Scaling a Bootstrapped Membership
with James Schramko
Many subscription entrepreneurs lament their lack of fancy software and dashboards to allow them to better manage their business. But if you know your ideal member and understand their pain points, and if you’re always tinkering and adjusting your offering to better align with the needs of those members, you can build a powerful recurring revenue business.
Even as a solopreneur, James Schramko has developed a unique model to help consultants and experts earn more while working less. And while he has been an early adopter of technology, many of the tools and tactics are flexible enough to be used by large or even very small businesses.
More importantly, James has succeeded in building his subscription-based business by focusing on his members and their desired outcomes. Ultimately, membership is about trust and relationships, and James is an expert in both.
In this conversation, you’ll learn why bundling too much into your subscription can cost you members, how to use technology to support a global community, and why a tiered ascension model sometimes leaves money on the table.
The following interview is adapted from my podcast, Subscription Stories: True Tales from the Trenches.
Robbie Baxter: James, welcome to the show!
James Schramko: Hey, It’s so good to catch up again, Robbie.
Robbie Baxter: It’s great to have you back, I really was so pleased and honored to be invited to your show and I’ve been hoping to get you here for quite some time and was just delighted to get into some details on your vast experience with subscriptions and with membership models.
Let’s jump in, I wanted to start with the current membership coaching model that you have for consultants and for experts, if you could just walk us through what that model looks like today?
James Schramko: I guess in the middle of it and I’ve always used my membership model as being in the middle of my whole landscape and I’d started doing that from about 2009. I called it a mafia plan but in the middle is a $1,000 per month mental program that has people who I’m helping with their online business in a really simplified consulting style of membership and the way that’s set up is they only get three things which it’s taken me a long time to take all the other stuff out, but they get a weekly group call with me and a small group of the other people in that program. It’s split over different time zones, so it doesn’t matter where they are in the world. They get private chat with me which is async and it’s in any modality they can do text, voice, or video, The other thing they get is playbooks which is where I took all my old training and all my knowledge and IP sheets and turned them into very simple checklists or frameworks. That’s it, they’re the only three things they get. They can access that via the web or via phone app. That’s at the core downstream.
From that is a broader group on a lower price point, that’s a $99 per month price point there’s a whole bunch of people in there, they actually get more things and less things. So they don’t get the private one-to-one back and forth, they do get a group call, but that’s once a month that’s recorded, and they get all the previous recordings and they get each other in a forum. So that’s really the classic old-school forum, which is where I started with this sort of stuff back in about 2009. They like that at their level and then above the mentor group, there are two level that says private coaching group, and that’s where people will get on a call with me every 2 weeks or so for half an hour and we do old school one to one and they can still come to group calls or get the playbooks, but it turns out they mostly just want to talk to me, vent, share or upload download whatever they need to do and then above this and this has really been the holy grail for me. I’ve been developing it for 8 years now. It’s a partnership program and that’s where I have a royalty model. So it’s performance-based, I get paid a percentage of revenue and to help my partner, I’ll do whatever is required in the mix whether it’s calls with them, whether it’s promoting their products or my podcast introducing them to contacts or networks. But that is like the ultimate forever deal.
It’s like, well, I want to go into this business but I’m not going to set up a competition with you, let’s partner with it and I’ll just quietly sit in the background and guide you and help you, and you can keep all the brand and the accolades and stuff. I’ll help you out and get a small percentage. I started that business and learned that business model from my grandfather when I was about 18 years old, he was a timber broker and collected 3% commission on timber deals, but I do like that model, and here’s the interesting thing I’ve got 8 partners now, and they contribute more than half my income and so it’s a really strong business model and the top few of those if I only had one or two partners that would actually be enough to fuel my lifestyle. In fact, one would fuel my lifestyle at this point.
Robbie Baxter: Well, it’s great, the role of the middle option, the membership. How do you think about that? Is that the point of entry? Do people come in at the lower level and take their time to work their way up? Or are there different kinds of people interacting with you in each of those levels?
James Schramko: It’s such a great question because we hear a lot about the ascension model online and I’m not a huge fan and my own data doesn’t support the classical ascension model.
I can give you some examples. If I’m a car buyer and I want to change brands, I’m not going to go and start with a bicycle and work my way up to the lowest model in the range and then go up to the model that’s suitable for me. I’m just going to go straight in and get the model that’s suitable for me, so the two things that I’m sort of against are this idea that you put people in the little stuff and work their way up because what has shown in my stats is the people in the middle program at least two-thirds of them, and probably even three-quarters of them come straight into that program that didn’t work their way up from the lower ranks and there’s a lot of people in my lower rank program who will never be in the higher level program because it’s not the right program for them. It’s like, if you don’t drink alcohol and you go to a bar you’re going to order Coke Zero, there’s no way that you’re going to be ordering vodka, so that’s just not your product.
If I’m a car buyer and I want to change brands, I’m not going to go and start with a bicycle and work my way up to the lowest model in the range and then go up to the model that’s suitable for me. — James Schramko
The other thing that I think is overcooked in the online space is this whole hyper-niching stuff and avatars. I have such an eclectic group of people in my program that you would never be able to pinpoint as a theoretical avatar, they’re just so different. I’ve got young, old men, women. I’ve got all different races, all different business models, but they do have some things in common, they do want help ongoing, they do feel that I’m the person who has the experience to help them with it, and the longer that I’m in this, the more use cases and data sets I’ve been exposed to to be able to help these people quickly and efficiently. So people can have quick wins, they come in and within a week they’re already starting to get a return on investment because I know exactly what levers to pull. It would be risky for me to just target a certain type of industry or a certain type of psychographic or demographic and so they’re the two oversimplifications that I think trap people, the ascension model and avatar niching and so I’ve always been a little broader and I feel like our role as a marketer is to help people find the exact right product straight out of the gate, and I brought this from working with Mercedes Benz in the car dealership. If someone walks into the showroom I have to quickly find out what’s important to them, and then eliminate the other 120 models that I could suggest to them to get them to the exact right perfect combination as quickly as possible. Actually, one of the greatest salesperson that I had, used to work in a retail suit store, and he said that his boss trained him that when a customer walks in he had to guess within one or two sizes the right size jacket to put on the customer or that customer’s going to lose interest and leave. So I believe our role is to find the perfect product as quickly as possible and eliminate all the distractions and that’s why, for a long time I used a chooser on my website to help people find the right product, and then only present the right product and I think that’s a good strategy rather than start everyone at the bottom and work their way up, which is going to annoy people who really need the high-level program.
The two oversimplifications that I think trap people, the ascension model and avatar niching — James Schramko
Robbie Baxter: If you met somebody, let’s say on a plane and they said to you, I have deep expertise in this area, I’ve been working for 20 years for a big company, I’m launching out on my own looking to build a strong brand. Would you be able to tell quickly if he’d make a good client for you or a good member? And if so, which product would probably be right by asking a few questions or by having an informal conversation?
James Schramko: Almost always that person would be excluded from working with me on the basis that they’re unproven, untested, and haven’t started in the subscription model yet, cause I only work with winners which sounds harsh, but it’s just such an easy business model.
Something my mentor taught me is you can’t steer a parked car and what I’ve found is there’s a lot of unknowns, If you see a car on the side of the road, and you want to think it’s a great bargain. But you don’t know if it’s even got an engine, if it runs, or if it’s unregistered. Just a lot of things to get past versus something that’s already in motion. But that being said, I have helped corporate people adjust to their own businesses. For example one of my royalty partners, I met him in the surf and it was during COVID, and he was surfing pretty much every day out there and then one day he said, I’ve been called back into the office and I said,” Okay,” he goes, “I don’t want to go back in” and I said, “Well, why go back in?” He goes, “What else would I do?” And I said, “What do you do?” He said, “I installed a hundred 1 million dollar banking systems for the bank. I deal with 60 or 70 developers all around the world, we manage these huge projects and deliver them with pinpoint accuracy.” I said, “That’s a fantastic skill, it’s exactly what my clients need because they are highly creative visionaries. They are usually hopeless at managing people and systems. They’re great at selling. They’ve got the best ideas, but they just get frustrated because they can never implement.”
Our role is to find the perfect product as quickly as possible and eliminate all the distractions- James Schramko
I said, “I want you to go and read Rocket Fuel by Gino Wickman and then we’re going to set up an agency where you’re going to be the integrator to help my visionary clients” and he said, okay and we set it up within a year we’re doing half a million dollars a year and I just hook him up to my visionary clients, and we had to go through this adjustment phase from him being an employee to him, being an operator of a business. That is a huge leap that not everyone’s prepared for.
And so there’s a lot of mindset that go into that. A lot of unwriting of the rules of corporate relearning about ultimate responsibility and also getting punched in the face metaphorically, in your business on a frequent basis the things that happen to you if your team member leaves and poaches your clients or it cuts you, you scale too quickly, and then your quality drops, or you go through us a sort of a dry patch during the Christmas-New Year break when all the corporates like, stop buying reassess their budgets and all that sort of stuff. So it’s been. It’s something that I’ll do on a very small basis. But in that case, I chose the partnership model, the highest level model, because it was such a strong need for my audience and I had so much confidence in this person’s ability to deliver and he’s amazing, and my clients have the best feedback, and he’s so grateful for this just a business from thin air and it’s amazing we can do that. But it would be rare if the person on the plane had that level of ability. I’d want to get to know them first, because I do have some rules and filters. When I’m going to go into partnership with someone, at least in this case, I’d observe this guy for a year or two and had a good sort of understanding of his character and personality.
Robbie Baxter: It’s a great story. It’s an outlier but I love that you can recognize the kind of people that you can work with and that you can help the most. I think that’s important, whether you’re doing it at scale, or whether you’re doing it member-by-member, you need to be able to recognize them in the wild and say, that’s a person, or that’s an organization that is going on the journey that I can accompany them on and guide them on.
James Schramko: Another aspect to that, too, and that is that I’ve usually been good at picking where the demand is and where the industry is growing. I sold my SEO business, for example, which was a fantastic subscription business, we were doing 6 figures a month in sales. It was a great business, I had it for 7 years but I felt like SEO was coming to some more choppy waters, and I feel like with AI, that’s been an interesting one for the SEO industry. But for this guy, I really recognize there are a lot of people coming online who have the expertise, especially since COVID and I recognize within my own portfolio, that this is a common problem that even though I can solve it with playlists, and I can solve it talking to somebody, but then, when they go away they don’t implement. I needed a service to implement, and I didn’t want to build the service. It’s like the perfect piece to the puzzle, and it made a lot of sense, and I’ve done this again with someone with a startup in another service that I see as such a growth thing, and the one thing that I’ll look at if I’m going to go into service provision or partnership is this a growing or a shrinking market segment? And that was just green fields. I mean, there are only a couple of people doing this fractional integration is still a brand new service.
Robbie Baxter: I wanted to circle back to something that you said at the beginning, I asked you about your membership model and where it is today, and you described it. But you said it’s much paired down from where you started.
I have found many subscription businesses, when they start, they basically throw in everything but the kitchen sink, saying, if I have it I’ll add it to the bundle, and if the person doesn’t need it, they just won’t use it. Can you walk us through how you started, how you paired it down, and anything you’re using as a guide to say, “These are the three features I need to deliver, and everything else is extraneous.”
James Schramko: It’s such an art. I mean, if we were to talk about a metaphor, we’re looking for that Statue of David from the block of marble, right? The risk of having things that your members don’t value or use in your membership is that they will use that as a reason to cancel. The classic, “Oh, I’m not using it.”
I learned this because in the early days of my membership, I had a couple of very enthusiastic members, and they were starting to feed off my flock, and they were starting to provide little services that were niche down services that were suitable for my audience because I’d gone out and spoken on platforms, I’d built my podcast, I’d brought these clients in, and I could see others. These wolves were sort of coming in and starting to eat my sheep and so to protect against that, I set up a weekly call, where we would cover the same sort of topics that these wolves were trying to lure my sheep away with and an interesting thing happened.
After about 7 or 8 weeks, I was starting to get some people starting to cancel and it didn’t make sense, because I was offering more value, more stuff, and the reason given was I just couldn’t keep up with the calls, I’m not using it, I’m not getting my value because it’s you know, there’s all this stuff. But I can’t get to it and it’s like, wow, that’s really interesting and so I switched it to monthly ever since, and that’s been going on now and for another 9 years or so to 10 years and that is the right frequency for that level. That was an interesting one.
The way that I find out what people need or not is I look at the stats, don’t ask people. I think that’s a terrible mistake, because they don’t even know, and they’ll probably just tell you whatever they think. What I do is I log in and look at what’s being used. A classic example in my $1,000 mentor level I used to have a chat room for people in that level. But when I log in a month or 2 later there are no chats, and people aren’t using it. It’s clear to me that that’s not useful or valuable to them. I just delete it and then I wait for someone to ask, where is that thing? And it just hasn’t happened yet. It’s the same.
The way that I find out what people need or not is I look at the stats, don’t ask people. I think that’s a terrible mistake, because they don’t even know. — James Schramko
In the old days of my membership I used to do a tour of the membership once a week I’d go around the membership with a screen share video and I’d make a video of the highlights of the week and what’s been going on and stuff and then I’d send out that, I’d edit the video, I’d upload the video, I’d put the embed on the video, I’d craft an email about the video, I’d send it out to the database and I’d get it, 65 or 70% open rate and a whole bunch of people would watch it, but not much interaction with it and then one week I just thought, maybe I’m just overdoing this. So I stopped doing it and that was about 12 years ago and I still haven’t had anyone ask where that video is or what happened to it right? And part of it is when I did my book, which I published about 6 years ago, one of the chapters was called 64/4 and that was exploring. What happens if you 80/20, the 80/20? And the bottom line is that two-thirds of your outcomes are coming from 4% of your inputs. So it made me ask the question of all the things that I’m offering like where’s the 96% that isn’t really that important right? It’s almost everything.
Now, just to prove a point and because I’ve been in the membership space for a while, and I used to have, I used to have people stalling like they’re creating all this Frankenstein behind. They’ve got to do all this stuff before they launch before they open. And so, I thought about what would happen if I started a membership with zero content. And so I started a brand new membership and I put on a new domain name and I started with zero content. It only had one feature, and the one feature was a chat wall like a Facebook wall. And the promise was, you ask a question. You’ll get an answer within 24 hours and I actually built up hundreds of subscribers for that membership, and so, when it opened, it had nothing in it. There was absolutely nothing. There was not one question, it was just the instructions on what to do, and that was a very sticky membership and a really popular membership and it was such a great experiment for me. I say to people, if you’re going to open up a membership it’s better to probably just have a waiting list and maybe ask a question or 2 like, what features do you think would be critical, or what problems are you having right now that you would like to solve? And then you decide what minimum features you want to put into it and the more that I work with people in the software industry, the more I discover how critical it is to not have that scope creep to not have feature creep, or to ruin a good thing. Plenty of good software gets ruined by adding in too many things, and then it mutates the whole purpose of the thing that there’s a lot to be said for Sputnik, simple.
Robbie Baxter: I am into that, I think you brought up the point that people will cancel when you have too many features because of subscription guilt. Right? I’m paying and I’m not using it, and that makes me feel bad about myself. So instead of saying using one or two features a month is all I need and justifies the expense. I’m just going to cancel and I think this is the New Yorker problem like, why people say, Oh, it’s a great magazine but I’m not reading every single article I’m going to cancel or work to produce a box, right where they delivered a box of a variety of fruits and vegetables and people were canceling because they don’t like kale right, and they’d look in the box, and they’d see the kale, and even though it was such a great value, they felt bad. It reminded them that they were picky eaters.
James Schramko: Probably their parents drummed into them, finish everything on the plate, there are kids starving in Africa. What a waste.
Robbie Baxter: Send them the kale. But what they did, which I thought was so clever is number one, they changed their messaging, so they said, even if you only eat two-thirds of your box, you’re getting way more value than you would get with the same spend at Whole Foods you’re getting. You’re keeping a local farmer in business, you’re organic, you’re putting fruits and vegetables in front of your family, and if it’s there, they’ll eat it. All these other great ways to think about it and then they had a bag in the bottom that said, hey, anything that you’re not using put in this bag and it said to give to a friend, it was like a pretty little bag, and I thought I always thought that was a very clever way of doing it. But even more than that, make sure that every feature you have is what it takes to get someone to sign up. It’s the acquisition benefit, or it’s what it takes to keep them.
And as you’ve pointed out community and relationships in your case, in your business, of the relationship with you, the direct human relationship. That’s what people are willing to pay for and everything else is either going to make them feel guilty or even worse, if it’s a lousy feature, if it’s out of date, if it’s not being maintained well, if it’s not completely on target, if somebody uses that as an early feature that they experiment with, and it’s not that good they’re not going to stick around and so I love your discipline of keeping the product thin and focus. And I also love this emphasis on community and relationships which I think people undervalue. Tell me, if you agree, or disagree, I’m a content creator, and I create tons of tons of articles. And I’ve written books like you have and obviously, podcasts but ultimately, it’s about the relationship. It’s about the connection with me, it’s about the connection with other subscription pros. It seems like that’s something you discovered quite early on in building your own community. Where did that come from, or how did you notice that that’s what was working?
James Schramko: Well, probably came from my mother taking us around to schools when we were kids and stuff, like we used to visit foster homes and or aboriginal communities in the country. She was pretty interested in making sure that we had cultural awareness and understood social.
It’s funny because my 5 year old daughter is very social. She’s basically got the button from my mom, but also beyond that when I went into the sales world, for quite some time in my life I was responsible for a showroom, and we had customers walking in the door every day, complete strangers, and we had to quickly build rapport and understand their problems and solve them for them and so I just had a high exposure to human communication. We had experts train us on communication, we did all sorts of courses from recruitment to train the trainer to sales, negotiations marketing. So just a really heavy exposure to interpersonal communication. When I was a debt collector I used to have to phone a hundred people a day asking them to pay their bills. I’ve spoken to more people than most people will ever speak to in their entire life. Probably by the time I was 30 years old, I just a high exposure. When I was at the peak of my sales career at Mercedes Benz I was the one that would deal with celebrities and superstars and heavy hitters because I had really good communication ability, I would deal with Russell Crowe, our Prime Minister, or billionaire families and sports stars because they knew I could handle it and it was such a privilege to be put in that responsible position. But I also had to make sure things went smoothly and we’re talking about big transactions and delicate deals. I knew that humans made a difference. The other thing that always fascinated me is in a sales team where you could have multiple people with the same resource. Let’s say, in a showroom, this was my first sales job, when I was 23 and there were 6 salespeople and they had the same sales manager, the same stock to sell in the same physical location, and pretty much the same catchment of customers, but I could regularly outsell the other 5 and it just blew my mind that with the same resources, some people just do a lot more, and some people do a lot less. It’s that unequal distribution that fascinated me. And I realized that the human factor is a very important thing.
Over the last few years, I rebranded my business into a personal brand, because I feel like that’s the strongest mode that I can have. I’m the only me and that is still in a world of robots, AI, and synthetic and inauthenticity. That is such a strong drawcard the person is going to be probably even stronger in the next few years.
Robbie Baxter: I know that most of your members are small business owners, entrepreneurs, and solopreneurs. Some of my listeners fit into that profile but a lot of them are executives in larger organizations, or are venture-backed entrepreneurs that have partners, that financial partners which give them less autonomy, and kind of a different set of goals and objectives and I’m listening to you talking about your skills at building relationships both in person and at scale, and I’m wondering to what extent your principles apply to my broader audience. Are there any skills?
James Schramko: The way that I worked my way through my career was understanding what people need and making sure I delivered on it. It wouldn’t matter if you’re servicing a grocery checkout store if there were 5 operators, you could be the best operator. You have a great relationship with the level above you. I’d always encouraged that and there was a very interesting time in my career where I’d reached the zenith of selling. I came first in Australia for selling Mercedes Benz and I was promoted to sales manager, I don’t want to sound like a wanker. But in that role, I had sort of maxed out where I could get to in that tier, and the next logical step was to run a dealership, Mercedes Benz selected me to go to dealer principal training, and I went to these very high-end camps where we got trained by the best like it was like navy seal type, level training. And there was another operator in the network who had noticed me and we used to have some conversations, but there were a couple of incidents that happened that showed my character to him. One was I’d put together a multi-deal. It was like millions of dollars worth of deals. I’d sold this multi-million dollar deal and on the day that the customer was coming to pick the car up, one of the people detailing the car smashed it into a pole and it ruined the bumper bar, and this entrepreneur who was around the corner with a Mercedes Benz authorized repair shop, I called him up and I said, someone’s just ruined the car, can I bring it around and see what you can do? And I brought it around, and I said, the customers coming in about 30 minutes from now, and they pulled this bumper bar off a shelf, and they like a formula on a pit stop, they put it on.
James Schramko: And then I drove back around and I said, I’ll sort out your invoice later and he was really impressed with how calm I was under the pressure and how wasn’t rude or demanding. And then, later, he came over and said, my guys just can’t sell this car that I’ve got. Can I give you guys a shot at it? I said, bring it over and so they brought it over, and we put it up on the showroom floor. And then the next day he came in and he said, “I thought that car should have been here by now” I said it. “Oh, it was! It’s here.” He goes, “Where is it? “I said, “It’s out in the back because we sold it, it’s just getting prepared for delivery.” He’s like, “My guys haven’t been able to sell that car for 6 months” and eventually this guy offered me a job to run his dealership and he said, “The reason I’m hiring you is because you have integrity” and it turns out in the car industry. Integrity is really a valued commodity. But I’d say that’s for any person, anywhere, in any role. If you’re in any role, no matter what level, have good values, and make sure that you’re serving the needs of the people above, you always be polite, even when you don’t have to be. We’ve all worked for crazy bosses, maniacs and bad operators, but that doesn’t mean we should pass the baton, like bad parents raising kids with bad parenting who’d then, in turn, become bad parents break the mold be so different that people want to deal with you, or they want to to be involved with you and that is s a tremendous asset. It’s really hard to earn for a long time and keep. But I would say at this point in my career it’s just been the number one valuable asset. It doesn’t matter where people go to a conference in our industry, or whatever there’ll be someone there who I’ve worked with or coached or helped in some way, or had on my podcasts, I’ve just kept at it for the longest time, but also it means saying no to cheap tricks, crazy bullshit tactics that often happen in, especially in corporate. I know all the tricks that happen in corporate. You’re driving home at the end of the month, and they call you and they say, we’re going to have to count some of the next month’s numbers into this month and I’m saying, why would you do that? They say, we have to report off to Germany, and the numbers haven’t been right, and we need to get it looking good on the books for them. But basically, fraud happens in every company at every level, unless you say no, I’m not accepting that and I saw how manipulated things can be in corporate, I’ve then seen how it can happen in politics and governments during a pandemic and I’ve always stood against that and stand for something. Have your values, and then you’ll actually surround yourself with the right people. And that’s why I’ve actually got the lower level tier of my membership now, which I really shouldn’t have and don’t need but there are people that have been there for 8, 9, 10 years that want to be there, and I guess I don’t want to close it on them.
Robbie Baxter: In a membership business or any business, relationships are important. But I think in membership businesses, subscription businesses, businesses where you’re counting on recurring revenue and an ongoing relationship, your values and your ethics are really at the core. I’m curious, since you worked in the car industry for a long time, what do you think about the subscription activities in the automotive space? The heated seats with BMW, and autonomous driving with Tesla, are some of the security measures. Do you think that there’s a future there? Are they going to figure it out what would be your prediction on that?
James Schramko: I don’t think there’s a future in Tesla so that might be counterintuitive. But I think, unfortunately, we’re sliding into a world where we will not be allowed to own a car
or drive a car at some point in the future. I think we’re in the last glory days of having whatever vehicle we want and being able to drive it.
In the UK,right now they’re regulating from July onwards speed limits or electronic speed limitations. There’s a lot of trouble with autonomous driving for Tesla right now with people dying cause they’re just letting go of responsibility. It’s kind of like they’re wheeling the future through being stupid not a huge fan of it. Already a lot of people lease their cars even if you wound the clock back 20 years. It was fascinating to me how many people finance a car and how often the car is out of equity by the time it comes to trade-in. Especially the North American market, it’s always been a pay-by-the-month market. It’s always been a subscription thing if you think about finance so it makes sense that it’s all going to be incorporated or rolled up, and then it’ll be regulated and then eventually you’d just be lucky if you can have access to a vehicle, and you’ll be paying a subscription, and if your credit scores are not good because the social media scoring system marks you down, like that episode of black mirror, then you won’t have access to a vehicle. I hope it doesn’t go that way more for the camp of independence and as a consumer that’s interesting, right? Because I’ve made a whole living off subscription income. Almost everything I sell is subscription income.
As a consumer, I’ll only pay subscriptions if there’s value. But I’d like the option to be able to just pay once if I don’t think the value will be there ongoing. So I think, where the gray line is, a lot of people are offering subscriptions for things that don’t have forever value. And that’s a bit naughty.
Robbie Baxter: Bad actors is what the FTC here in the United States is calling them. Bad actors who trick and trap their subscribers, offering them more than they can deliver making them think they’re getting a great one-time deal, but not realizing that they signed up for a punishment model, and then the dreaded hiding of the cancel button on the back end.
I am with you, I love subscriptions. I love the ability to pay as you go and pay for value but I do think that the organizations have to be at a certain level of ethical high ground in order to justify that kind of payment method. They’re not by themselves a model. You earn the right to have a subscription by treating your customers like they’re a member.
James Schramko: I’d love to address that particular point if it’s possible. Early on with subscriptions, I was in the online crowd, they are the Wild West and they ruin everything. Hiding and not sending out billing reminders, hiding the fact that it is a subscription. All the very bad stuff. I went the complete opposite way, especially after learning that people canceling for not using. My choice is, I want people to get the best possible value, there’s three things that I do that make sure of that. But one is, I’m only getting the right people in the first place, so I don’t do any tricky marketing stuff that gets the wrong people in that just ruins a membership. You’re increasing your chance of chargebacks, you’re having dissatisfied customers. There’s no point doing that. Only dealing with the right qualified people is very important. We do send billing reminders every month, then I only actually now bill monthly. On all my programs, I only bill monthly, because I want to earn my seat.
Robbie Baxter: You and Netflix are probably the only two subscriptions that only do monthly.
James Schramko: I did annual only for a long time as well, for other reasons. But I’m 30 days away from retiring at any point in my life without any service step beyond 30 days, and I quite like that.
The two most important things and this is very important. If you have a subscription, you don’t have these, and you have something similar to me, and you put these in. It will change your life. One is on the weekly group calls. We added an add to calendar button. It sounds so simple. But I had people joining, and then, not knowing how to get to the call or not come into the calls. But once we had that add to calendar button, and it populated their calendar with the calls they show up and if they show up I can help them, and then they get a return on investment, and they never leave. That was one major retention strategy.
The other one is the classic slipping-away email reminder. If people stop engaging, I will hunt them down and ask them to come back. And I’ve got this email that comes out and it’s got a 90% open rate and it has made me millions of dollars and that’s just making sure that people are going to engage with me because I hate it when someone buys and then disappears and then later that gremlin can really grow. They could actually build up anger or resentment towards you for their lack of resourcefulness or forgetfulness if you’re not careful. So I take that out of the equation. If they don’t come after multiple follow-ups, I might even unsubscribe them.
Robbie Baxter: Okay, I love that. I’m wondering if we can get that email.
James Schramko: Well, I’ll tell you that it is so simple.
It’s so simple that people would write it off as being too simple. But the subject line is, “You okay?” and then the body is something almost equally as simple. It’s first name. How are you doing?” That’s it.
It’s like Robbie, how are you doing? Kind of compels you to say, Oh, sorry. I got busy recording 5 or 6 podcasts and I saw the meeting was on, but then I had to pick my kids up from school. But I’ll be there next week, and that’s where the extent of how much they respect and value the personal relationship. They won’t want to let me down, because I don’t want to let them down right.
Robbie Baxter: That’s the whole thing.
James Schramko: That’s it! That’s the whole.
Robbie Baxter: You Okay, Robbie? How are you doing?
James Schramko: Yeah.
Robbie Baxter: Awesome. I think that’s important, I’ve been advising organizations for years that the number one way that they can retain people is, to make sure they’re getting value from the product and have some way of tracking when someone’s disengaging. But your intervention is so elegant and so simple it’s total gold and the calendar one removing friction between the member and the value is just so easy. Those little operational things can make such a huge difference. I appreciate that.
I want to ask you, I’m an independent consultant, and I’ve been doing this for a long time. What’s one thing I could be doing to be more successful?
James Schramko: Looking back through your archive of clients and scoring them, I pull up a spreadsheet and populate it with your clients down one column, and then across the top you can put factors that might be interesting to you like you could rate them out of 10 for revenue contribution enjoyment working with refers you to others. Got a result and you could find the high score clients and then 0 in on them as the bullseye of your target board and then develop a campaign to attract more people just like them and only work with them. And now you would cut away the waste, and you would have learned from them, if you get a very low score, you’d want to know what caused that. How can you defend against that in your marketing offer? Who is this not for? That’s why you asked me about the error plan scenario. I will exclude almost everybody from working with them unless they fit the perfect criteria, because if they fit the criteria, they’re going to be so wildly successful that it’s ridiculous, and I enjoy that the most.
Robbie Baxter: Got it. Very helpful. Okay, we’re past time. But I’m enjoying this so much and I hope you’ll come back because I have more questions. But to wrap up today, are you okay with the speed round?
James Schramko: Oh, yeah, though I’ve got all day. I literally don’t have any appointments today.
Robbie Baxter: First subscription you ever paid for?
James Schramko: Email autoresponder. Unless you’re talking about the telephone. My telephone service in the nineties would have been the first one.
Robbie Baxter: Your favorite subscription that you use today outside of your own?
James Schramko: Surf Forecast. That’s a no-brainer.
Robbie Baxter: Top tip for podcast interviewers?
James Schramko: Plan the structure of your show before you hit the record. If you are just freewheeling, it could be very dangerous unless you have a super-talented guest.
Robbie Baxter: And final question. You sold Mercedes Benz cars for many years. Well, since it’s BMW, and Jim, what’s your favorite thing to drive today?
James Schramko: I’ve got a Toyota Land Cruiser, Twin Turbo 6 Cylinder that’s tuned. And it’s so impressive, they’re actually the world’s most profitable car company, and I really like Toyota, and probably sounds pedestrian. And in Australia, they’re sort of a cult following. You can buy it and then sell it again without losing much money at all, and they’re just so fit for purpose.
Robbie Baxter: Fascinating. James Schramko, thank you so much for being a guest on subscription stories. It was a real pleasure to talk to you today.
James Schramko: Enjoyed it a lot. Thanks, Robbie.
