How to Price for Both B2B and B2C Subscriptions

Robbie K Baxter
31 min readOct 3, 2024

with American Home Shield’s Braeden Russell

Making pricing simple can be really complicated, especially in the world of subscriptions, where every pricing change can affect how much your members trust you. How do you manage different pricing for different segments? And how do you change that pricing over time?

American Home Shield’s Braeden Russell

Today’s guest, Braeden Russell, is the Director of Pricing for American Home Shield, a home warranty provider with over 2 million members. He needs to optimize the price for the realtors, who often gift the first year of coverage to new homeowners, with the pricing needs of the homeowners themselves, who will eventually be responsible for the relationship.

In this episode, you’ll learn how to balance the pricing needs of your B2B and B2C members, when to bill monthly versus annually, and how you can use pricing to drive loyalty among your best members.

The following interview is adapted from my podcast, Subscription Stories: True Tales from the Trenches.

Robbie Baxter: Braeden, welcome.

Braeden Russell: So happy to be here, Robbie. Thanks for having me.

Robbie Baxter: It’s great to have you, too.

To help people understand what American Home Shield is and what it is that they do there. If you could just give us a sense of what’s going on and what your work is like.

Braeden Russell: We’re a home warranty company. I think people confuse this with home insurance. We often see this really as more of a complimentary product. Home insurance, that’s typically done through a mortgage company, you build a lot altogether. And that’s going to cover lots of those natural disaster types of floods or any type of theft.

For our products with home warranties, we see this as much more of a complimentary product where we cover the things that you have inside the home that help keep it going. Your major systems like your HVAC, your plumbing, and your electrical systems, and we also cover your kitchen appliances, your washer and dryer. That full suite of home systems and appliances, and we also offer coverage for other things like your electronics inside your home. If you have a swimming pool, we also cover those things as well, so really, everything that home insurance policy does not cover. We step in and provide the coverage for those items and systems as well.

Robbie Baxter: Awesome. And how do people usually buy a home warranty?

Braeden Russell: The way that this industry was started and founded over 50 years ago was traditionally through a real estate transaction, so as that settlement process is happening, we partner with real estate agencies and realtors themselves to kind of make this part of the sale transaction. You go through all of your different coverages a lot. This really was founded on a seller providing it for a home buyer to help entice people to buy their home. We’ve changed throughout the home markets throughout the years, going back and forth between sellers, markets, and buyers markets. We have evolved this product into a direct-to-consumer channel as well. So we offer any type of consumer product on our website, ahs.com. We also offer over-the-phone purchases. Over the past 10 or 20 years, we have started to break into that direct-to-consumer space and move out of only having it attached to that real estate transaction and really kind of making it a consumer product that folks can seek out and purchase themselves, even if they’re not going through a home sale.

Robbie Baxter: Okay, so to summarize, and I’ll make sure that I got it. The home warranty is something that protects everything inside your home. Historically, this was a product that you would get as a gift from your realtor when you bought your home, particularly in buyer’s markets, to kind of sweeten the deal. And then they don’t buy it in perpetuity. They buy it for the first year for you.

Braeden Russell: Right. So all of our contracts are 12-month contracts. So for that home transaction, they would have it for their first year, and then traditionally, we’ll start that retention effort to keep that customer beyond their first year and get them into our life cycle and kind of turn them into a subscription ongoing customer with us.

Robbie Baxter: There’s a B2B side, which you just explained. That is where the realtor buys it on behalf of a home buyer. The home buyer gets to enjoy that coverage for free, as a gift for the first year, and then they’re brought into some kind of communication cycle with you to understand the value they’re getting and get them to renew at the end of the first period.

There’s also, as you said, a direct-to-consumer option that has become more popular. It wasn’t where you started, and that’s for people who buy it directly at the outset, so that might be someone familiar with your offering. Maybe they got it at their first home, but now they’re buying a second home, and maybe that realtor isn’t so generous and still wants that product.

So there are two ideas. And you come from the B2B side. Is that right?

Braeden Russell: I’m currently on the pricing side. I’m the Director of Pricing, I deal with both our D2C and our B2B channels, and our renewals channel. Kind of the whole customer book. The first 8 years at the company I spent in our product management department. And I focused primarily on that B2B product set, and we’ll get into some of this, but I do think there are a lot of nuances of you know how the products are built and positioned both from an offering and value standpoint and also that price point that gets attached with it. Coming from that kind of B2B side has helped me really root myself in the foundation of the business, understanding what the traditional thoughts and uses for this type of product are. But as we pivot more into the world’s moving to digital subscription, everything is just on your phone, immediately at your fingertips,it’s a far cry, really, from this real estate channel, where honestly, the majority of our real estate sales are still processed via like a faxed in application that comes with all of the closing documents. It’s all a very paper-based channel that takes a lot of time to make things happen. So it’s kind of the best of both worlds of being able to take a long look at life cycles and try to make these decisions for future success versus on the direct-to-consumer side.

Again, there’s not this long ramp-up of needing to make these types of decisions, and you can kind of move faster and learn quicker in that channel.

Robbie Baxter: It’s great. If you think of real estate, it’s a very traditional, paper-driven, and document-driven kind of business, and I would imagine also that warranties in the way that they might think about warranties would be different than the way a consumer would.

As a product person and now the pricing lead, how do you think about the challenges and the considerations when you’re structuring, packaging, and pricing the B2B offering?

Braeden Russell: Yeah, absolutely. For pricing, it is probably one of the biggest differences in how we approach it. Again on that B2B side, given how that transaction really happens, we are selling agents on the value of our product, who we need to turn around and then basically sell our product again to their clients at the end of the day. And this started again very much as a paper-based. So we wanted to have a consistent message that they can rinse and repeat with every client, so the way that we price for these types of packages.

It’s very similar across the industry, it is geography or state-based. If a salesperson is going to be operating within a certain footprint, we try to keep that pricing for all of the area that they’re in the same, so that whether they’re in the office at the very north end of their territory versus the southern end, it’s the same price. That is different than our direct-to-consumer pricing. Real estate, we want to keep it nice and static. Get them used to saying, Hey, I’ve got this offer. Here’s the price, and it’s something they can memorize and just keep going with.

On the direct-to-consumer side. Given that we have a lot of inbound traffic, we have our media search typical marketing efforts. So we get traffic all over the country. We do what we call dynamic pricing on the D2C side. It’s geography-based still. But instead of state level, and the example that we gave investors when we rolled this out was, if you kind of take your California exit, it’s a huge state, and you’ve got your 1 million dollar zip codes. You’ve got your lower median house price zip codes. But the way that we were pricing at the time was that it’s all in California, so it’s all the same price.

And we’ve slowly evolved that over the years of we’ve gone down to a zip code level pricing, which again, we realized that within the same zip code, there can be very wide differences in home sizes and home values, and we want to be able to give the right price to the right customer, at that right time. So we actually have gone down a level further, we use what we call Zip Nine pricing. It’s 4 additional digits at the end of your zip code. Essentially, in terms of the scope. It’s one side of one street. So a lot of times you can have different Zip Nines within the same neighborhood, and we’re really delivering customized and unique pricing for each of those customers. But we haven’t really pivoted that into our realtor channel. Because if a realtor is operating, they’ve got a bunch of homes listed in a neighborhood. But all those homes are different prices, even if it’s just a couple of dollars a month, which is what we’re like, we’re just fine. It really puts them in a spot where they’re not sure what to tell, and they just want to have that consistent message to their clients every time it’s this price, and there’s no guesswork involved.

Robbie Baxter: You mean when they’re gifting the membership or the warranty that they can say this is my gift to you for the year, and next year it’s going to cost this much. They can say that with confidence.

Braeden Russell: Exactly. The gifting part is a big piece of it because it is a big avenue of how the warranties are originally or eventually purchased. Another part of it, though, and this is where the industry has really changed over the past 10 years, heavily since COVID times. This was part of the seller’s offer to the buyer, like, Hey, this home comes with a home trend, a home warranty. And so a lot of the time, the agent that was gifting it was that seller’s agent. They were saying, Hey, for using me, I’m going to put this warranty on the home. It’s going to help us sell it.

We moved into such a heavy seller’s market, where we just had all of these homes going off the market. That message kind of started to fall off over the past few years where homes, with or without a warranty, we’re selling at record prices in 3 days. So it wasn’t so much a seller’s tool anymore. That’s where we’ve started to try to pivot a lot of our marketing efforts. And how we talk about the product with that realtor audience into more of a subscription for your client on the buy side, like, “Hey, you were going to get this as part of your transaction. That’s not happening anymore, but you still need this for your client, like we need to give you the tools to make this easy for your client to use and to give them that peace of mind in the first year in the home.”

One of the things I miss about being in my old role on the realtor side is that I got to go on lots of field visits. Go sit into real estate offices. And when you really think about how our sales team is interacting with these realtors, you either go into the office and you get lucky with who’s there, because the realtors are out all day selling houses.

They have scheduled office meetings where everyone is in the office at the same time, and oftentimes the person behind you presenting next is a salesperson at another home warranty company. So they’re hearing the same thing. They’re getting pitched at the end of the day. A very similar product like there might be small differences here and there, like one company might cover ornamental fountains in the front yard versus sprinkler systems, there’s little slight differences, but at the end of the day we all cover a lot of the HVAC systems, your laundry, and kitchen appliances.

I had a salesperson position it to me this way, as what they are really selling to the agents is a phone call saver, and how she explained that to me is that first year when that buyer goes into the house. If 2 months after they move in, the refrigerator starts going out. Usually, the first person they’re going to call is their realtor, “Hey? I thought we just moved in. Do you have the number for the…” They start getting the realtor involved when those early problems start happening. That’s where we can insert ourselves into the process and say, “Hey, we got you covered. We can come and fix that refrigerator.” And really help save that realtor all the additional downstream work and finding a repair guy and making their client happy. And that’s where we want to be a partner with that realtor and show them that while this isn’t being included in transactions like it used to be on that sales side, that we are still here to help make their relationship with their buy client stronger. And for realtors, we always look at repeat business and say, “Hey, if they move again in a few years, we want to be part of that positive experience.” They remember when they moved in something might have gone wrong, but we were right there to take care of that issue and kept them whole in that new house.

When early issues arise in a new home, buyers often call their realtor for help. By stepping in to resolve problems, like fixing a malfunctioning refrigerator, American Home Shield not only assists the buyer but also relieves the realtor of extra work.

So there’s a lot of convincing the agents what our value is because at the prices that are paid, it is a few $100 in this now, close to half a million dollar average transaction, like it’s a line item. That’s why we just try to keep it consistent, because they’re essentially just writing a price on a line as with all those other closing documents. And it has been a challenge to really pivot that messaging away from seller’s agents into buyers because a lot of the time homes are buying or homes are being sold just as fast without these warranties. We’re trying to show that it’s a post-sale tool as well.

Robbie Baxter: Yeah, it’s really interesting. And because you said a lot of really useful things that I’m hoping the audience is taking away. We’ve been focusing on the B2B side, and what I heard you say is this is a very small purchase in a very big transaction.

Number one. They might see it as a commodity, and you need to differentiate through that experience the one call, the peace of mind. You’re having to change your value prop from kind of an incentive to an incentive for the buyer to actually being something that eases the work for the realtor themselves. So it’s a different value proposition.

The pricing. As a pricing expert when it comes to B2B, with all of your expertise about pricing and your ability to do dynamic pricing, differentiated pricing, and pricing based on a lot of variables. When it comes to this particular audience, simple is what matters, even if some people are maybe paying a little more than they should. And other people are paying a little less than they should. They would prefer to do that so that they can have peace of mind, clarity, and simplicity, and I think these are things that are true in a lot of B2B situations when you’re selling it as B2B2C, right? Somebody else is buying on behalf of you, the end user. And so the way you sell to the B is different than the way that you would sell directly to the C.

And my next question, which kind of leads into this, is the minute you close that deal, you have to start selling to the home buyer because otherwise they’re going to cancel at the end of the first period. What changes at the moment of transaction? The new customer comes because somebody bought it on their behalf, and then what happens?

Braeden Russell: With the realtor channel, a lot of our efforts are just getting that customer onboarded and essentially making them aware that they have the product. Because that’s what we found through a lot of our surveys. We’ve done kind of some focus groups around these customers. When you have this product and it’s time for retention, across the industry we see this. When we talk with folks at other companies and at our conferences, a very similar trend across these home warranty industries is the retention differences between these two channels. It’s about twice as likely for a direct-to-consumer customer to renew than a real estate transaction customer, and a lot of that comes down to awareness. We talk to these customers, and they’re like, “I didn’t even know I had the product.” So when you’re calling me to try to renew me. I feel like it’s a scam because I didn’t even know I had it. It’s like, “Hey, we’re trying to reach you about your cars, extended warranty.” And that’s another thing we face. A challenge of the fact that the word warranty is in our name. So when we’re reaching out to these people who might not be aware, it just kind of gets lost in their conscience of when they bought this home a year ago. They were just like there was so much happening. I don’t really remember what happened. So we do have a lot of efforts. We’ve got a great team in place. Through a series of welcome emails as well as phone calls, we do over the first 2 months of the contract. A lot of efforts to reach out to make sure they understand they have the product. We have some upgrade offers for it if they’re on one of our middle-tier plans, and we’ll offer if they want to increase their coverage.

So really connecting. We see a lot of success with that call. It’s hard to get people to answer. In today’s world, outbound calls are those types of potential spam. It’s hard to get people to answer. And I think that’s a very common struggle across all of our lines of business, really versus whether it’s a welcome call or renewals. Any type of call that we are making right now, connect rates have been going down, but when we do connect, we see a lot of benefit in that retention rate. Especially in those instances when members are upgrading, we see that member, the member who decides to upgrade within that first month, and say, “Yeah, I want more coverage.” When it comes time to renew. They are renewing much more similarly to a member who came in through that consumer channel because they kind of had that. And that’s where we see that really proactive action being taken and having the most impact.

Despite declining call connect rates, successful connections boost retention

We really have started shifting our focus. When you say for the first year, pricing simpler is better, and that is kind of how we get them in the door. And we’ve struggled because we have this really great dynamic pricing tool that we use across our direct-to-consumer and renewals business, and we’ve wanted to pivot that into real estate. But it’s hard because you can’t just go change prices all the time, and realtors will get mad and be like, “I just need a price that stays the same, so I can go sell it.”

We’ve pivoted that functionality really more for that first renewal when they come up. What we really had traditionally before that was we kind of dumped everybody into the same funnel, like, “Okay, we got you in the door now.” Everyone’s just going down the same journey, and over the past 10 years. We’ve really split these out, and we’ve realized that we need to tailor that message for that customer who is a real estate transaction. And now getting ready to renew that messaging. Now we’ve almost pivoted all of that to be as if they’re a new prospect, because that’s really what we’ve learned is they don’t remember a price. They don’t remember a lot of the details of the product. So you’re almost having to sell them again on the product. Which is where what we’ve really started doing is we kind of made the connection that a lot of these customers are just going to our website. And they’re looking at a price. And they’re saying, “Well, why is my renewal price this? When I’m looking at your website, it’s this?” So what we’ve done just systematically is those first-year retention price points for those customers are very similar to what they would see on the website. It’s not exactly the same necessarily, but we’ve tried to set it up in a way to where that was just a big pushback of I can get it cheaper if I just buy it new. So why would I renew today?

We’re keeping that journey and keeping them in our kind of life cycle, and within that renewal flow, trying to make that first to second year transition make the most sense to them. And we really think of it almost like again as a new D2C customer, even though we are trying to renew them in our data for a second term, more often than not. They don’t even know they had the product for the first term, so we’re trying to resell them on the value and kind of re-educate them if we weren’t able to get a hold of them on that front end with our welcome call and welcome email series.

When you say for the first year, pricing simpler is better, and that is kind of how we get them in the door. — Braeden Russell

Robbie Baxter: Yeah, it is funny. It seems so obvious that, as a consumer, you would say, “I want to pay the price that my neighbors are paying.”

But I can see how, from companies’ perspectives, it’s like it’s in the B2B division. And I think this is a common challenge that bigger organizations face because they’re so structured. This is our B2B channel, and it’s tagged that way, or there’s a different general manager.

And when it comes to pricing, which is the theme of today’s talk, it’s really important, as it is honestly, with everything relating to membership and subscription models that you look at it from the members’ perspective. And you say to yourself, Where are they in their journey? What are they thinking about? What are the problems they have? What are the considerations they have?

Sometimes they’re wearing their consumer hat where they’re looking at alternatives, and they’re suspicious. They’re leaning forward. They’re paying attention. And then once they decide, like, “Okay, I’m using this. I’ve upgraded. This is a warranty that I’m comfortable with. I’ve used it. I’ve gotten benefit.” Then they can lean back. Then they can relax. Then they can trust you, and then they just pay.

Whether you’ve educated them to know that it might vary a little bit from year to year. They’re more comfortable. The other thing that’s important. You talked about onboarding. You talked about the 30-day call and how important it is that people might think, Well, you’ve been paying for a year, a member for a year, but if they haven’t gotten value, they don’t feel like they are even a member. They’re still in their minds. They’re still shopping. They haven’t committed.

And so I like what you’re saying about that interaction with you, whether that’s the call or ideally, I guess it would be actually needing to exercise the warranty is probably going to drive a lot of loyalty.

Braeden Russell: Yes. And one thing that we’ve actually noticed, and I’m sure a lot of my colleagues at other warranty companies can attest. Because of how foundational this home sale transaction, a lot of everything that we do, from the contract terms to how we look at things, is on this 12-month annual cycle. It was designed in its original conception to be a 1-year post-home sale protection product. And it’s just that structure has kind of permeated throughout the years. Other competitors with us that have gotten into the D2C space.

We still operate on this 12-month coverage cycle. And what I’ve noticed in our data and what a lot of our data analysis team has seen is that it’s not even so much like if you get them on that first 30-day call and they use a service, then that is great. But then there are still 11 months that go by before they renew. And we just continue the engagement. Because we get trapped in this like 12-month cycle. Like when you’re just looking at the data on paper and that person checks the box. If they use the product, they’re probably going to be more likely to renew. But there’s so much more nuance of when did they use it? What service did they use? Was the outcome good or bad? Are they currently on autopay or there are lots of underlying factors that, as we start looking, and it’s this overall journey of we have to show like this customer, at the end of the day we hear a lot about, “Well, I don’t want it because it’s too expensive” and as the pricing person. I get a little defensive about that. They say it’s too expensive because they don’t feel like they’re getting enough value out of it. If you feel like you’re getting the value out. You’re going to pay whatever pretty much you feel. It’s just that there’s no question to you.

Whereas, ”I haven’t used this all year, and my price is going up like,” it calls it into question of like, “Do I really need this?” We have a unique challenge in this industry.

We do want people to use the product because it encourages loyalty and experiencing the value. But in order to use the product, something has to go wrong in their life. Most of our services, we do have some additional services, which was part of my roles a few years ago that I’ll come back to that. We have some services like we’ll do an HVAC tune-up that are more proactive, and you can take advantage of the product without anything being broken, but 90% are very similar to all of the other companies in the industry. It’s a break-fix type of repair. This sounds weird to say it this way, but we need something to be broken to kind of do our job. Nobody’s happy to call us, right?

How do we show that value to those customers when they need us most? Because it is very easy for a bad situation to get worse? Especially when that customer is not getting what they want. If the HVAC system goes out in the middle of the summer and it’s 100 degrees out. It’s all kind of the nuance that not any service request is really the same because of all the underlying conditions. And that’s where we’ve just started using our data again to kind of bring this back to pricing. Getting out of this 12-month cycle, looking at data points of how frequently they have used us? When have they used us? Are they a 15-year member versus new?

There are all of these data points that 10 years ago, we were just from a pricing perspective and were saying, “Are you first year or are you renewal?” And that was really our main pricing difference. And now we’ve got multiple pricing models with over 200. I would say inputs that are feeding into a machine learning algorithm that are continuously evolving to these trends that we see where customers that are using the product are more willing to pay at this range, and this stage is continuing to dive into deeper layers of that data. Because it is unique, and almost every interaction has a different context.

Where I boil it down to my job and how I can help move the business forward is that while every context and every use of the product is different for the customer individually, everyone still has to pay a price. And that’s where we’re trying to make sure that that price they’re paying makes the most sense to them. And we aren’t setting ourselves up as a business for failure down the road by giving a price increase on this customer this year when we shouldn’t. Shouldn’t and should is all very subjective. But that is where we are using our data to continue to learn more and more. About our own customer base as well as new incoming customers.

Robbie Baxter: This is interesting, and it’s different than a lot of other guests I’ve had on this show. It’s effectively a subscription business or a renewal business, but the price is going to be different every year based on the zip code but also based on whether they got value last year. Is that fair?

Braeden Russell: And there’s a lot of input into the model. There’s not just one or two things, but it is more or less individualized pricing, because we do realize that customers purchase this product and see the value for different reasons.

There are the budget protectors who truly are purchasing the product for their own budgetary guardrails like they know how much it costs to replace an HVAC. And this is something they’ve set themselves up for financial protection and then on the other end of the spectrum. We have segments, and we just kind of call it warranty people there. Every time you go to checkout at Walmart, it’s like, “Do you want to add two nights?” Like they’re hitting yes, and they buy our warrant. So it’s kind of in between people who just want warranties on everything, and we fall into that category for them.

Then the other side of this is almost a necessity for some folks in terms of home ownership, protecting their budget, and making sure that if things do go wrong they’re covered and are able to continue living comfortably in that house. So it is where we’re really pivoting now in terms of what we think is a big driver into that. But it’s very hard to conceptualize in data the loyalty aspect of it all. It’s this other side of the coin, this customer has been with us for 25 years, like we should be doing things to make sure they stay with us for 26, 27, 28 years, and so on.

Robbie Baxter: Also, the challenge with loyalty that I see is that if somebody really values your product, you can charge more, right? And there’s a temptation to offer a discount to your least loyal customers because they’re the ones you’re most likely to lose.

On the other hand, the whole model of loyalty of subscriptions is based on the idea that people who commit to your products and services for the long term are your best customers. They’re your cheapest service, and they should enjoy some benefits from their loyalty. So I think a lot of pricing professionals are constantly balancing those two things.

Do we offer discounts to the most loyal people and keep the lower pricing and not do pricing increases. Give them special stuff. Or do we actually charge them more, like the newspaper industry? They charge their most loyal customers more. Which I think works financially in the short term. But I would argue that sometimes people wake up and say, “Wait a minute. Why am I paying triple what my next-door neighbor is paying?”

Valuing your product allows for higher prices, but the temptation to discount less loyal customers can be risky

Braeden Russell: Right. There’s another layer to it. A lot of times, those most loyal customers are the ones using your product the most. And again, kind of driving the most cost. We don’t want to take the price, but to maintain the profitability, we have to.

One thing that we’ve been ideating around from a pricing perspective that I really am a big fan of, and something that we’re trying to again conceptualize on our end is the Allstate’s Safe Driver Discount. It’s a loyalty thing. It’s a similar product to car insurance. You kind of have to have an accident, which nobody’s happy about. But if you didn’t use the product, here’s a new offer of why you should stay with us. And that is something that we’re considering.

Every kind of corner we turn, we uncover a few more questions about the way that we’ve done this, which has probably negatively impacted this particular customer segment, although it works for the other 80%. And so we are just continuously splitting all the way down almost to a customer level of really looking at what the problems are, listening to how the complaints call in. One thing that I do bi-weekly, and I encourage anyone who has the opportunity to do this as well, is we listen to the calls. We just pick random calls over an hour, and it has helped us find little gaps and little small operational changes that can help. You think that you know what you’re doing when we’re all doing our focus groups and our surveys and we’ve got a sweet little UI mockup that we show everybody, and then, when you listen to a call, you’re like, “Wow, we totally missed that.” And that seems to be a pretty obvious thing that we should work on.

Robbie Baxter: I’m interested, with people paying annually. The advantage of an annual payment is that you get a year’s worth of payment upfront. The disadvantage is it’s usually a big number.

And so I would be interested in your thoughts on when the product is paid annually, is there a benefit in having that actually be in monthly increments as opposed to being paid in one big chunk?

I know that’s a question. A lot of people grapple with annual versus monthly and how to manage it.

Braeden Russell: Yeah, I think it’s kind of a lot of things that play into each other. That is why the data comes out this way. But we’ve seen that our most engaged, and people that would get the most value out of our product would be on those monthly payments. To kind of come back to the channel splits when a customer goes through our website and signs up for a new product today, all of our systems are defaulted to monthly pay. We automatically create an account for you. You get set up like an ideal customer who’s got everything they need to make those decisions. So we do a lot of on that direct-to-consumer side, pretty much everything is done in annual terms, like we set up our promotions and our discounts to be divisible by 12, so when you talk about it in monthly terms, it makes more sense. A lot of times, our standard discount was a hundred dollars, and then we were listening and everyone’s talking about giving $9.82 off of it. And we’re like, “Well, let’s just make that a hundred and twenty and make it easier for everybody to talk about in that channel.

We do a lot of things around the monthly pay, and we see a lot of engagement that way. When you come back to the realtor channel. How it’s all submitted through paper form, or just we get an email from the customer, or we might not. We have a lot of outbound efforts to collect that if we don’t. We’re kind of beholden to the information we get from that agent. So that initial year it’s all done annually, the prices are all positioned annually because it gets cut through a check from the closing company. That’s really how all those payments are made as an annual payment.

We will kind of start pushing some of that messaging into the monthly side, like on those welcome calls like, “Hey, if you would like to upgrade today, it’ll only add $5 a month,” we started getting into that monthly cadence as we get their email and payment method on file. They get the monthly bill. It kind of gets them into that habit of seeing the charge and seeing our name and getting used to being familiar with the company.

The challenge, though, was kind of our initial realization of autopay. You see a lot less cancellation. The renewal rates are much higher. But as you see it bear out in the data, it’s exciting. But then the other side of it was we do see autopay customers react to price increases more strongly. Personally, I’ve had my same phone bill account for who knows how long. I have no idea when my yearly 12-month cycle is up. I’m on autopay, so I’m just paying the same every month, and what we have found is that it really matters, like how recently people have seen that value.

We send emails, we send notifications that they’re going to get a new contract and that their price might change. We have all of these legal guardrails that we follow. But a lot of people might just open it and say, “Okay,” and close it. What they do notice is when that monthly charge changes from $49.99 to $59.99. And that’s kind of where we’ve seen. They might not notice for a couple of months.

From a data perspective, “Oh, look! They renewed, and this customer’s happy.” But then, all of a sudden, they’re calling 2 months later, and it’s a cancel call instead of a renewal call. So we have shifted some of our non-renewal business into a cancel. And that’s where we’re threading this needle of how do you make the decision to sign up for autopay and stay with us. The obvious decision for this customer. But then, how do you make that journey continue to be smooth and not have these moments where you’re shaking it real quick and you’re like, “Oh, did you know you had this? And the price is going up by the way.” And that’s where we’re trying to thread that true price walk, looking at the customers that have been with us for 30 years versus one year. And how do you really make a full book of business that way whole, without having to get to your point and without having to really punish your more loyal members? You’ve been here the longest. You’re costing like the model, all things considered, tells you to take the price on those customers. They’re more willing to pay. They’ve been with you. It costs, but it’s that is where it gets to a little bit of an art and science. The numbers do say some. But at one point there’s going to be a breaking point of, “I’m not going to pay this anymore.” We don’t want to hit that point. We’re trying to find ways to get ahead of that and drive that underlying value with the product. Whether it be through pricing, with promotions like the Allstate Safe Drivers. In what ways do we grow customer loyalty through price? Which is an odd way to think about it. But that’s how I approach my job. Everyone’s paying something to us, and then not everyone pays the same. How much sophistication can we put behind getting the right price to the right customer?

It’s an ever-evolving science on that side. And that’s where we’re really starting to on that realtor channel. Start to think through ways we can involve technology and functionality without breaking the foundation of the channel of needing that consistent pricing to really get those orders flowing and get the foothold in those offices.

Robbie Baxter: It sounds like one of the top things on your mind is, How can we modernize and add sophistication to our B2B business using the tools from what we’ve learned from our consumer-focused business.

You have a great advantage. I have a lot of clients that I work with that have B2B and B2C channels. If you get it right, you can use one to strengthen the other. You can share what you’ve learned from working directly with consumers, with your business buyer, and then you can use the volume that you’ve got with your business buyer to offer interesting things to your consumers. It is a challenge.

Do you have advice for a subscription business that has one channel? Let’s say B2C, and they’re opening up their B2B channel, or the other way around to get it right from the beginning or to set up the right systems, culture, or teams to balance the different needs of those two channels.

Braeden Russell: Yeah, I’m sure it’s different by industry, but at least for our industry and thinking more kind of these D2C channels that are faster moving. B2B channels that are a little bit slower legacy channels. Going one way or the other. I think my main advice is to listen and to think about that end user. We have fallen into the trap ourselves in that we developed something in that D2C channel that was a home run. Everyone loved it, and then we tried to pivot it over to our realtor channel, and it just didn’t resonate the same way. That’s where I think a lot of times to what you said, to use the lessons you learn in one channel to help grow and drive the other, and I think the nuance is kind of where you use those lessons, because what we’ve learned to go back to that. How we’ve evolved this real estate channel of first renewal. We were trying to apply a lot of our learnings from the direct-to-consumer channel to the sales process of that initial real estate order. When we run a promo on our website, customers respond really well. So let’s try to go run a $100 off promo for the real estate channel. It worked enough in some areas. That way is a lot different than on the consumer side. So we’ve started pivoting, at least in this one example of this learning and kind of the pricing and discount activity that we have learned when we acquired new direct-to-consumer prospects. We’re applying that now on the retention side, for that real estate customer of going back to this almost feels like a new prospect.

So what we’re doing here on the acquisition and the website, is trying to replicate some of that with our promotional activity and the way we position the products for that first renewal for a real estate customer. It seems kind of obvious now that we’re here, but that really is a concept that over the past 6 to 12 months we’ve started diving into and realized, “Wow! There is a lot of similarity and commonality in how these cohorts are acting.” But in our day, data sheets and Excel files, they’re different. So we never really connected the dots of maybe we should try this tactic over here instead of just saying, “Well, it works to get new units on the acquisition side, so it must work to get new units for acquisition on this channel as well.”

It’s just nuance of where that lesson is applied of knowing how the customers are interacting with your product. Trying to predict, like whether or not that’s going to happen within that same timeframe because we think about it on this 12-month cycle. But we don’t really know when something’s going to break in a customer’s home. So it’s just a matter of whatever we’re doing on that front end to convince new prospects to buy. Let’s start replicating that on a retention side for a real estate customer, because it’s kind of a similar mindset and timeframe. It’s a fun challenge to solve. There’s a lot of conflict that pops up to, “Oh, they get all the promos, and we get no promos.” But then trying to talk the sales teams and agents through like, “Well, here’s why,” and then kind of seeing it all click, and they realize it’s rewarding. So it’s an evolving journey. But I do think we’ve made a lot of progress in the past 5 or 6 years.

Robbie Baxter: Awesome. This is fascinating, and I think you know you’ve brought up a lot of gems about balancing the two where it works. I love what you said. It’s not just about using one channel to help the other channel, it’s also about knowing when it works and when it’s different and having kind of clear ways of explaining that among the team members.

We could have a whole episode on building the right culture, the right team, and the right expectations, but that’s for another day.

Before I let you go. I want to take you through a speed round. Are you up for that?

Braeden Russell: Yes, absolutely.

Robbie Baxter: Okay. First subscription you ever had?

Braeden Russell: A Blockbuster card when I turned 16. So the first thing I did was I went and drove, and they had a subscription program.

It was laminated, and everything. I felt so official.

Robbie Baxter: If they had more of those, maybe they would still have a subscription business.

Braeden Russell: Right.

Robbie Baxter: At that time, it seemed like they would dominate.

Favorite subscription right now?

Braeden Russell: Bloom box.

Robbie Baxter: Pricing strategy that someone else used that impressed you out in the world?

Braeden Russell: I already said it, but the Allstate’s Safe Driver Discount. I think it is a very simple and obvious tool, but it is a genius tool that we are very much trying to replicate.

Robbie Baxter: And your favorite thing about Memphis?

Braeden Russell: The food and the people.

People ask me what the culture of Memphis is like, and I’m like, I will just take you to as many restaurants as your heart will desire. I’ll show you some good places to eat.

Robbie Baxter: Awesome. Braeden Russell, thank you so much.

Braeden Russell: Thanks again, Robbie. It’s been great.

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Robbie K Baxter
Robbie K Baxter

Written by Robbie K Baxter

Author of THE FOREVER TRANSACTION & THE MEMBERSHIP ECONOMY; Leading expert on membership models and subscription pricing. http://www.robbiekellmanbaxter.com

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