"Why Do 3 Out of 4 of My Customers Cancel?" — Transcript

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1. 0:00I sell a monthly meat subscription box
2. 0:02to chronically ill and health conscious
3. 0:03people and we launched five months ago
4. 0:07and we are currently doing like 33k per
5. 0:10month in revenue.
6. 0:11>> So this is a brand new thing that you
7. 0:12just started?
8. 0:14>> Yes, that's right. And my question is
9. 0:16about churn.
10. 0:17>> Okay.
11. 0:18>> Because customers who stay past the
12. 0:20first couple of months tend to stick.
13. 0:22For example, our very first group of
14. 0:24customers from five months ago
15. 0:26they just placed their fourth order and
16. 0:28churn from last month to this month was
17. 0:31only 16%.
18. 0:33>> I mean
19. 0:34>> but new customers churn a lot after
20. 0:37their first month.
21. 0:39From the group that bought for the first
22. 0:41time last month, 75% did not buy a
23. 0:44second box.
24. 0:45>> Okay.
25. 0:47>> So the question is what should I do to
26. 0:48specifically reduce the churn between
27. 0:50the first and second month of the
28. 0:52subscription?
29. 0:55>> What do you want to do with this
30. 0:56business?
31. 0:59>> Well, this is one of the first business
32. 1:00that I wanted to do something that would
33. 1:02compound because before I was
34. 1:05in social education
35. 1:07one course that I would have to promote
36. 1:09all over
37. 1:10and over again.
38. 1:11>> Yeah, yeah, I got you.
39. 1:13All right. Um
40. 1:16>> And I'm sorry just a little reminder, I
41. 1:18hear myself double in the phone.
42. 1:21>> Good to know. Sorry about that. Can you
43. 1:22hear me without hearing the double?
44. 1:25>> Yeah, I hear you perfectly.
45. 1:26>> so I'll just I'll do more of the
46. 1:28talking. How about that?
47. 1:29Um
48. 1:31Okay. So here's the deal.
49. 1:34You're you're selling like wellness
50. 1:36boxes to people who are sick, right?
51. 1:39>> Yes.
52. 1:39>> Okay, got it.
53. 1:41Um
54. 1:44Is it a changing thing every month like
55. 1:46what's inside of it?
56. 1:48>> Yeah, they they actually have to place
57. 1:50the order each month again.
58. 1:54>> They have to manually place it again?
59. 1:57>> Yes.
60. 1:57>> Oh, well, I mean that's I mean that's
61. 1:59thing number one. I mean it has to be
62. 2:00automatic. No one's going to want to do
63. 2:01that every month.
64. 2:04>> Yeah.
65. 2:05>> So, I would just say like have a default
66. 2:06box and they can choose to edit it if
67. 2:08they want to, but like you send a
68. 2:09default box to everybody.
69. 2:11Even if it's new. Does that make sense?
70. 2:12>> Okay.
71. 2:14>> So, that's the thing number one. Um but
72. 2:15what the reason I asked like what do you
73. 2:17want to have happen with this business?
74. 2:18Is this all drop shipped or is this like
75. 2:19you have a warehouse full of like
76. 2:20goodies?
77. 2:23>> Uh
78. 2:24we have we have uh rented a warehouse
79. 2:26and we have farmers
80. 2:29who who sell the sheep who sell the meat
81. 2:31to us.
82. 2:33>> Okay, so it's meat.
83. 2:37>> I'm sorry. I I just hear Yeah, good.
84. 2:39>> It's meat?
85. 2:40>> just hearing sound.
86. 2:41>> Uh got it. Okay, so these are meat
87. 2:43boxes. This is like ButcherBox.
88. 2:45>> Yeah, yeah, it's exactly like
89. 2:46ButcherBox.
90. 2:48>> Got [laughter] it. Okay, I understood.
91. 2:50Um
92. 2:51avatar selection seemed really
93. 2:52important, number one. Number two, so
94. 2:55it's like if you go to poor people, they
95. 2:57will turn out because they basically
96. 2:59bought you for a one-time discounted
97. 3:00like steak or whatever.
98. 3:02Um you want to be positioning against
99. 3:04groceries and like their source of food.
100. 3:07Um
101. 3:08and you'll probably need a mix of
102. 3:12different meats. It is very elastic from
103. 3:14a pricing perspective, which I don't
104. 3:15love. Um I'm pretty sure like actually I
105. 3:19don't know if I'm under NDA.
106. 3:21Well, I've seen very big ones of these
107. 3:22and they run paper thin margins.
108. 3:26>> Mhm.
109. 3:27>> So, I don't know if this like I'm being
110. 3:28like really real with you. I don't know
111. 3:29if this is like, "Hey, I want to just
112. 3:31have like
113. 3:33it's tough because people's people's
114. 3:34flavors change, their palate change.
115. 3:36This isn't me trying to tell you not to
116. 3:37do this business, but like this is going
117. 3:39to be a hard business that will eat
118. 3:40capital for a long time.
119. 3:44>> We actually didn't have to invest
120. 3:46anything into that.
121. 3:47>> Uh-huh.
122. 3:51>> We have like third-party logistics we
123. 3:53just
124. 3:54Yeah. People people pay to us and then
125. 3:55we go buy the meat.
126. 3:57>> Yeah. Yeah. Yeah.
127. 3:57No, I get it.
128. 3:59Um okay, so number one is that you have
129. 4:01to give them a sample box every month
130. 4:03and just have them uh agree to the this
131. 4:05the mix of meats. That'll be much easier
132. 4:07for you and make everybody do the
133. 4:09default there. Um I'm assuming the next
134. 4:12issue is that people will
135. 4:14basically feel like they already have
136. 4:15enough meat.
137. 4:17So they don't need more. And so before
138. 4:19they do their subscription, you need to
139. 4:20text them and tell them like they have
140. 4:22the option of skipping uh skipping a
141. 4:24month and so it can go every other
142. 4:26month. Um or like they can change their
143. 4:28order via text if they want to just like
144. 4:31cut the cut the portions down in half.
145. 4:33Both of those are viable and they have
146. 4:34to be able to do that conveniently.
147. 4:36Um but I think the biggest thing though
148. 4:38is going to be how they're being sold.
149. 4:41If it's sold fun only based on like
150. 4:44Is it Is it Is it mostly sold on the
151. 4:46discount, the fact that it's cheaper to
152. 4:47buy it this way?
153. 4:49>> No, no, no. It's quite opposite,
154. 4:51actually.
155. 4:51>> Okay.
156. 4:52>> We We called it bet- better meat.
157. 4:54>> Okay.
158. 4:55>> And we just sell at a premium.
159. 4:58>> Okay.
160. 4:58>> those from the farmers, pasture-raised,
161. 5:01and everything.
162. 5:01>> Cool. Then what was the number one
163. 5:02reason that people canceled?
164. 5:04Or did they just not reorder?
165. 5:08>> We We just did a survey and
166. 5:11there were two reasons. First one was
167. 5:13that they were not able to curate their
168. 5:15box and second was price.
169. 5:21>> Got it. Okay.
170. 5:23So I would sell on the meat being
171. 5:25superior as obviously the strong angle,
172. 5:27which you already have, which is good.
173. 5:29Um
174. 5:31from the customization, I think you have
175. 5:33to make it easier. So it's like you will
176. 5:34get the default box and you can edit it
177. 5:36via text. No one wants to like log in
178. 5:38and do it. I'm just telling you right
179. 5:39now. So I think you could just have an
180. 5:41agent that receives it and then and then
181. 5:43edits the orders in the back. That's
182. 5:44super for now.
183. 5:46Um so there's that. I think editing the
184. 5:49the system flow. In terms of the
185. 5:50pricing,
186. 5:51normally I ignore people who say price
187. 5:53stuff, but when it comes to food, it is
188. 5:55so elastic um, in terms of pricing. So,
189. 5:58it may be like a are you pricing it by
190. 6:00pound?
191. 6:03>> No, we just price it per per box.
192. 6:06>> Yeah.
193. 6:07I would the nice thing that you can do
194. 6:08is you can probably put cuz it's not
195. 6:10going to cuz you're you're just getting
196. 6:11started with this new business. Um, I
197. 6:13would consider price testing try Like do
198. 6:15this first stuff first, right? Add in
199. 6:18add in the the the like a default box
200. 6:21that they can change whenever they want.
201. 6:22Add the text in ahead of time so they
202. 6:24can skip. They can cut the portions in
203. 6:25half or add it all in that one flow.
204. 6:27That's the first thing that I would do.
205. 6:30Beyond that,
206. 6:31um,
207. 6:32I would test
208. 6:33funnels that are like maybe like
209. 6:36quarterly shipments cuz that'll also
210. 6:38help you offset CAC cuz you'll be able
211. 6:39to get more cash up front and it'll be
212. 6:41less frequent. So, that's another option
213. 6:44that probably be [clears throat] like
214. 6:45test number two that will allow you to
215. 6:46scale more that will probably allow you
216. 6:48to scale faster.
217. 6:50Um, and um,
218. 6:54number cuz you could also basically
219. 6:56think about this way is like you could
220. 6:57have the subscription
221. 6:59renew on a different cadence than the
222. 7:01boxes are being shipped. Does that make
223. 7:03sense?
224. 7:05>> Yes.
225. 7:06>> So, that that's probably like I know I'm
226. 7:08giving you to but like you have one
227. 7:09clear thing which is meat. So, a lot of
228. 7:11the a lot of the tests are going to be
229. 7:12like kind of like pricing and offer
230. 7:14driven. Um, but these are the things
231. 7:16that I'd be looking at.
232. 7:17>> Can Can I just add
233. 7:19Uh, we tested the pricing because
234. 7:22very first months we calculated per
235. 7:24early and we had to increase the price
236. 7:26and we did it in AB test and it was like
237. 7:28plus 35% and plus 50%.
238. 7:32And now we see that those with 50% churn
239. 7:35less.
240. 7:36>> Churn less. Okay, so this is good. So,
241. 7:38what it is is basically what so before I
242. 7:40don't know. I mean, the day the sample
243. 7:42size seems kind of small given the
244. 7:43revenue. So, I don't know if it's
245. 7:44statistically significant. So, I'll
246. 7:46probably just keep running that. But, if
247. 7:48the 50 keeps winning,
248. 7:50then what that would indicate to me is
249. 7:51an avatar thing. So, that means that you
250. 7:53need to lean more in terms of the
251. 7:55creative on the types of people who
252. 7:58resemble the ideal customer more.
253. 8:02>> Mhm.
254. 8:03>> So, it's like we need to target those
255. 8:04people and we need messaging that
256. 8:05resonates more with that person. And so,
257. 8:07it might I mean, you might find that 50
258. 8:09and that 100% boost actually goes even
259. 8:11higher because they just want the best
260. 8:12stuff.
261. 8:14>> Mhm.
262. 8:14>> Does that make sense? Like, if you
263. 8:15become a stre- like, I'll tell you a
264. 8:17completely different example, but like
265. 8:18in the gym world, when we had
266. 8:20memberships that were like at $300 a
267. 8:22month, it was a price point that was
268. 8:25like a stretch for a middle-class
269. 8:28person, but too cheap for a rich person.
270. 8:31It sort of kind of gets in this no man's
271. 8:32land. And so, you might find that plus
272. 8:3375 even performs better than 50. Again,
273. 8:36if this data holds.
274. 8:39>> Yeah. It It's holding for 2 months
275. 8:41already, and we are at the top of the
276. 8:43market right now.
277. 8:44>> Okay. Then, there might be a position
278. 8:46for you to continue to raise the price
279. 8:47so that they can associate with premium.
280. 8:49And just say And I would say like, in
281. 8:51then if that becomes the position, then
282. 8:53all my copy in the ads is like, "We are
283. 8:55not the cheapest meat. In fact, we're
284. 8:57the most expensive you can find, but
285. 8:58that's because we're the best. And meat
286. 9:01is probably the most meaty thing that
287. 9:03you're eating as a portion of your diet.
288. 9:05And so, you should probably think about
289. 9:07like every single calorie that you eat
290. 9:08is what your body gets made of. It's
291. 9:10like, wouldn't you want to eat the best
292. 9:11stuff?"
293. 9:13>> Mhm.
294. 9:14>> So, those are probably the marketing
295. 9:15angles I would take. I would experiment
296. 9:17with the different billing cycles, and
297. 9:18for sure I'd add in the AI agent.
298. 9:20There's part of you that's probably
299. 9:22going to be afraid of like texting them
300. 9:23before the billing, but you have to just
301. 9:25get rid of all of that. You want to just
302. 9:27have a product that people want to keep
303. 9:28subscribing, not that they forget about
304. 9:30it.
305. 9:31>> Yeah. Yeah. Yeah. Yeah. No, no, it's
306. 9:33okay because anyway, in Czech Republic,
307. 9:35we have to remind them before before the
308. 9:37charge.
309. 9:38>> Even better. So, yeah, that like I would
310. 9:40have the AI agent allow them and then I
311. 9:41would really strongly consider switching
312. 9:43to a quarterly billing cycle
313. 9:45um as a test and then you and you
314. 9:48deliver them weekly or whatever.
315. 9:51>> Yeah.
316. 9:52Makes sense.
317. 9:54Makes sense. And and focus on the avatar
318. 9:57on the higher avatar.
319. 9:58>> that's what it's I mean that's what it's
320. 9:59showing very clearly. It's the richer
321. 10:01people who want it so then like keep
322. 10:03honestly I'll keep going until they they
323. 10:05they tell me no.
324. 10:08>> Mhm.
325. 10:08>> So, like if if this test concludes
326. 10:12>> So, when this test concludes between
327. 10:13plus 30 and plus 50, you might have a
328. 10:15plus 50 versus a plus 75 and run that
329. 10:18test.
330. 10:19>> Yeah.
331. 10:21I understood.
332. 10:22>> Even if it's the same it's like it's a
333. 10:23huge amount of extra profit.
334. 10:26>> Yeah, yeah, yeah.
335. 10:27>> Cool.
336. 10:28>> It is.
337. 10:30Thank you.
338. 10:31>> Appreciate you, man.
339. 10:33>> Thank you very much. See you. Have a
340. 10:34great day.
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