#364 - Cracking the Code on Retention: Recharge CEO Reveals What Best-in-Class Subscription Brands Do Differently

21:14Now I'm going to sell a floss on subscription into them, right? That's where the cart comes in. And then the checkout again, same thing, cross sells and upsells and post checkout as well. So I and what I see is people get more aggressive in the funnel. So you might start with a smaller offer on the product page. And then by the time it gets to post checkout, that's your most aggressive offer. Because that's when you're really trying to convert the last group that's holding out.

21:38Oisin O'Connor:Yeah. And it's cool to see that you start this sort of stuff. You start getting a motion that's sort of six. And then as you start to scale, like we're talking about on the acquisition side, you're like, wait a minute. I can actually, through these improvements that I'm doing on the CRO and the conversion and the cart and the subscription, all of a sudden I can really drive AOV, which gives me more money to pour into that top of funnel. So those first two parts of the entire customer sort of experience are sort of solved for. The next thing I want to talk about is it's because it is something you mentioned is, and this is a great thing also, like anytime we're, you know, talking to the recharge team, like, you know, you guys are always super helpful in terms of like pointing out like, hey, here are the benchmarks you want to be hitting.

22:25Oisin O'Connor:If you are in this category, here's the churn numbers you want to hit. Here's ways that you can reduce churn. So I want to think about, let's assume that we've got a brand spun up. We're starting to do well. We're starting to get subscribers. And then now we want to say, okay, let's make sure our numbers look healthy. What is what is healthy look like in terms of, you know, general benchmarks? I know it may vary across categories, but generally for a subscription brand, what's a healthy number that you like to see? And then, you know, what are some ways that brands that are successful at like reducing that churn element?

23:03Oisin O'Connor:How do they how do they tackle it? Yeah, totally. So I think, you know, if you want to be healthy, you want your second order to be 70 percent or above. right like that's the benchmark of in the second order really matters the most because that's the biggest delta of churn right the biggest group turns out in that one to two and i think you're also in this period where people have just tried out your product for the first time right let's say they try your olive oil supplements you need it's your job then to educate them and keep them in on the journey with you right so the first 30 days is really important from like the onboarding sequence of how do they feel connected to the brand?

23:44How do they feel educated around the problem space that you're going after, how your product solves it? And what is it like things like the benefits and usage and when should they see those things? Right. So I think that's, I really tell people focus on order one, order two. Right. And then you can order like order three should be like 45 % or plus, right. And onwards. But if you fix those, like the first, let's say a couple orders that has huge impacts because by then you have a group of people who like the product have been using it for a while and they'll stay with you at a high way higher clip than if you hadn't fixed those groups so that that's what i would go after first

24:19Oisin O'Connor:and then the other question i was going to say is how do you like how do the best brands who do this how do they tackle it right like do you what tools does recharge have in there to like you know kind of monitor it the and like you mentioned analytics are such a big piece so like how do the brands actually tackle this, assuming that, you know, okay, I see that my numbers are maybe a little bit below that 70 mark or that 45 mark after month two and three, I want to get in there. You know, do you guys integrate with other tools so that people can like, like a Klaviyo or something? Like, what is the, what does the picture look like to say, okay, now we want to take action here.

24:56Oisin O'Connor:How do we improve it? Yeah, totally. Totally. Yeah. And I think our goal is to be like the best partner to help you retain your customers, right? Fundamentally, Like that's our mission. And by doing that, we want to be that retention platform in a lot of ways with subscriptions at the core. And so for us, it's like one, we got to give you the analytics so that you have the data to understand like, oh, hey, here's my cohorts that I'm acquiring. Here's how they're, you know, churning out month one, month two, month three or between orders. Right. Two, once we give you the data and then we also give you the benchmarks to understand, OK, here's what your business, what's happening in your business.

25:32Here's what, you know, the industry looks like within your category, right? And we have 30 ,000 merchants, so we can give you a pretty clear view of that insight. We then give you the tools then to help retain, right? And so, like, the key tools are here is, like, things like cancellation prevention. So when people go to cancel, how do you deal with that, right? How do you use that as a push point to gather data, to educate the shopper, to potentially give offers? So the cancellation flows. things like the upcoming order emails, we actually launched those out so that they're the first class in the user experience for the shopper to manage subscriptions.

26:13We have a lot of people, you know, 90 % of our customers use other email solutions like Klaviyo for like more campaign-based things. But we see more and more people want to use our email pages because what happens is, let's say you email a customer about their upcoming order. You really want to make it so that it's easy for them to skip a date. or to change the product and not have to like log into a website to figure that out. Right. And so because it's congruent, it's in one place, we allow you to do that. Another thing that we allow you is rewards. Right. So another big tactic that people want to do is as people get to order two, three, four, how do you reward the person so they feel connected to the brand and they feel locked into the program?

26:55Right. So we also provide that loyalty suite as well.

26:58Oisin O'Connor:Yeah. And another Another cool one that, you know, we've had the pleasure of leveraging is the automate flow. So maybe you talk about that a little bit in terms of like, so I mean, at least on the logistics side, you know, when you're dealing with 3PL or something like that, maybe, you know, in our case, we've got a certain type that goes out in the first order of a subscription. And then afterwards, there's a second type. And if you don't have ways to, you know, make adjustments like that in an automated fashion your 3pl is going to get really mad at you so you just tell us a little bit about like the flows and the automated side of things that you guys are doing yeah totally so we yeah we have a whole automate product which is like basically like very much like shopify flows where it helps all the back-end processes of like swapping out products changing tags the stuff the nuts and bolts to make your subscription program work so that's also really important um and then One actually that I did mention that we're really excited about is that we've launched an AI concierge for shoppers.

27:59So the biggest issue that we see in retention is the end shopper has a hard time managing orders. And we can all think about this as a shopper ourselves is oftentimes the issue you subscribe to these physical products, you end up getting too much of the product or you get versions of the product you don't want. and then you get frustrated and you cancel, right? And we see this in the data is like people that log into the customer portal, over 40 % of them want to cancel. When they cancel, you know, two thirds say either it was, you know, basically they weren't on the right product or they had too much of that product.

28:34And so what we actually have launched out now is the AI concierge is as you buy the product and you subscribe, you get notifications via SMS and then you can chat with the SMS to manage everything, right? Which has been a game changer on not only retention of these cohorts for shoppers, but we've also seen like when we survey shoppers using this tool, 93 % of them say it's essential. Like they wouldn't order or manage subscriptions without that tool. Wow.

29:05Oisin O'Connor:So basically the way it works is you guys are integrating with the SMS. So like orders go out, it can SMS text the customer, And then you have an AI layer that's interfacing between Recharge and the actual subscriptions and behaviors that they have set up and the customer in a super easy to deal with way. If someone says, hey, I'm out of town for a week. Can you change my order? It'll be like, oh, cool. I bumped your order a week. Or you're like, hey, this flavor isn't working out. What are the flavors you got? It gives you recommendations and you can choose your recommendations. Like, cool, I've updated your upcoming order.

29:39Things like that.

29:40Oisin O'Connor:And this area is super. And this is what always gets me about like the e-commerce enablement system is like there's so many like customer touch points and they always like overlap. And you've got like this overlap between what's happening in subscription, what's happening in support, what's happening in conversion, what's happening at the Shopify level. Like it's also like intertwined, like in this example, right? Like, you know, so much of like CX, like when customers reach out, it's like, hey, can you update my subscription or hey, can you help me here? And then the customer support real person or agent has to go take action.

30:14Oisin O'Connor:But, you know, developing tools and giving the merchants the way that like they can, you know, the AI can handle this like that. You're saving so much time just by being able to to do something like that with the customer. Right. A hundred percent. Yeah. Yeah, so like definitely like, you know, we see it significantly drops the custom support tickets that merchants have. Right. So that's a cost and that's like time. Also, it just delights the end shopper. Right. And like, you know, when I talk about like, you know, these like when I see these like more legacy subscription companies that move to us is the fact that they still have these cohorts, you know, 15, 20 percent of people there.

30:51They're buying decades later. That is the true value of these subscription businesses. Right. And that's the true uncompetitive dynamic that they build up. And I think so many people in commerce are really short-sighted because they've been built on this model. Like, I do a Facebook ad. I make a sale. I make a bit of money. And they're thinking day-to-day, which they have to because they have a hard time to get cash flow and so competitive. But I really think that the businesses that I see are going to be truly great companies are thinking decades outwards of like, oh, cool, we're going to build up this brand.

31:29We're going to have all these subscribers. We're going to build a great, delightful experience where people just won't turn off them. And they'll be using this for decades. And we paid whatever,$50,$70 for acquisition up front. And we make everything else as gravy.

31:43Oisin O'Connor:Yeah. No, it's awesome. And then I think the other point there that's just so important is like, you know, customers or people like they don't really care about software, like even recharge. Like before it was like, oh, you've got a customer portal where they can go in and they can update their frequency. But like at the end of the day, like when a customer wants their thing updated, they just want it updated. They don't want to like they're like, oh, yes, you can have a support agent tell them, hey, go into your portal and do this. But if they get a text and they're like, yeah, update it, like they're happy.

32:11Oisin O'Connor:The brand's happy. Less work for everyone on both sides and better experience. Right. Yeah. And it's so funny. It's like, I think people in our industry need to think more about their own shopping experiences and what they like, you know, and geared towards that because it's like, it's that simple. It's like, we're the end consumer and we all get frustrated when things are hard to manage, right? Like I can tell you right now, if I'm on a subscription and they ship me a bunch of products I don't want, by order three, I'm like, forget this brand. I'm out. I'm done. You know, and maybe I'll come back to it at some point.

32:44But what happens is I then like rage quit. I go into the post number portal. I quit. And then I'm on my Instagram or TikTok and someone starts talking to me about the same product or same problem with a different product. And I buy from them. I'm like, oh, I'll try these guys out. Maybe the experience will be different. it. And yeah, it's just really interesting. It's like, I think the truly big, great companies on us really think about customer experience a lot. Maybe that's also something just at the core.

33:12Oisin O'Connor:Yeah. And when you think about customer experience, it's everything. It touches every platform. It's not just the product. It's also the email communication from the top of funnel stuff you might be doing from when you acquire them to like the email campaigns you might be running in something like Klaviyo to the experience. Like, you know, subscription is such an important experience because like there's everyone knows like there's nothing worse than dealing with a subscription that you don't want to be on that you're getting charged for right so like but that's part of the customer experience i think that's that's a that's that that's a super spot on take the next thing i want to ask about and just get some clarity on because like we're talking about it's like this landscape is so complex with all these different tools they all have functions that sort of overlap even in the subscription space right like you guys aren't the only player.

33:56Oisin O'Connor:You guys are scaled up. Congrats on hitting the 100 million subscriber and ARR milestone. That's amazing. But tell me a little bit about the subscription landscape. What is it that you guys do? Where are the other players? How do you guys see this landscape evolving? Yeah, totally. So I think, number one, we always want to be the best partner for brands and entrepreneurs and builders to scale, right? And to start and scale, really, right? And so I think part of that is we want to be the best on innovation and R &D because you need the best solution. But we also want to be the best in support and guidance.

34:33Right. And so I think when I think on those those pillars, right, of like innovation, support and guidance, I think from a innovation perspective, you know, the reality is we power 75 percent of all subscriptions on Shopify. And we're the one, you know, our next biggest competitor, we're probably 10x the size them. So we just pile more money into innovation and we're in it for the long run, right? We're, you know, we've been doing this for a decade. I love working with entrepreneurs and builders. I want to do it for decades forward. So we're in that long run part, long-term partner for people, right?

35:09So that's our goal. And then I think on the guidance side, because we have so much data and because we see so much, it's my belief that we can also then become the best partner in giving you guidance on what you should do because we just see everything, right? And then support, we have to be great support just like everybody else. So I'm always, I'm never like focused on competitors because I think you need to be focused on the problems of the brands and the merchants you serve, right? But I think competition helps you become stronger, right? Yeah.

35:41Oisin O'Connor:And it might push you in different ways and give you the nudges that, you know, this is something that the market wants. But like to your earlier point, I think that what you said about guidance, is like so important because a lot of times brands like you guys it's it's almost like you know like when you're operating you said you guys started almost like as a little agency well even when you're an agency versus one brand you're seeing like 10 brands and how those 10 brands are like doing things so you've got like more data points to operate versus one and you guys at recharge you scale you said you you're serving 30 000 brands across like 100 million subscriptions so you see it and like i think one of the cool parts like even when you know we'd chat with the team, they'd be like, hey, guys, here's the benchmarks.

36:20Oisin O'Connor:Like, here's a couple like quick wins that, you know, you guys obviously aren't doing. Just turn them on. And we'd turn them on. And all of a sudden, like revenue would go up. You know what I mean? So like just having that like data and perspective and confidence to be like, this is kind of what you need to do and this will help you and this is best practice. It goes a long way. Totally. Yeah. And I think and then we because we see everything that's happening, we're then able to innovate faster because we then take the best practices and we bring it into the product. You know, because and, you know, it's been interesting.

36:52I was looking at the data today of all the products that we've launched in the last year. The incremental lift on merchants has been over a billion dollars.

37:00Oisin O'Connor:That's insane. Right. But all those products at the core started with us seeing what our merchants were doing, what was working, what was not, and then bringing those into the product so that we can better help accelerate the ecosystem, right? And I think in a lot of ways, that's how we want to be the best partners. We want to be not only hands-on from support perspective, but also that guidance and then also that innovation and product. No, absolutely. And the other questions I have for you is like, where do you see this space evolving to? Like what's next for Recharge? You know, you talk about innovation, different products that like excite you solving these like customer points.

37:39Oisin O'Connor:Like where are we headed in subscription? like you know call it like the mvp like you said it was like oh someone just wanted to be able to differentiate between a one-time product and a subscription product and now you hit these complex like landers with all sorts of customizations and personalizations um where do you see subscription going and what's kind of like on your roadmap as you think about continuing to uh you know build in the space yeah totally so i think like first i look at where merchants are and where they're going right so that's like my first my north star is the brands right and the merchants.

38:13So I think right now, life is hard, right? Like everybody has a million things they got to figure out, a million different systems, you know, especially in our categories, a lot of people have to like not only get D2C right, they got to get Amazon right, they got to get retail right. So things are just really complex, right? And I think what we see is people want more of a partner in that journey, right? More from a hands-on perspective, from, you know, product innovation, all that stuff. And I think from ours, they don't want to partner just like, hey, can you handle my subscription billing? They fundamentally want a partner of like, hey, how do I retain customers?

38:53You know, how do I keep my customers in for the long run? And what can you do to solve that? Of course, subscription is at the core of that, but that's the relationship they want with us, right? And so then when I think about that is like from us is like, hey, what do we need to do from a, you know, our account managers and guidance perspective, just like hands on like people almost like giving them more services to help them and support to from the product is we've been bringing in more of the data. Right. So we brought in we have all your one time data and your subscription data. Our goal is to bring in more data to give you that full picture of what retention looks like.

39:30Right. So you can know what's going. and then we also want to bring in the tools that drive retention right so you know we've launched a suite of tools around how do you convert people into subscriptions from the product page the cart to the checkout to the post checkout so we want to help you better convert we also launched a bunch of tools on basically how do you retain people right which is like loyalty and churn tools and fail payments and all that stuff and then now i think with the concierge ai concierge how do you communicate to your subscribers to lock them in better, right?

40:01Oisin O'Connor:On that journey. So I think that's our goal is to be the retention platform. And there's many pillars that lead into that. Yeah. And it's so cool how you started as like the subscription platform and that's like your core thing. But at the end of the day, that's what you're serving is like retention, which drives growth. And it's like a key part of the business. So the last question I have for you is, you know, for founders, right, who might be like thinking about launching a brand, maybe they have a brand. Well, I actually have two questions. The first one is like, what is the biggest mistake that like founders or like brand operators typically make when it comes to subscriptions?

40:38Well, I think first is they don't get that product, right? So I think first, first focus on the product, right? That you're making. Do customers love it? All that. Is it a repeated formula? Then I think the first, after that, again, it's acquisition, right? How do you create the funnel to push people to subscriptions? And I actually think when it comes to acquisition, what people do is they over-discount for people to subscribe oftentimes. And they don't make subscription by default. Those are the two easiest things. And it's actually interesting. We look at the data. If you make subscription by default, it converts 3x more people into subscriptions.

41:18If you move from a 10 % discount to a 20 % discount, it only improves it by 2%. Wow.

41:24Oisin O'Connor:That's wild. I had no idea. Our products were 20 % for its subscription. I may have to test that. Yeah, what you've done is you now have given a 10 % discount margin to these people forever for the lifetime when you didn't have to do it. So, yeah, no, that's super fair. Yeah. And the second thing that I was going to ask that, like, kind of pairs up with with what we're just talking about or what kind of experiments, you know, if you had like a one or two sort of experiments that founders should be running or testing with recharge, like what would those be aside from like turning on subscriptions in the first place?

41:58Yeah, I mean, I think the experiments, I would be first, I would focus on top of funnel. I'd be like subscription by default. I would add upsells to subscription. You can use our car checkout, post checkout tool or another one for that. So that'd be my first, right? And then I would be looking at the data of what the retention is and lifetime value of that. I then would experiment on how to keep people in the program, right? Because like, you don't want to scale the thing up too quickly and have a leaky bucket. So then I would experiment with like, okay, cancellation prevention. When people go to cancel, how do I educate them about the product, right?

42:34And like tell those founder stories. I would also experiment with the first 30 days, how to educate the person as well.

42:40Oisin O'Connor:No, I love that. Super sound advice. Appreciate you coming on. And for anyone who's looking to learn more about yourself all along, I love the content that you've also been posting on LinkedIn. Like, where do we connect with you? Why don't you just shout out your socials and where people can find out more about you and recharge? Totally. So feel free to always hit me up on LinkedIn or X. So LinkedIn is just my name. Pretty unique. So and X, it's a O-I-S-I-N-O. I always have my DMs open. I always love to hear from entrepreneurs, builders, people, you know, scaling businesses. I also keep my Fridays open for just calls with merchants because that's like the lightblood of like why we exist and who we want to help and partner with.

43:27So always down to chat, always down to like give back to the community. And yeah, that's awesome.

43:33Oisin O'Connor:I love that. And even as just like a builder, like thinking about it, like keeping Fridays open and staying close to the customer. That's a great one. So appreciate the time. Cool. Awesome. Thanks so much. If you enjoyed the show, we'd love your support. A rating and review would go a long way as we continue to host the best builders in DTC and beyond. Follow and subscribe to the show and make sure to check out our show notes where you can find our socials and weekly newsletter. Visit us on DTCpod.com to join our founder community and access resources from every episode. We'll see you on the next pod.