I was talking with Jeremy Reeves recently about the power of subscriptions.
During our conversation, I wrote out a pretty cool breakdown…
And I figured I’d share it with my blog readers too.
What you’re about to read is in reference to a health supplement funnel…
But the same concept can be applied to pretty much anything you’re selling.
Check it out and enjoy 🙂
When it comes to subscription revenue, here’s what I did in the past:
- The checkout is your standard one, where they have the option to get 1, 3, or 6 bottles.
- On that checkout page, you give them the option to subscribe and get a 10% discount.
- When giving them that option, you explain clearly that they are enrolling in an auto-ship, and that they can cancel anytime.
When my health company did this in the past, we’d get about a 20% take rate for the subscription.
For those who subscribed…
We would not show them a 6 bottle “stock up” up-sell or a 3 bottle “last chance” down-sell…
Instead, we’d take them straight to cross-sell pages, where we sell them different products.
Now when it comes to the details of subscription billing and how it was executed, here’s what we did:
When the customer’s is rebilled is dependent upon how many bottles they took.
So if they took 6 bottles, then they get rebilled towards the end of month 6.
And here’s the SUPER IMPORTANT part:
Before the customer gets rebilled for the first time…
I would have my team send them an email AND call them…
To confirm they were good with getting rebilled.
We found that about 50% of people were good with the rebill…
But of those 50%, they tended to stick with us for a very long time after (aka, multiple rebill cycles).
And now let’s get to the fun part, where we do the math on this:
Say you're doing 100 sales a day, total.
That means 20 people are subscribing per day (20% of people check the box).
Out of that, let's say:
- 50% of those people take your 6-month option
- 30% take your 3-month option
- 20% take your 1-month option.
We know that half (10) of those people who subscribe will actually rebill.
So, this means that each day you're getting:
- 5 people who are going to rebill at a 6 bottle package (let's call it $240 in rev per person, per rebill)
- 3 people who are going to rebill at your 3 bottle package (let's call it $120 in rev per person, per rebill)
- 2 people who are going to rebill at your 1 bottle package (let's call it $59 in rev per person, per rebill).
That's an extra $1,678 in expected revenue you'll get from those customers on their FIRST billing cycle.
Realistically though, most of them will rebill more than once.
And, here’s the crazy part…
Even if they only rebill two times – we double the future expected revenue to $3,356.
As in you're generating an extra $3,356 in expected revenue PER DAY.
Every day that you do 100 sales, and add 20 new subscribers…
That’s another $3,356 you can expect to collect in the next year (realistically it will be a lot more).
The math on this is pretty simple:
No matter if they are rebilled every 1-month, 3-months, or 6-months…
If we assume two re-billing cycles…
That means they’ll be rebilled twice in the next year.
Additional Expected Revenue Per day = $3,356….
365 Days in a Year…
That's $1,224,940 in extra revenue you are generating…
And it’s coming from just TEN customers per day!!!
Talk about the 80/20 Rule in Action (or in this case 90/10).
Plus, don’t forget…
You’re not having to pay a CPA when these customers rebill in the future.
So your costs are very modest.
At most maybe $200,000 – but probably it’s a lot lower than that.
All of which is to say that subscriptions are one of the fastest ways to become a millionaire.
A couple more notes on this:
- I’m sure other people are better with subscription than me, but this is what I’ve done.
- We were super transparent about our rebills when we used this model in the past, and our chargebacks did not increase AT ALL. They stayed below 1% on average.
- No joke, I still have customers from 2017 who are on rebill today 🙂
- Extrapolate this out to 1,000 front ends a day. Suddenly it’s $12,249,400 in additional revenue you’re getting. Realistically, your profit margin on this is probably 80% too. So you’re looking at close to $10MM in additional profit PER YEAR. That’s how you become a centimillionaire within a decade.
Pretty dope, right?
And if you’ve ever noticed that Justin and I spend a lot of time talking about the importance of getting your offer to scale on cold traffic…
That’s why.
100 sales a day can be life-changing…
1,000 sales a day can make you rich beyond your wildest dreams…
It’s that simple.
– SPG
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