On Friday Ron and Ed were pleased to welcome to the show, Anne Janzer, the author of Subscription Marketing, and four other books on writing. In addition to being an award-winning author, Anne is an armchair cognitive science geek, nonfiction author coach, marketing practitioner, and blogger. She’s on a mission to help people spread important ideas through writing.
Ron’s Questions: Segment One
Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so that organizations can thrive. I'm Ron Baker, along with my good friend and VeraSage Institute colleague Ed Kless, and on today's show, folks, we are honored to be talking with Anne Janzer, author of Subscription Marketing. Hey, Ed, how's it going?
Ed Kless
It's going great, Ron, I mean, who would have thought that the nation would come together so quickly? On Wednesday, and of course, I'm not talking about the inauguration, I'm talking about over the Bernie memes that we all seem to have united around.
Ron Baker
I just saw him with the guys from the Great White North in Canada, SCTV sketch.
Ed Kless
No, I think that Bernie has been true to his socialist word, he has been a burden on productivity now, this is just what everybody's been doing the last two days? That's all we've done.
Ron Baker
All right, well, let's bring in Anne Janzer, an award-winning author, armchair cognitive science geek (I love that), nonfiction author, coach, marketing practitioner, and blogger. She's on a mission to help people spread important ideas through writing. She's the author of many books on writing, Get the Word Out, Writing to Be Understood, The Writer’s Process, The Workplace Writer's Process, and of course, Subscription Marketing, which is now in its third edition, which we'll talk to her about. Her books have won numerous awards, and they've been translated into Japanese, Korean, and Russian language editions. So that's great news. Anne, welcome to The Soul of Enterprise.
So before we get into subscription, which is why we brought you on, I want to ask you, what's it like to teach writing to business professionals? Have you been able to remove their jargon?
The Economist has this columnist I just love, Bartleby. And he constantly rails on the terrible language and writing skills of most business people. They write memos that are indecipherable, and just full of jargon. And he just really takes them to task. I just love the guy. Anne, what motivated you to write a book on subscription marketing?
I bet, because revolutions always start from the bottom up, right? They don't start from the big companies down. You know, we've had Tien Tzuo on [Episode #230], the CEO of Zuora and author of Subscribed and he is, I would say, one of the chief evangelists for this business model. He wrote in his book that “In five years, you won't buy anything, but you'll subscribe to everything.” And I actually like how you put it in your book, you say, “In five years, you'll have the option to subscribe to everything and every business will have to accommodate that fact.” But what we see, Anne, is a lot of inertia. Why do I have to accommodate it, it’s not going to affect Me? How do you respond to that?
That's a great point. We have a saying around here that you compete against any organization that has the ability to raise customer expectations. And how many of your customers are comparing your experience with their experience on Amazon, or when they visit Disney World? This model requires such a different mindset. We always talk about how difficult it is to unlearn. Sometimes unlearning is harder than learning something new. Like I think about Fender guitar, I don't know if you've run across them, but their Digital Play, and they are just a phenomenal success story during this COVID pandemic. They're not really selling guitars, they're selling you how to play the guitar and how to play it continuously better. And that's just not the same thing at all, is it?
Right, and rather than just focusing on the transaction, I love what the fender CEO said: If I sell somebody a guitar, and they try to play it, and they get frustrated, and it goes under their bad, and then they give it away, that's another sale that I don't get to make in the future. So just that whole mindset of customer success and in the book, you talk about Inadequacy marketing. And I love this idea: The prospect lacks something that only can be fixed with our product or service. This idea that we're selling solutions, it seems to me you have an issue with this?
And [Apple] has done this since day one. They show the one user using their product, and they are the hero. Yeah, it's such a narrow mindset to think we sell solutions to problem. It's broader than that, its possibilities and opportunities as well.
We talk a lot about value pricing, Ed and I are faculty members of the Professional Pricing Society. We teach value pricing, and [what we call] value pricing 1.0 was all about pricing the customer. Now we talk about VP 2.0, which is subscription, where you price the relationship. And people say, “Well, that's just semantics. What's the difference between the customer and the relationship?” There's a big difference. Because with Fender, you have a relationship with the customer, it's a direct relationship, they're invested in your success.
You call it Value nurturing. Can you explain that? Because I love that, too.
You’ll get a royalty when we say it.
Right, and you talk about five approaches to this idea of value nurturing, and I love the content and community. Sometimes just leveraging your community of users or members can make a big difference.
I think about Harley Davidson, that's a way of life. It's not just a motorcycle.
Ed’s Questions: Segment Two
Our conversation today is with Anne Janzer, author of Subscription Marketing: Strategies for Nurturing Customers in a World of Churn, and Anne I want to ask you about a couple of quotes in the book that I've picked out. One of them is this, quote, “I've become convinced of the following truth. Organizational boundaries are the enemies of the subscriber experience.” Expound on that
Ron and I are tied into economics as well. Ludwig von Mises is an economist who said that you cannot parse value, right? You can't break down the difference between the value of the experience in a restaurant of the waiter, the food, or the cleanliness. I mean, if one of those things fails, we judge it all the same. So even if the waitstaff is stellar, but a cockroach runs across your meal, it doesn't matter. I want to just take this to the next level, because later on in that same chapter, you say, “In a subscription based business, everyone is in marketing.” period, really, period, which I loved. But when I read that for the first time, I thought, what is also interesting is how some people in marketing are actually resentful of that.
That's such an important point. I think that the challenge is, of course, when I read that phrase the first time through the book, you think, “Oh, everybody in marketing wants that to happen;” but they don't, they really do sometimes want to hold on to the different pieces. And it's really up to them to educate out. I think that's a great, great point. I wanted to talk to you a little bit about Amazon Prime, and what a great success story that is. It offers you the discounts to be able to do the “Subscribe and Save” choice. And I just want to get your thoughts on this. I think Amazon has made it too easy to order and messed themselves out of Subscribe and Save. I subscribed and saved to some things and found myself unsubscribing because it was so easy to just order it when I need it instead. That's the bizarre part, right?
Yeah, and I can't believe it won't be too long before it's not just COVID tests, but also COVID vaccines. In my fantasy world we have Amazon doing the distribution and Chick-fil-A doing the actual injections, I think we'd have a much better experience overall.
Apparently, in fact, our social media person, Greg Tirico and I talked earlier, [Dave Clark, CEO, Worldwide Consumer] wrote a letter today that has appeared about that very thing—offering Amazon up to do a better distribution of the vaccine. So we'll see how that that plays itself out. This next topic I know is a passion of both Ron and I, and that is, you're talking about the common adaptation models of subscription: the trial, the segmented approach, all-in approach pivot as a marketing subscription. And one of the things that you say is the low-risk strategy of dipping your toe in the water is, inherently, a lack of commitment, and it may doom the trial to failure? Can you talk a little bit about that because I think that's a critical point for people to understand who are trying to transition, that you can't be a little bit into subscription.
This goes back to Peter Drucker, this inherent tension between sales and marketing. In so many companies people say, “If marketing would just do their job,” and others say, “If sales would just do their job,” this back and forth. And I think part of it stems from something that was a problem that emerged out of the ‘80s and ‘90s, was marketing's belief that they were there to just provide leads, right? In fact, compensation systems were built totally on just delivering leads, regardless of how crappy they were, it didn't matter. And I think subscription just completely jettisons that idea. So expand on that a little bit, if you would.
It was interesting reading through your book, a concept flew into my mind, which was how poorly some companies that were subscription based performed early on in this subscription marketing world. I'm thinking specifically of cable and cell phone companies. These companies had the model but just then performed completely poorly, and today are still recovering, in my view. So thoughts on that? Why did that happen? Where did they get lost? They had it.
One of my jokes is I'm pretty sure I'm still subscribed to Columbia House Records. I'm pretty sure that somewhere, if I combed through all of my credit card statements, they're getting money from me somewhere.
Ron’s Questions: Third Segment
Welcome back everybody. We're here with Anne Janzer, and her book Subscription Marketing, which we highly recommend. Ed and I both loved it, and if you do run out to Amazon and get it make sure you get the latest edition, which is the third edition. Anne, you were talking with Ed about your adoption models: The trial, the segmented approach, and the all-in pivot. And I just wanted to get your take on the news reports in the last week or so that BMW, Audi, and Mercedes, all have given up on their subscription trials. BMW might bring theirs back, Audi has no plans, and Mercedes, they'll probably bring it back at some point. Why do you think they failed? I have strong opinions about it, but I'd love to hear what you think.
The legacy systems with the dealer networks are definitely an issue. But, and you probably know this as well—I learned this from Tien’s newsletter—Porsche Drive has been expanding, they are in six cities now. And 80% of the people that have signed up for it are new to the brand. They're flourishing with it. In my mind, they're no different from BMW, another fantastic brand. They're the two most profitable car companies in the world. I think BMW just can't get out of the mindset that they're selling cars. And Porsche says, “No, no, you're subscribing to Porsche. You have a direct relationship with us.”
Obviously [Porsche’s] regular customers are getting older, they're dying off. And they're going after a younger demographic, which is probably going to really be helpful in the future. I'm so glad I asked you during the break about direct primary care and concierge medicine, because you said you have a DPC doctor now. And when I look at those practices, and I've done a deep dive on them, and I realized that a house can't stand if it's divided. You can't be a DPC practice and still have fee-for-service and take insurance. You've got to be one or the other. It's kind of like the problems BMW is having [with its subscription trial]. How do you advise, especially smaller firms, like Ed said, you can't be half pregnant with subscription. You're either all in or don't do it?
One of the things that impresses me about the DPC movement is that they're saying that this is why I became a doctor in the first place, to help people. And the typical general practitioner has 3000+ patients, which is why you can spend seven minutes with them when you have an appointment. And now, because they’ve reduced their panel of patients—like you were saying, not all growth is good growth—they might have 600 patients, but now it's not just about treating you when you're sick, it's also keeping you healthy. And they have the capacity to do that. And, to me, that model just makes so much more sense.
It's really fascinating. Most DPC doctors’ patients have less emergency room visits, less hospitalizations, they even take less drugs, which even the pharmaceutical companies are noticing. It's just like you say, it aligns the incentives, which is great. Greg Tirico actually asked this question, and I thought it was a really good one. He said the number one question he gets, and he's never had an answer for is, “What if someone signs up and then leaves in 30 days with all their stuff?”
One of the biggest challenges, and frankly Ed and I've been working on out on this, and still wrestling with it, is when you convert a CPA firm or a law firm that does litigation, or an IT firm that does massive software installations, they have these one-off projects that are really, really expensive, and loaded upfront with a lot of work. Are you okay with carving out separate prices for large projects, and not having those on subscription, but then the ongoing relationship on subscription?
For projects that come up all the time, then my attitude is you can just bake it in. I think we are really hard on ourselves on this because we don't think we're thinking far enough outside the box. We're still thinking we're selling guitars. We're not thinking like we're helping you play better.
When I when I look at, like you say in the book, even marketing powerhouses like Procter and Gamble and Coca Cola are confronted with these direct-to-consumer brands, like Warby Parker, Casper, and Harry's Razors? Didn't Unilever buy [Dollar Shave Club] for $1 billion?
How do you how do you recommend that firms overcome subscription fatigue? This is another pushback we get?
It comes back to that relationship. And the other thing is the innovation, like you said before about [Amazon] Prime, the innovation baked into this model, which I just love about it. You continuously add capacity but it doesn't change your price, necessarily.
Well, and this has been great, Anne, unfortunately we're up against our next break.
Ed’s Questions: Fourth Segment
We are talking subscription marketing with Anne Janzer, the woman who literally wrote the book on that subject. Anne, I wanted to pick up on another sentence that jumped out at me. At first I had a negative reaction to it. But then over time I've come a little bit more accustomed to what it is that you were trying to say, because I read further in the book. You say, “Upselling and cross selling, these are important results of successful value nurturing.” And here's the thing I objected to, “but never mistake selling for creating value.” Why should we never mistake selling for creating value?
My objection was based on my priors, right, which is this notion that, to me, sales is about what we call the value conversation. It is about having that conversation with a prospect. Keep in mind, we sell large systems to accountants, and also people who need accounting solutions, which is, by the way, one of the few areas that is extraordinarily sticky, and switching costs, even in subscription, are astronomical, because nobody wants to change their accounting system. So it's one of the few exceptions to your rule. I think that was my reaction to it. But I think you make a very important distinction there. Because so many people think that, oh, if I just tell them what the features are, they will miraculously say, “Oh, I get it now.” And that's just not the case.
I want to quickly explore something and I have to set this one up. Ron and I do an exercise that we call the Value Gap, and you write eloquently about economic value. And one of the things that we suggest people do is look at their relationship with a current customer and ask themselves, How much value have they actually created for that customer? And then think, How much value can I create for them in the future? That exercise, to me, has really come home with the notion of subscription, because of what Ron was talking about—the continuous need to innovate. So this idea of what can we do for current customers to create value for them tomorrow? Explore that a little bit with me?
The great example from your book that I love is the MailChimp hang 10 when you successfully launch your campaign, which makes me happy when it happens.
And if they took it away, I would miss it. I wanted to get to this, too. I love your conversations about the launch plan. And by the way, folks, you have to buy this book because it is chock full of not only the great theory, which Ron and I love, but the practical little tips that you can do to make this really, really work. So that's one of the reasons why we love this book, there's a great balance. Back to the launch plan, what I'm finding, and I wonder if you're finding this, and you probably are overly critical of this as well, these email campaigns to get you to use. I'm like, “Stop, please.” They're all the same now. People have to innovate around them now, don't they?
Please, please shut up. If you stop I will continue to subscribe. As long as you leave me alone.
It's like the Brazilian steakhouse with the green and red card that you flip over when you want them to bring more meat? The other thing I want to ask you about is what you call the 90/10 rule that applies to new subscribers. If a customer doesn't start using your solution within 90 days, there's only a 10% chance that they'll become a loyal customer. Is that still true? Is that something that continues to bear itself out in your latest work?
Which leads me to a question that we talked about with Robbie Kellman Baxter as well [Episode #319]. And you do mention this a little bit in your book. I'm curious, and Tien Tzuo is absolutely convinced that freemium is dead—long live the free trial. Robbie says he's a provocateur. What are your thoughts on freemium versus free trial? Has there been any clarity from your perspective on that?
That's a great answer, and this has been terrific conversation. The hour flew by. Ron, what do we have coming up next week?
Ron Baker
Next week, Ed, we have Virginia Postrel, the author of The Fabric of Civilization.
Ed Kless
I can't wait. That's going to be great. I'll see you in 167 hours.
