Pros and Cons of a Subscription Model for Local Services?

Avid Learner · May 30, 2015

Rather than continuing the following conversation in another's thread, thought I'd post it here for continued discussion...

JonnyMehoff said:
On topic of orm, the idea of having the multiple layers of subscription, is so they can downgrade instead of fully ending services...

originalposter said:
Instead of 'downgrading', you should also upsell them on our services you offer - such as social media management, web development, seo, ppc management and more. Think 'growth'!

JonnyMehoff said:
I use the term downgrade, only for the review funnel cost, as most of the stuff we are talking about now, are additions to the original concept of a review funnel. Everything should be considered a stand alone service, after an "initial blitz" package. A taste of it all, with evergreen subscription, meaning they are itemized, and an option for client customization in case they feel they don't need one thing or another. Lifetime value and subscription, should be the goal, as that is a predictable profit stream. If you have ten options and they cancel one, you are still retaining them with nine other "products." If you only sell as a single package, they will be reluctant after they are put on a positive track, and think you only offer a limited value per dollar as a "redemption" service. It's obviously easier to maintain speed, than to accelerate, so why should the cost stay the same when the client is no longer in the hot seat?

JonnyMehoff said:
I'm thinking of it like buying a car from a dealership. You done continue to pay full price. But you then have things you can buy afterwards. The bad reviews are like needing to replace a transmission. The subscription, is the preventative maintenance, to keep the transmission in good condition. Would YOU pay full price for a transmission every time you changed its fluids? Or replace an engine costing the same as an oil change after??

I will add my comments shortly.

Deleted member 855230 · May 30, 2015

Hey hey! I'm here to hijack this one too! Oh wait... This one is the theory thread... I'll put my thoughts into presentable formatting, in order to try to keep the meat on the front page of the thread... Hopefully I get to it before I can't edit this post..

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Avid Learner · May 30, 2015

If I get what you are saying, Jonny, it is that the "downgrade" is really the maintenance package, after the initial investment for service "A", whatever "A" may be on your initial sales blitz. For example, it could be on-site SEO optimization is the initial package and the maintenance package might be loading new content and optimizing it. Is this correct?

Maybe I don't understand that concept fully, but with this understanding, I'd be a bit concerned about some things:

1) Too many "stand alone" services, which can be confusing to clients, especially those who are not sophisticated buyers.

Code:

http://www.businessinsider.com/too-many-choices-are-bad-for-business-2012-12?op=1

2) That "itemized" packages lend themselves to commoditization, which leads to competition based on price (vs value add).

3) Having the clients self select/determine what they want, leaves out the consultative process. How do they know what they need, and what will achieve the results they are expecting? Too easy for them to get unrealistic on expected results and decide to look for alternatives.

A quick search on "seo nyc" and "orm nyc", the top firms listed in the results, if that's anything to go by, don't go into much detail between their different offerings. They do make it clear what they each are about, but that's pretty much it. On the other hand, just because they are doing it that way, doesn't mean that is the right way or only way.

Edit: I see you posted that you were going to add more detail...looking forward to it.

Deleted member 855230 · May 30, 2015

I'm on my phone at my day job, so I can't get too deep in detail, as typing with a rogue auto correct is difficult, to describe politely. And as a cnc machinist, every once in a while, the machine gets done doing its job so I am forced to stop screwing around and to do a little more work.

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Deleted member 855230 · May 30, 2015

Avid Learner said:
If I get what you are saying, Jonny, it is that the "downgrade" is really the maintenance package, after the initial investment for service "A", whatever "A" may be on your initial sales blitz. For example, it could be on-site SEO optimization is the initial package and the maintenance package might be loading new content and optimizing it. Is this correct?

Maybe I don't understand that concept fully, but with this understanding, I'd be a bit concerned about some things:

1) Too many "stand alone" services, which can be confusing to clients, especially those who are not sophisticated buyers.

Code:

http://www.businessinsider.com/too-many-choices-are-bad-for-business-2012-12?op=1

2) That "itemized" packages lend themselves to commoditization, which leads to competition based on price (vs value add).

3) Having the clients self select/determine what they want, leaves out the consultative process. How do they know what they need, and what will achieve the results they are expecting? Too easy for them to get unrealistic on expected results and decide to look for alternatives.

A quick search on "seo nyc" and "orm nyc", the top firms listed in the results, if that's anything to go by, don't go into much detail between their different offerings. They do make it clear what they each are about, but that's pretty much it. On the other hand, just because they are doing it that way, doesn't mean that is the right way or only way.

Edit: I see you posted that you were going to add more detail...looking forward to it.

To respond, I see your point and concern. The example of ten, is just that: a number I pulled from my pocket. Realistically, I couldn't think of ten things! I would stick with three packages. The universe likes things in sets of three and MOST studies I've come across, people want the biggest best options possible.

We are a competitive species for sure. Who brags about being fiscally responsible when buying a sports car? V6 mustang? Give me a break. Tell me about your big block supercharged drag monster. I don't care about fuel economics. The same goes with tv's, homes, anything of value.

Why do I mention this? Because business owners want a competetive edge. The "works" is what you will probably have people remain subscribed to.

The other lower levels, are for the owners who are hesitant at your continued services.

Hell, maybe you only have two levels, and the third, is your safety net, to catch the people who try to end subscriptions. Give them an offer of half off for 3 months of your "custom just for them" package to retain them.

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Deleted member 855230 · May 30, 2015

An example I just read, a company called raz*war started with a subscription for razor blades. They had three levels. Forgot the names, but it was like: "businessman, professional, and executive."
Most of the guys chose executive! We all want the best service. They turned it into a huge business. Now they have expanded, and are trying to take over the man's bathroom. Their second subscription service is disposable wipes, that aren't all frufru like the ones for women and children.

The levels of subscription, are selling the BENEFITS, and NOT the features. That is how to get away with multiple services, without the "I can find it better elsewhere"

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phpprogrammer · May 30, 2015

hey! I'm here to kidnap them too! Oh wait ... this is the theory thread ... I'm going to put my thoughts in presentable format to try to keep the meat on the front page of the thread ... Hopefully I get it before I 't this post ..

Deleted member 855230 · May 30, 2015

phpprogrammer said:
hey! I'm here to kidnap them too! Oh wait ... this is the theory thread ... I'm going to put my thoughts in presentable format to try to keep the meat on the front page of the thread ... Hopefully I get it before I 't this post ..

Did you just spin my comment, or are you subtly telling me to keep on track?

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phpprogrammer · May 30, 2015

hey! I'm here to kidnap her! Oh wait ... That's the theory thread ... I'm going to put my thoughts in presentable format to try to keep the meat on the front page of the thread ... Hopefully I get it before I 't this post ..

Deleted member 855230 · May 30, 2015

phpprogrammer said:
hey! I'm here to kidnap her! Oh wait ... That's the theory thread ... I'm going to put my thoughts in presentable format to try to keep the meat on the front page of the thread ... Hopefully I get it before I 't this post ..

Whew! That cleared some things up for me. Thanks for the quick reply.

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Avid Learner · May 30, 2015

JonnyMehoff said:
An example I just read, a company called raz*war started with a subscription for razor blades. They had three levels. Forgot the names, but it was like: "businessman, professional, and executive."

So, something similar to these examples (when searching "seo services chicago")?...

Code:

http://chicagoranking.com/affordable-seo-chicago/
http://www.designandpromote.com/our-seo-plans/

I didn't (on my quick search) find any plans like this for ORM related services, so stuck with SEO for now for tiered service plans. I've even seen some that make the middle box bigger and more colorful, as though to say "pick me".

I like the second one more as it more clearly delineates the differences vs the vagueness of "competitive terms". However, most SMB clients probably won't meaningfully know the differences in either case, but may well trigger on the marketing terms like "businessman" vs "executive" - kind of like how some drive through car washes label their packages.

Deleted member 855230 · May 30, 2015

The six month SILVER SEO campaign is ideal for smal to mid-sized, local and established companies looking to target 10-15 keywords with a moderate level of competition.

See anything wrong with the ad? No "time taken" to spell check or proof read? All credibility instantly gone. Hopefully they use spell check for the keyword that they are ranking for you. Otherwise you'll only rank for people who cant spell!

Although the design and promote site has clearly defined FEATURES, unless you are familiar with the industry, it is GREEK to many. Here's an example from my own little world of horsepower:

These cylinder heads flow 330CFM with a CSA of 2.25", a port centerline length of 5.21" and a total volume of 215cc. They will support up to 700HP on a minimum CID of 350 cubic inches, and 8,000 RPM with a 12.5:1 CR. The valves are 2.25" intake, 1.90" exhaust, and the valve guides are 8mm stems. Both valves are stainless steel, and the guides are bronze manganese.

Unless you know the intricacies of BUILDING ENGINES, a lot of that stuff is unnecessary. The only thing MOST PEOPLE will understand is this:
These cylinder heads will make 700 horsepower and rev to 8,000rpm! WOW!

The head should be described to sell the benefits, not the features:

With the properly sized engine, you can make up to 700 horsepower and rev to 8,000 RPM! Everything has been optimized for a 350 cubic inch short block with 12.5:1 compression ratio! You can run pump gas, and kick some ass! You will have one of the fastest cars on your block! No other heads on the market are going to make you as much horsepower, and turn as much RPM as ours. Call us today, so we can verify that your engine will be able to utilize these heads, as they are monsters when done properly, and are optimized for a very specific engine. If you have something smaller, or bigger, let's discuss different options to better OPTIMIZE your experience! We can determine what it will take to make your current engine have crisp throttle response, powerful acceleration, and generally just fast!

I just pulled the examples out of my pocket, but I hope I have described the difference of features vs benefits. Most people don't buy for the features. They buy because of how it will benefit them! Features are just for bragging rights after the fact.

Avid Learner · May 30, 2015

Fair enough (and I missed the misspelling - there is also the fact that they don't align the list to be easily comparable, but not looking for the best possible representative examples either).

Searched for others (again, not exhaustive) but haven't come up with any who offer tiered subscription packages that were differentiated, or sold by articulated benefits (instead of features). I see how that would stick out above the crowd.

On the flip side, it will take some great word craftsmanship to come up with tiers that don't end up setting open ended expectations.

Deleted member 855230 · May 30, 2015

Avid Learner said:
Fair enough (and I missed the misspelling - there is also the fact that they don't align the list to be easily comparable, but not looking for the best possible representative examples either).

Searched for others (again, not exhaustive) but haven't come up with any who offer tiered subscription packages that were differentiated, or sold by articulated benefits (instead of features). I see how that would stick out above the crowd.

On the flip side, it will take some great word craftsmanship to come up with tiers that don't end up setting open ended expectations.

Well this should be good news then. I don't want to enter a market and aim at whatever the rest are doing. I don't even want to raise the bar. I want to throw the bar out the window, and create my own standard. Imagine the first car with a suspension, vs solid axles attached to a rigid body!

The tricky part, is to develop a wildly successful method, without saturating the market. Hopefully, with this being in the " LOCAL " section, people will keep it local... I don't want to compete with my own clones! On that note, topic closed!

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Deleted member 855230 · May 31, 2015

A book that explains in great detail, subscription based businesses, I just finished reading:

The automatic customer, by John warrwillow.
Published this year, and talks about nine different styles and motivators for subscription. Highly recommended!

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Avid Learner · Jun 1, 2015

JonnyMehoff said:
The automatic customer, by John warrwillow.
Published this year, and talks about nine different styles and motivators for subscription. Highly recommended!

Thanks for the tip on the book!

Crap. His website has some stupid "GET is not supported" error. Maybe site is getting updated.

BTW, he also has "Built to Sell" and "Drilling for Gold". Automatic Customer is one of the success factors behind the model in "Built to Sell", so might be worth checking that out too.

Inventing something new in services is not quite analogous to inventing some new device or mechanical design. Reading through originalposter's thread(s) or T0mmy's, even some of 7878's stuff, and I'm not so sure they are NOT talking about a subscription type of model.

The difference is in how some implement it...

What I do see from most of the local seo/orm/etc companies I've come across, so far, is that most do focus on "features" and not enough focus on "benefits". However, the higher up the marketplace they aiim (say, upper Medium to Large Businesses), there are many that talk high level on benefits, but few talk subscription on their webpages - though I'm sure they engage in some term contracts. Overall, any package offerings, if not based on "features", tend to be boxed in on some sort of deliverable vs exclusively on benefit.

Will check out the book to see if there is an obvious wedge not being addressed here.

Deleted member 855230 · Jun 1, 2015

He mentions "built to sell," and that he wrote it first. He states that he wish he did automatic customer first, as when he was doing his research, his points of views changed drastically.

I cant remember off the top of my head, but I remember the common rule of thumb for selling/buying an established business is anywhere from 3:1 to 10:1 of annual revenue, when setting a reasonable price on selling your business.

He mentions subscription based models, blowing these standards out of the water, at around an average of 26:1 annual revenue! Incredible!

Also, after brainstorming out loud, with you on this thread, and others in the ORM thread, I've come across a company who does exactly what I've described. It just so happens to be endorsed / mentioned / included by Google, in their series "Zero Moment of Truth." The company is

Code:

http://www.bazaarvoice.com/

It looks like they've mastered the selling of benefits. They have a nice looking site too! I plan on emulating as much of their stuff as I can.

Avid Learner · Jun 1, 2015

JonnyMehoff said:
I've come across a company who does exactly what I've described. It just so happens to be endorsed / mentioned / included by Google, in their series "Zero Moment of Truth." The company is

Code:

http://www.bazaarvoice.com/

It looks like they've mastered the selling of benefits. They have a nice looking site too! I plan on emulating as much of their stuff as I can.

Interesting.

Looks like they've invested in developing a proprietary product (to monitor and manage customer reviews - they've since extended their offering) and wrap services around it, SAAS with a twist...

Code:

http://www.informationweek.com/software/social/why-bazaarvoice-believes-in-social-widgets/d/d-id/1098812
https://www.quora.com/Who-are-key-BazaarVoice-competitors-and-what-is-the-BazaarVoice-revenue-model?share=1

They definitely found a narrow niche within ORM and have exploited it well...now worth >$500M.

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