Robbie Kellman Baxter on Market Strategy

Welcome!

Welcome to my weblog!   Baxter's Blog is a place where I comment on trends in business strategy.  Many of my clients have recurring revenue models, so I spend a lot of time thinking and writing about best practices in online subscriptions.  My personal belief is that successful subscription businesses share a lot of the same core fundamental strengths, and span consumer/SMB/enterprise as well as a number of industries and services--from entertainment to dating to accounting services to cloud-based businesses--this blog is about what can be shared across these groups. You can expect topics like tiered subscriptions, pricing strategy and the role for freemium, customer acquisition, partnerships,  I welcome your questions, suggestions and ideas.

Great Infographic on Freemium

Just read a great article on Freemium and how it works in the mobile gaming world. Nice job to blogger LInda Bustos Love the infographic!  And special thanks to my friend and colleagues Rick Vosper, for bringing it to my attention!

Webinar Recording "The Economics of Free"

I recently gave a webinar entitled The Economics of Free.  My host, Vindicia, is the leading provider of SaaS billing and marketing systems for digital content and services providers, and it was a lot of fun to field questions from their customers, who include dating sites, gaming companies and content publishers, as well as application developers.

They have been kind enough to make the webinar available to the public.  Feel free to check it out--and also take a look at Vindicia--they have a great offering.

My Op-Ed Piece in the San Francisco Chronicle "Netflix's Avoidable Mistake"

Yesterday, my Op-Ed piece on Netflix's recent price hike was picked up by the San Francisco Chronicle.

The copy is below, or you can click to link.

 

Netflix, the popular movie rental service, announced last week that it will be unbundling its DVD business from its newer movie-streaming business, resulting in a 60 percent price increase for customers who wish to continue to receive DVDs in the mail in addition to the streaming content. Netflix made three mistakes:

A 60 percent price increase is hard to swallow: This is especially true for a subscription-based business, which needs to avoid making customers rethink their original commitment to the monthly fee. The beauty of recurring revenue models is the implicit trust between customer and company, which is lost when the customer feels as if he needs to re-evaluate the value he gets for his money. Netflix's strategy of ripping off the Band-Aid may have been the wrong approach.

The streaming model that Netflix wants customers to adopt is not ready for prime time: It offers only a fraction of the Netflix content that is available on DVDs. Even people who want to move to streaming are holding back until there is a significant library of movies to watch.

Netflix positioned this change as a benefit: If you want to receive only the DVD service, $7.99 is indeed a reduced price. However, for most subscribers, the new pricing means paying much more for the same level of service. Once a company gives something away, it is difficult to charge for it. Netflix has effectively been giving away streaming, and now it wants payment. Customers feel misled in addition to overcharged.

If Netflix had been more transparent about its new direction, it might have said, "We are focusing on our streaming business and moving away from our DVD business. We have been subsidizing both streaming and DVD rentals for a while, as we transitioned from one model to the next, but it no longer makes sense. We recognize that some of our customers are not ready to move to streaming, so we will keep DVDs available. However, we will raise the prices, even dramatically, so it makes financial sense for us. If some DVD-oriented customers don't want to pay for it, that's OK; they probably weren't profitable customers for us anyway."

I love Netflix and have been a subscriber since the beginning. However, Netflix's overly positive positioning, combined with such a jarring price increase, is causing much greater backlash than Netflix expected. Netflix was able to beat Blockbuster in the early days by promising simple pricing.

If Netflix can bring its movie-streaming service to parity with its DVD library, and can keep the pricing simple, it can win back its passionate customers. In the meantime, it might want to consider limiting its new pricing to new customers. It can always raise prices when it has new value to share.

More broadly, Netflix's experience can be seen as a learning opportunity for anyone who has to deliver bad news. Honesty is key, and sometimes it's not best to just rip off the Band-Aid.

This article appeared on page A - 8 of the San Francisco Chronicle

Report from Paris: Nespresso and the Coffee Club

As I sipped my morning Starbucks today, I got a call from friend and fellow consultant Roberta Matuson.  She just returned from Paris, where she was charmed by a fascinating example  of the Membership Economy: the Nespresso Store.

The Membership Economy is a term I use to describe the sea change that is driving companies as they transition from ownership to access, and from individual sales to ongoing, community relationships.

Roberta was walking along the Champs Elysees (lucky her) when she saw what she describes as "the most beautiful store".  It wasn't clear from the outside what the store sold, so they went inside, where they discovered that the store sold Nespresso coffee machines and individual coffee capsules.  The stores are streamlined, modern and opulent, with coffee machines displayed like Teslas and Ferraris. 

What was especially interesting was the sheer volume of service area dedicated to "Club Members" at their flagship store. What kind of club would a coffee machine manufacturer have and why would someone want to join?  Benefits include special discounts, repairs and a tastings at their retail outlets. They also include services to enable gifting of Nespresso products (packaging, delivering, welcome experience etc) to take advantage of the cultlike following they have developed.

What can be learned from Nespresso?

1.  Product manufacturers (not just service providers) can benefit from membership programs.

2.  Bringing together fans of your products can generate additional sales and longer term relationships

Even something as mundane as a coffee maker can be elevated to the level of aspirational club membership. Nespresso isn't the only coffee company with membership--Starbucks cards track people's purchases, provide unique benefits and are color coded as a means of indicating status.  People want to belong and be connected around products and services that matter to them.  Opportunities abound for creating community through an emphasis on connection and access as opposed to privacy and ownership.

 

 

Research and Your Mother-in-Law

When you assume, you make an ASS out of U and ME.

The tech companies I work with need to move quickly, and don't always have the luxury of doing primary research on their customers and prospects.  In many cases, actual historical data is available, which can be an even better source of information on preferences and concerns.  However, in some cases, companies have to go on their intuition, or base decisions (even some important ones) on the feedback of a few, potentially irrelevant, voices.

At Booz-Allen, where i started my career, they called this "mothe-in-law" research--it's like when you go to dinner at your in-laws and tell them about your company, which targets teenagers, and your mother-in-law tells you why SHE wouldn't buy the blinged out mobile phone covers or subscribe to a feed of the latest underground  music.  Interesting, but not relevant.

I see this trend in volunteer organizations as well, cases in which one or two volunteers make assumptions about "everyone" and the rest of the group is swayed by their confident assertions.  "No one will come on a Sunday because of church" --is that really true? Maybe if you are organizing choir practice,but not as likely for a soccer game or a bookclub. 

Take a poll.  Ask your audience.  The technology exists to make it easy to get relevant and broadbased data.  It's not as hard as you think.  And you might just get better results!

Membership Programs and Retail Chains: What Happens When Your House Burns Down

Last year, a friend of mine and fellow consultant lost her everything in a fire.  Her insurance company required her to itemize and price everything that needed replacing.

What she discovered was that there is a huge discrepancy among retailers' ability and willingness to help with past purchase records. While nearly all of them have some membership program, some really didn't seem to know my friend at all.  Others were amazing.

The leaders: Best Buy, Amazon, World Markets.  Honorable Mention for Staples.

At the top of the list are the retailers with membership programs who can produce a list rather quickly – Best Buy, Amazon (really nice for both past purchases & current purchases), possibly World Markets (has not delivered, but seems to be working on it) · Staples has a membership program, but still had difficulty creating a list.  However, they get an honorable mention for the exceptional customer service

Ann Taylor recently started a membership program, so my friend didn't have a formal history with them, although she had been a loyal customer for many years.  She wished she had though because it was hard to recreate her history.

The laggards: CVS/Savon, Costco, Target, Brookstone, Crate & Barrel, Bed Bath & Beyond and most furniture and department stores.

My friend was disappointed and surprised by chains with membership programs who failed to produce a list (or even transactions)  without specific information about the transaction, including CVS/ Savon, Costco ·

What is especially surprising is that several major retailers   still don't have membership program – Target, Brookstone, furniture stores, department stores, Crate & Barrel, and Bed, Bath & Beyond - This was perplexing, given that most of these chains have affinity credit cards.  The card statements, unfortunately, proved useless to my friend because they don’t say exactly what was purchased on an item by item basis.

Implication

The technology is here and consumer demand is here.  We are living in an economy where membership is key--it enables companies to provide superior service and to market more effectively to their customers.  Companies who don't build ongoing relationships with their customers are letting down their customers, and risk being left behind.

And word to the wise...videotape all of your belongings, keep all receipts someplace safe (not in your home) and try to do most of your shopping at places with strong membership programs.

Playboy's New Online Subscription

I have been avidly following the evolving strategy at Playboy ever since I met Christie Hefner at a Watermark talk a few years ago.  Despite how I feel about their airbrushed, objectifying content (as a woman, a mother and a member of the human race) I admire the way they have continued to tinker with their offerings and distribution strategy.

Last week, Playboy announced a new digital subscription, which will feature both new content and their ENTIRE archive of past issues.  The idea is to attract both new users, who are part of the digital economy, as well as existing babyboomer subscribers who may have been slow to move digital.  For this second group, access to their favorite (ahem) articles may be what they need to move online.  The subscription is $8/month, $60/year or $100 for 2 years, encouraging people to lock in a longer subscription, and build a habit.

I have not personally bought a subscription--although I am very curious about the UI and overall experience--so if any of you out there HAVE--please let me know what you think! 

The Membership Economy (or The End of Ownership?)

It seems that nearly everything is available on a pay-as-you-go or pay-for-access model. Even things that you used to have to buy outright.  You can pay for membership to musical content, games, encyclopedias, and software applications.  But you can also pay for membership to gain access to physical goods like cars, purses and produce.

Customers have always wanted options with lower financial risk, greater flexibility, and the ability to feel like they're part of something bigger themselves.  Now with advances in technology, companies can offer nearly every product as a service, and bundle in membership components that create loyalty to the company by offering the customer exactly what they need, instead of just something that they have to own.

The Membership Economy is driving change across every industry, and every company should be taking a closer look at how they can create additional value for their customers by thinking membership instead of ownership.  while there are some items people still want to own, there are many more creative options to truly meet customers' needs.  And for business owners, recurring revenue models can provide a strong foundation from which to build new businesses.

Be Prepared--What Girl Scouts and Marketing Strategy Have in Common

As many of you know, I am a Girl Scout leader.  Our motto is "be prepared.  Recently, I have been noticing that many adults, even former scouts, have forgotten this message.

When you have an important meeting scheduled, it makes sense to prepare. 

1.  Know your objectives for the meeting. Why are you attending? What do you hope to gain?

2.  Know the objectives of the other participants. Why are THEY attending? What do THEY hope to gain?

3.  If you are driving the meeting--have an agenda set, and maybe even send around prior to the meeting, so others can be prepared too.

4.  If you are not driving the meeting, make sure you anticipate the agenda (if it is not sent to you--you should ask for it in advance)

5.  Anticipate the questions you may be asked, and prepare your answer.  For example, most sales calls usually center on the following: 

• What can we do for you
• What can you do for us
• Tell us about yourself and why we should work together

In marketing, preparation is critical--anticipating what your audience expects, needs and desires, so you can delight them. So pull out your old Scouting Handbook--there are plenty of lessons that are still relevant today.

Special invitation to participate in May 13 webinar "Independent Consulting for MBAs"

I am presenting a webinar for the Rady School of Management at University of California, San Diego. The topic is "Independent Consulting for MBAs" and it is being held on May 13 at Noon Pacific time.

The UCSD administration is permitting me to invite my clients and friends to attend at no cost but registration is required and space is limited. Please click here to register