Jackie Zach
October 29, 2024
Listen in as Jackie Zach and Mike McKay explore the transformative potential of subscription and membership models in various industries in this episode of the Make More Work Less podcast. They highlight innovative examples, such as Porsche’s subscription service, which allows customers to select different vehicles weekly without the usual hassles of ownership. Mike emphasizes that businesses must adapt to this trend, understanding customer needs to create differentiated value through subscriptions. He mentions the economic shift from product-based to subscription-based services, citing how companies like Warby Parker and Tesla redefine the retail experience.
The discussion also underscores the importance of building customer relationships through data-driven insights, illustrating how a well-structured subscription model can provide stability and predictability in revenue. Mike encourages entrepreneurs to consider how they might implement subscription services in their own businesses, referencing the books Oversubscribed and Subscribed as valuable resources for understanding these emerging economic trends. The episode concludes with a call to action for listeners to rethink their business strategies in light of the subscription economy and to engage in discussions about integrating these models for success.
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Podcast Transcript:
Jackie Zach: Welcome back to Make More Work Less podcast! I’m Jackie Zach, here with Mike McKay, and I’m thrilled about today’s topic because we’ve got some gems lined up. We’re diving into membership models and the book Oversubscribed.
Mike McKay: Did you know you can actually subscribe to Porsche?
Jackie: No, really?
Mike: Yep! Imagine a setup where you pay a substantial monthly fee—because it’s Porsche, of course—but every Monday, you can select your car for the week through an app. No insurance, no car payments, no maintenance scheduling, no hassle. You just pick up the car or keep the one you have. All the tedious parts of car ownership are gone.
Jackie: I’d love that! And if they delivered it to me, that’d be even better.
Mike: They do—they’ll swap them out right in your driveway. They’re even working on a model where packages can be delivered straight to your trunk, thanks to a secure third-party app that opens your trunk remotely. No more waiting around for deliveries!
Jackie: That sounds amazing.
Mike: Right?
Jackie: It goes perfectly with your robot lawnmower idea. Sign me up for all of that!
Mike: You know, it’s called TurfBot. I’m a fan—my robot Fred mows my lawn every night. My yard always looks the same. I just run the mower along the edges every two weeks. It’s a six-minute job instead of 45 minutes, three times, to keep my lawn in shape. Everyone should have a Fred mowing for them!
Jackie: Sounds great. And Porsche delivery!
Mike: Exactly! Porsche’s subscription started at $2,000 a month in 2017. It’s not cheap, but with insurance, maintenance, and convenience included, maybe it’s the future. Subscription and membership models like Netflix, Disney+, Uber, Stitch Fix, Porsche, Stan, and Blue Box could be where business is heading. Millennials love subscriptions, after all.
Jackie: You can even get dog or cat food on a rotating subscription.
Mike: I have a subscription to Amazon for weekly coffee deliveries because I dislike shopping. The future model is one where the customer drives the business, not the other way around. The notion that retail is dying seems exaggerated. Take Warby Parker, for instance; they specialize in sunglasses and eyeglasses and are opening hundreds of physical locations. Amazon acquired Whole Foods and is launching its own stores. Even Apple, which mainly focuses on subscriptions for new phone upgrades, has a substantial physical presence.
In the past, a physical store might generate $250 or $300 per square foot in revenue, while Warby Parker claims $3,000 per foot. However, their retail experience isn’t about sifting through piles of products; it’s consultative. You visit the store, choose what you want, and they create an experience for you, with your glasses shipped directly to your home. Generally, transactions don’t occur in the store. For Tesla, you don’t buy a car from a dealership. Instead, in a Tesla showroom, you can test drive and learn about the car, but most research is done online beforehand. Customers visit to feel the car before making a final decision, and while you can purchase at a kiosk, it’s likely you’ll order it online later.
Now, consider Apple’s valuation: it’s not based on hardware but rather on services like iTunes, subscriptions, upgrades, and Apple TV. So, what does this mean for businesses? We need to rethink how we engage with our customers, as we’ve always advocated. Remember the concept of the Membership Kit? It used to be a simple card with limited information, but now, as an Amazon Prime member, you can view your entire order history. The world is driven by data. While many fear data security, various organizations focus on protecting it. For instance, LifeLock offers a subscription service to secure your data and rectify issues if they arise. Theft has evolved from physical assets to data.
So, what does this imply for businesses? We need to consider what a subscription model looks like for our clients and ourselves. In our last episode, we touched on launching our subscription model, which is akin to networking with guidance to make it effective. It’s natural to feel uncertain, as our business prioritizes return on investment. We believe that anyone investing in coaching should do so to earn more while working fewer hours, ultimately becoming a successful entrepreneur. Thus, our subscription model will focus on simplifying that process.
Jackie: So, as you’re looking at your own business, what products or services could you create for people to subscribe to?
Mike: Right, so Oversubscribed is a book about ensuring you create scarcity in your business. This generates desire by having limited availability. It ties into the methods of persuasion. There’s also a book called Subscribed that discusses the economy’s shift from products to subscriptions. I’m about 80% through it, and I was literally shaking in my car today, thinking, “We need to make our clients aware of what’s happening.” Each industry is moving at different speeds, but a transformation is coming, and it will depend on who can create differentiated value.
Take the legal world, for example. Legal Shield has been around for a long time and operates on a subscription model, but it’s quite basic. They don’t know their customers well enough to offer additional value, unlike Amazon, which emails suggestions based on your order history. The Porsche membership represents an elite experience—it’s exclusive and solves a problem. You get to drive a Porsche without worrying about insurance, maintenance, or any of the hassles.
So, what do your customers really want? Understanding the needs of your industry’s customers will help you create better offerings. Think about how you can draw inspiration from existing subscription models and adapt them to your business.
Jackie: Exactly. A subscription model can eliminate the need to remember tasks, like remembering your wife’s birthday. What if you had a service that automatically sent a gift or flowers?
Mike: Someone is likely working on a subscription model for your industry right now. Venture capital is actively pursuing these ideas, and a strong concept can attract funding and scale quickly. Uber didn’t exist about 12 years ago—though I should double-check that. I believe it really took off during the recession. It’s a shared asset model, so how can you implement a subscription service within that framework?
Subscription revenue is multiplied by your retention rate. Most businesses can lock in about 90% of their revenue for the upcoming year. For example, if Uber offered a daily commute subscription, you could build a cost model around it. Let’s say it’s $300 for a five-day-a-week plan. That eliminates the need for car ownership and saves people a lot of money. If you were a subscriber, you wouldn’t have to worry about surcharges during busy times, unlike when fares can spike.
Imagine if 90% of your projected sales for the year were secured by January 1st—how comforting would that be? I was literally shaking thinking about the potential for our clients and our business. It’s fascinating to wrap your head around. I highly recommend reading both Subscribed and Oversubscribed. One focuses on marketing, while the other explains the economic shift. Both provide valuable insights into the future of business.
Jackie: Excellent! If this has sparked your interest or curiosity, let’s have a conversation about your business and explore how you could integrate subscriptions. Click the link below, and until then, go kick some ass!