you know, selling packages? Like, is there a strategy there for keeping people retained or keeping, like people from unsubscribing? Basically, like, is there a period of time or anything like that?

04:26

Every little bit different and that's kind of where it gets down to is like, you know, if your buddy's running a subscription company and their rates like their typical drop off points, like month five, you go into thinking you're going in month five, usually month seven, it could be month three. So it really comes down to like first is understanding your own data, understanding what's happening. And so a really common statistic is an average like lifecycle of a subscriber how long they're average on but averages are tough because you'll have a core around for a long time. Just launch it having an average subscription life if you've been inactive for two months. It doesn't do you any good. All right, so you want to start just putting some basic offers in place, if people are canceling or they're leaving, you want to be asking I and then seeing if you can make a simple offer to keep them around, around. And then as time goes on, you're gonna building a data set on how people are going. And what ends up happening is, most brands start to see that there's like a, there's a common drop off point, or there's a point, they know, if they get you to this point, you're going to be around for a long time on average, right. So like, you know, a brand I was working with the other day, it's like, they know if they can get somebody to a month for they, they have a really solid group after that their churn from month four to five to six, seven is really, really slight as compared to months, one, two, and three. So they're taking actions to try to motivate people to get to that. But it's a really common technique, people usually start with our discounts or gifts. And that's good thing to test with. But really, you want to understand the user behavior behind what's happening. And so that's why that data collection is so important is and just as a quick example, like a food company, hot dogs, they're just this great brand, they donate food to shelter pets, right? Yeah. And they started doing this data collection. And they found, you know, a lot of really common reason similar to a lot of subscriptions. People cancel, they have too much product. Yeah, well, the reason why people had too much product that was really, really critical to understand it wasn't because they just, you know, it was because they weren't sure how much to order, because people have different dogs is that consume a difference. So they went back to their product? Yes. So they went back to their product page and change their product page. So it was easier to understand what to order and how much store based on your size of dog. And that helped their conversion and their retention, their retention just changed. Consider that so so you want that's why that is so important is if you're selling CBD or selling just even a server early, you want to know why P canceling. It's like, oh, well, I didn't need this anymore. Well, why didn't you need it anymore? Oh, well, I was doing this other thing? Well, well, now if you're doing that other thing, maybe the month three, I start offering the other thing, right? And so that's how you kind of want to be approaching the mentalities understanding what's happening. And then see if you can fix that with vacation or messaging, that kind of stuff.

Kathryn Thompson  07:13

Cool. And what a cool example, right is because, you know, you could write it off as old people just cancelled, and then don't want it anymore, or whatever. But it's a really easy, quick, simple tweak for them to make right is like explaining it better for the customer of like, what actually to order for their dog, for example. So they don't have a ton of leftover product that they're not able able to use. So in terms of your software, what does your software actually do?

07:43

Yeah, so we make it really easy to add the Subscribe and Save option on your website. And then, you know, we're adding a portal where people can come in and manage that. And then there's a lot of like data and plot, like, as a platform, we're managing all these change. So for us, we're really specifically as like a differentiator, we really, really care about delivery outcomes. And so, you know, if somebody wants to change, they're getting one package versus two pack or one small box versus a big box that changes shipping. And yeah, most shipping ports subscription software doesn't care about those, it's fairly static, or most businesses are fairly static, but we're seeing a future where people want more and more control. So we're giving our merchants have are able to offer their customers flexibility to do whatever they want with subscription and we make all that stuff happen really, really easily and seamless with their back pocket upwards.

Kathryn Thompson  08:33

So is that then like a plugin for like, like yes for Shopify or and so what Where did where can you integrate this on like any website? Or is it just through like Shopify

08:46

or in commerce and yeah WooCommerce Shopify you know, we'll have Salesforce big commerce soon but most most platforms will have some it's just a question of you either have the option of you feel like there's sometimes it's too few up big big commerce is a couple of things and Salesforce have a couple options Shopify has a ton and and so if you're evaluating stop valuing software in Shopify, I always recommend you do you need to start with and your your kind of basic needs, like what do you need it to do? You get caught up in too many of the bells whistles until you know more about what you're trying to make happen because different platforms will have different differentiators. Anyway,

Kathryn Thompson  09:28

yeah. Okay. And then in terms of like, you know, again, I mean, mostly ecommerce is where you're kind of focused, but we do see in the service space now people are like you said, like the videos right to being able to get X amount of videos for X dollars per month or whatnot. If somebody was interested at like assessing their business, I know that consumables is a, an indicator, right? Like whether it's vitamins or CBD or dog food or good food or whatever, like something consumable that we know we're going to repeat it But how can someone really assess whether or not their business is a good fit for subscription?

10:08

Yeah, I think it definitely comes down to kind of like testing and also doing some interviews. So a really good example is a friend of mine does podcast consulting. And so he was he was we were chatting about this just the other day. And he was saying, like, you know, I'm selling these podcast packages where I consult and help people launch a podcast. You know, could I offer that on a subscription? And so the question is, well, what is the reason why people are coming to you? And maybe the reason why they're not quite buying the full package? Is there a service? Or is there a problem that they have, that you could offer on a subscription? For example, if you have a lot of people who are DIY errs on the podcast, but maybe just they just have question occasionally, right? So just the idea that they can maybe slack you whenever they want, or with a question, could you charge 20 bucks a month for that 100 bucks a month for that, instead of charging a three or four or $5,000 package? I'm doing it myself, but I really want to know, I could just ask you for some help occasionally, and I don't want to pay you $150 an hour every time we do a call. So can I just pay you $150 a month and then I get an f3 whenever I want. So it's that's that's the kind of that idea of like, start if you start to ask, what other problems are they having? What is the different like, what am I missing from a conversion standpoint? Am I not getting somebody because they don't want to buy this, but they'd rather have this. So if you can start to ask those kind of questions and think it's so some really interesting ones, what I'm seeing is people changing up how they're offering consulting, Apple, changing how they're offering design time. So instead of necessarily, I'm paying you per project, I'm paying you a reduced rate for a guaranteed minimum number of projects is a typical subscription. Now you're saying like with the video creation or content creation. And so I think just think about whether you can make that a little bit more dynamic. And again, the goal with that is that you're going to capture more revenue without having to do a lot more work from your existing marketing channels. Because you're missing me, maybe or a potential like revenue opportunity that.

Kathryn Thompson  12:11

Yeah, and I think that, you know, we see this drive now one, I think for like, it's not necessarily passive income, but it's not like that recurring income. And it's not like you're recreating the wheel, you're just taking a bit of your wheel, and maybe refining it to meet that subscription. Is there any other cool subscription stuff, like, you know, I'd love for our listeners to hear like just more ideas of like, cool subscription companies that you work with, like just different ideas of things that have come across your plate that you're like, this is super novel.

12:42

Yeah. One of the things that's happening a lot more that I think is really, really cool is is personalization. And so, like there, you know, a company that I love is called herb Smith, and it's another pet food company, and will ask you questions about your dogs and then give you like, recommended products, and like health supplements and treats and, and all these things. I think some others are, like, you know, innovating around, if you think about the substance, like say I go to buy like a supplements is another one I really like. If you think about I'm going to buy protein powder, because I'm working out right. But it's also because I'm trying to make a game. I'm trying to do something personally. So the idea that you could be have more engagement, whether that's an app or a community where you're learning more about my goals, and I'm checking in with the brand, because there's some trust there. Yeah. So like, say if I'm in a bulk up phase, and I'm buying this certain sets of products, and then I reach a plateau, and I'm like, You know what, now I want to tone up and I want different products. I think what's really cool is that there's more brands that are trying to engage with that and get more information related. So then then they can they can offer more products. It's like, Oh, you don't you're not taking a protein out. You want this, you want to take this product now. Because your goal shifted or changed or you know what I mean? Or like, oh, you knew that there's pre workout, you've plateaued, right? Like you should be adding this kind of thing. And so that's where I think is really cool with the subscriptions. It's it's not it's the engagement. It's if you're finding more opportunities to engage community, getting more information, you can you can drive you it's just beautiful. As a marketer, I get giddy because it's like you're getting all this extra information, which means you can sell to people.

Kathryn Thompson  14:23

Totally, totally. And just I love the personalization thing for sure. I owned a brick and mortar. And that was one of the and we've sold it now but it was custom winemaking. And that was the one thing that we stood out with because we would personalize they could come in and personalize the labels, the shrink wraps that they put on their bottles and they would walk away and then they would serve this bottle at family dinner or friend's house. And the label would be funny and then people would come in and go like I want I want a bottle that has my name on it or whatever right. And that would just get so much traffic through our doors right? And I think this subscription And then when you talk about the proteins as well, or vitamins or whatever, like, people's lives change, so So like you said, the more you can get data from somebody about where they're at where they're going so that they don't fall off because they're like, Well, I'm what you're offering no longer appeals to me because I'm in this different phases of my life or workout or whatever it is, and, and how to get more of that. And as a marketer, I just absolutely love that data collection piece of being able to go okay, what, what other products can we sort of sell? So in terms of any other mistakes that people are making, when it comes to launching? I know, like, being really simple, like starting at the out of the gate of like, do the thing that simple, don't do all have sort of the bells and whistles, but are there any other like big mistakes that you see companies making when they go to launch a subscription?

15:50

I mean, it does come back to like, you know, this the idea of like you're building with that customer input? Yeah, no, you're like BMW. The the example I like to cite is BMW launched earlier this year, a subscription around seat heating in their cars. Wow, really, you're buying, you're buying a BMW, it comes with the technology to heat the seat, but you got to pay $20 a month to have access to the seat heater. So I don't know I'm not in I wasn't in their internal meetings, they did not consult with me. So I can't say I but I would assume they either didn't get or had really horrible customer feedback about that. But they still launched it anyway. And they're probably still going to launch it any way. But it but for me, the example is like, Oh, well, instead of lawn, if you're trying to add subscriptions to BMW, like, people aren't going to want to pay $20 for a seat heater, but would they pay $20 a month, get on a zoom call with the engineer behind and like somebody who's test driving the new Like, seriously saying, yeah, so Yeah, but what right, like so thinking about that kind of thing is just don't don't what you think you want to sell, build what you what your customers are telling you they want to buy, or that you see as a problem that you could you could really capitalize on because you've got a great offer.

Kathryn Thompson  17:04

Yeah, and that heat seating thing, like, I mean, I could see people the backlash of that, for sure. Because like, you've already bought the expensive car. And now Now you're gonna make me pay for these additionals. Right. It's kind of like, I mean, we see we saw radio subscription, right, like Spotify, and that sort of rollout. But I know when Sirius radio, I think rolled out I don't think it was meant it's it would be like, you buy the BMW and you have to have Sirius Radio, and you can't have any other access to radio unless you subscribe, like that would be maddening for a consumer, right. It's like, well, I should be able to control the radio in my car. Yeah. And in terms of benefits, again, we talked about the recurring, we talked about being able to get financing, like what are some of the other benefits for businesses to add a subscription.

17:57

I think it comes down to that engagement in the data side of things, right. So the most powerful ecommerce companies aren't doing it just because current revenue, they're doing it because it allows them to get more information from their customers around what they're using, what they're caring about their goals, that kind of thing. And when you know that you can, you can develop more products, you can, you can find more ways to create revenue opportunities from customers, because they're telling you what they want what they need. So again, a great example is if you're selling, like if you're selling a single SKU of something, right, you say you're selling sweaters, right? That might not seem like a great opportunity for a subscription business, but maybe people are buying the sweaters because they're funny, or they're interesting, and they would want to get a different one each time. You know, like, you have this assumption of why people are buying but until you figure that out, and so any business as your as you mentioned, too, is like you want that data you want to know. So for us think of it like I like to think of subscribers are your potential your best customers so the people that love your product the most. So capitalize on that more information, understand more about what they want drive that kind of engagement and you're just gonna have tons of opportunities to create revenue for your business.

Kathryn Thompson  19:07

Yeah, and it's just it's really Yeah, totally. And it's not necessarily a one or the other right when we see with vitamins even like I mean that you start to see a lot of this on Amazon but you can order like a vitamin one thing or they or there's the subscription there so it's not like if you choose subscription for your business it's not like a one track thing it's just another way to make profit or revenue in your business and as most business owners while they should know by now is that that that loyal customer, the one that's recurring and buying over and over and over again like you said is is your most loyal customer they're the easiest ones to sell to and will continue to buy from you if you give them what you what they ultimately desire. Yeah.

19:57

Absolutely. And I one thing I think is important like you were making immediately think of the idea that the typical repeat purchase processes, you look at past data and you understand on average, when people come back, back to back another purchase, right, and that can be good. And there's levers you can pull to kind of like try to motivate that. But there's only so far you can go the difference with a subscription, if you have stuff that's happening into the future. Yeah, so you have customers that are already committing to make purchases with you. And it gives you a different set of data and a different kind of insight of what they're using and how they're using it and why. And you can often if you understand that you can get ahead of it more, right. And so a good example, too is if people are dropping off month three on a product, and you know, that's because people aren't using it enough to see the results, you can emphasize how much how important daily use is for people that are successfully changing x. Right? So you know, people are trying to change x in their life, you're emphasizing how much product usage does that that just doing something like that can push people from month three to month four month five?

Kathryn Thompson  21:00

Yeah. And I think, you know, the understand understanding usage better, right, because, like you said, before, you know, we again, produce small scale wine, custom wine for people. And our whole thing was, is if we can get 700 loyal customers that buy four times a year, you know, we've built a successful business model based on profit and all of that. And but we were wanting, we're trying to predict how much they drank in a period of time. And obviously, everybody's different. But how do we integrate a subscription, we would actually know because similar to the dog company, if the subscription renewed, and they were dropping off, because they were still not out of their wine, we'd be able to sort of gauge that usage, right, way better than, than just sort of kind of predicting and putting out you know, every quarter, a discount or a call to come back into the store or whatever. So it's just a beautiful way to gauge customer behavior a lot better. And just build up that, that data points to be able to sell to them in a more customized and personalized way that you're not hitting them with stuff when they actually don't need it. Or they don't need to refill the vitamin or the dog food or whatever. So it's just a cool way I just

22:17

are they're running out. Yes. And would buy more often, right? Like you're doing the four times a year. And it's like, you know, month, quarter three people usually need more quarters, because of the holidays. And so you're given that upsell, hey, like people usually run out of holidays. You want extra? Because you know that from your data? Yeah, no, totally the nail on the head.

Kathryn Thompson  22:34

Yeah, totally. And I just love the different I loved seeing all of these different types and styles of businesses integrating subscription, right? Whether it's product or service consulting, right? Like how can you add these recurring income streams into your business like, so that you have that predictable income, but also learning from your customers even more, which is, which is phenomenal. I know we've chatted about a lot here around subscriptions. There's lots of really great examples. Is there anything else you'd love to share with our listeners that maybe we haven't touched on?

23:10

I would just emphasize, I mean, I mentioned a little bit but the power of community, like you mentioned, like wanting to get 700 customers, right? So the idea of you selling this goal, this idea like I just need 100 evangelists. Yeah. Right. Like whether that's, you know, there's a lot of ways to do it, whether you're starting Facebook groups, just going to markets or connecting with people locally, like finding ways to just if you're trying to if you do believe you have to do a problem, starting to find people and see if you can build a community of people, because ultimately, that community can be a great way of answering questions about the product about getting other people's did, it helps them or support because people go to the group to ask questions around things instead of necessarily just bugging you, and you can create. So I just think for me when I say scription is a great way to engage that really dovetails into community loyalty and other things like that.

Kathryn Thompson  24:04

Yeah, and it's, that's, that's just such a beautiful point, too. Because, you know, again, from the business perspective, we're like, how can we create this recurring income, but when you create that community, and again, I think that's why we experienced a lot of success in our brick and mortar was because of the word of mouth, right? It was like we personalized things, then people take wine and talk about it at their kitchen table. And then they come in, and there was this experience that we created. And so the community around that, I think is is such a key point. And then also, I think that just builds more loyalty, right? When people when they're engaging with each other, and they're learning from each other. And yeah, so is there any, any advice you have about creating community like point like besides just having like the subscription, the software setup and the ease of ordering and all of that, but like in terms of community building, have you seen any really cool things with people that they've done that have established that

25:01

Yeah, I think I mean, there's a couple of things. And we could talk about this for a long time because that's something else I do personally like building ecommerce and building an E commerce community. Yeah. So I, a couple things one, don't don't overcomplicate it. Yeah, like you see these groups with hundreds of 1000s of members. Don't think about how that got built. Just think about, you could literally start a Facebook group like, again, if you think you have a problem with people who want fractional video editing, you could literally start a Facebook group about video editing, and just some tips on how to do quick video editing, or how to vet contractors, stuff like that. People will find you on Facebook, right? That happens naturally, organically, you could then start inviting people or talking to people have conversations. So if you're thinking about having more conversations with people, and then have a place that you can push people to write like or invite to, I've got a Slack, Discord, I've got a Facebook group, you know, or I have a weekly or monthly newsletter, of a lot of other people like that are that are having the same kind of like questions or problems. And then you just want to think about how you continue to try to engage and find value. I personally love doing events. meetups are another great example. Like, you know, if you're selling a new protein bar for wilderness people, and you want to start doing meetups around hiking, and then you share your protein bars, just oh, this is some cool stuff. And I just love the outdoors and why we're here. And you know, so just about simple ways to engage like that is how you would start and then that will start to give you those ideas on how you could try to like, you know, add scale to the community or get other people to invite people into the community for you.

Kathryn Thompson  26:40

So cool. So cool. Well, it's been such a pleasure chatting with you. And I know our listeners are gonna love this. Where can they find you if they want to connect with you chat with you more?

26:52

Absolutely, yeah. So I've got a YouTube channel subscription prescription. I'm also very active on Twitter and LinkedIn. So give me a shout. Matthew Holman put her a subscription Doc, you can connect with me there you can also find my links to my weekly newsletter. But I'm always happy to chat with anybody when it when it comes to ecommerce, and especially subscriptions.

Kathryn Thompson  27:15

So cool. And we will link all of those up in the show notes so that our listeners can quickly access those for you again, it's been such a pleasure. I have so many ideas in my brain going about subscription and how I can add subscriptions into my business. So thank you, I know our listeners are gonna love that. 

Kathryn hompson  00:00

There are so many cool ways that you can integrate subscriptions into your business. Even if you think it doesn't work for your specific business. I know that Matthew shared some really cool examples. And so it's definitely something to consider, especially if you want to get off that emotional roller coaster of that worry that angst of where's my next client or customer coming from? It's not a very comfortable place to be. As a business owner, it just doesn't feel very good. And it makes you not really feel that safe in your business. So definitely something to consider. Now on to next week's episode. It's a bit of a two part series, I am sharing with you how I've been able to attract two to three sales calls into my calendar each week, basically on autopilot, yes, there was some front end legwork that had to happen to do this and to build this and whatnot. So I'm sharing it over a two part series. You're not going to want to miss these episodes, so be sure to subscribe to the show so that you can hear what I have to say cheers.