Dose #115: Prioritize the Offer (The Math Says So)

Matt here with your weekly Subscription Prescription 💊

This week’s dose is about the math behind why focusing on the offer will make you more money than anything else. We start with what makes up subscription revenue, do a little math homework, and then I share more resources on how to improve your offer.

This week we interviewed Ben Sharf, the Cofounder of Platter, to hear more about how you can improve online purchase experiences. Listen on your favorite platform:

B2B Subscriptions - What Are They?

Are subscriptions for B2B customers possible?

The complexity comes from how different a B2B customer is from a B2C one. With B2B orders, you typically see larger orders, need unique pricing or discounting rules, and want to review + approve orders before processing, to name a few differences.

Subscription apps struggle to reconcile these differences, but creating a dynamic, powerful, and mostly automated subscription program is possible.

Nimbus Dental accomplished this by using QPilot’s Autoship Cloud app, Shopify Plus, and Riess Group, a leading Shopify dev agency.

The result is a unique program that lets B2B users manage recurring orders through a typical subscription portal experience. Nimbus can also customize this experience to work best for its business and its B2B customers.

If you’re working on a B2B subscription program, want to learn more about the ins and outs of what makes it complicated, or read how this solution works for Nimbus Dental, you can read all about it in a blog article.

Read on to see how you, too, could craft the ideal B2B Subscription experience.

Knowing what to work on may be the most asked and difficult question for subscription brands.

From what to sell, how to sell it, how to keep people on, and all of the things that go into those pieces - it’s a lot to worry about.

In this week’s dose, I will unpack why focusing on the offer is the most impactful step of the subscription process. There will be a bit of math, but I’ll keep things simple.

Let’s dive in!

What Makes up Topline Revenue for Subscriptions

When deciding what to focus on for subscription growth, let’s first review what makes up topline revenue for subscriptions.

There is a simple formula to help you understand this.

Topline revenue is created by the number of subscribers x their average order value (AOV) x the number of times their order processes.

For example, if you have 100 subscribers with $50 AOV, and they last (on average) 5 months, you’d have this for revenue:

100 x $50 × 5 = $25,000 in revenue.

This is important to understand because all of our actions to improve subscriptions should be to influence (at least) one of those pieces.

Dive a Little Deeper

Think of all subscription revenue like a waterfall. Each month we acquire a number of new subscribers. Month after month, we retain less and less of them.

You can see this visualized here:

The right side of the graph shows the percentage of subscribers that make it from one month to the next.

Let’s assume that your website converts 100 new subscribers each month. To simplify the math, assume you convert 2% of all site visitors, and half of those pick the subscription option.

Based on this model, we make 200 sales each month, with half being subscriptions.

The Most Important Lever to Boost Subscription Revenue

Looking at the graphic above, if you improve retention in Month 2, you might keep 90 subscribers instead of 85. That’s FIVE more subscribers to pass down the funnel.

Getting better at initially acquiring them, however, means you’ll get more subscribers into the top of this funnel, allowing you to keep more overall.

Let’s say you get 60% of sales to be subscriptions instead of 50%. That’s TWENTY more subscribers at the top.

Or you improve conversion rates to 2.5%. That’s TWENTY FIVE more subscribers at the top.

The best way to improve subscription conversions is to focus on your offer and design on the product page.

Ways to Improve the Offer

Thankfully, I have a lot of resources to share here.

First, this is a slide deck that breaks down different elements of the offer and some design tips too:

Next, some past doses that share different tips on the offer:

The bottom line is that focusing on the offer can increase conversions and attract more subscribers. Experimenting in this way, along with collecting feedback after the purchase, will also improve retention!

Keep focusing on what makes someone want to subscribe to your product in the first place. Come up with ideas other than just a discount to make an impact.

Final Thoughts

I harp on offer testing so much because the math supports it. Getting better at acquiring subscribers not only creates more revenue for your brand but can also positively impact retention.

Keep focused on the offer to unlock subscription growth!

That’s it for this week! Stay tuned for next dose #116 out next Tuesday.

 - Matt Holman 🩺

The Subscription Doc