Earlier, we reframed Clayton Christensen's well-known Jobs To Be Done Milkshake Metaphor for the subscription economy and posited the idea of a Milkshake Monthly subscription service. If you're not familiar with the concept of Jobs To Be Done — or if you'd just like to catch up -- check out Part One of this series. Otherwise, read on to learn about how our milkshake subscription might break down in each stage of adoption.
First things first: It’s important to remember that whatever kind of product or service we’re talking about, before someone can hire your service to do a job, first they have to fire something else. And it’s a psychological truth that there are two competing forces at work when it comes to switching products: the force compelling change, and the force opposing it. No matter how many problems inherent in the current solution someone is employing to make progress, there is, as Christensen points out, a comfort in our “habits of the present.”
And that means Milkshake Monthly has to do the job much better that whatever method your customers are currently using -- and be very enticing as a potential substitute. (Of course it bears mentioning that this shouldn’t be used as an excuse to just be “good enough” in the hopes of retaining the customers you already have. If you’re not convinced of the importance of continuous improvement, ask Kodak how their aversion to change worked out.)
Knowing who your true competition is can help guide you in conveying to customers why they should fire another product and hire yours. In the case of Milkshake Monthly, that could mean firing their bagel or banana -- or whatever else they’re consuming to do the job you want them to hire your milkshake subscription to do. You need to convey the superior ways that Milkshake Monthly will ease their struggles and help them make progress in their lives. Possible enticements to highlight could be because milkshakes aren’t messy, they last for an entire commute, they fit in the cupholder, and they’re filling.
Aversion to change also applies if someone is doing nothing at all; in this case, a milkshake is a hassle-free alternative to being bored on the commute and hungry all morning. In other words, milkshakes do the job much, much better than the alternatives - and it’s important that potential customers know it.
This might also mean showing your existing brick-and-mortar customers how Milkshake Monthly offers more bang for their buck, and is a more convenient way to ease any existing struggles they might have when purchasing your milkshakes. You’ll need to answer questions such as: Why should people make the switch and subscribe to Milkshake Monthly? How will this help in their daily struggles and/or improve their lives? What increased value will they get from a subscription vs. just coming in to get a milkshake the regular way? Perhaps they could save time in the morning through a milkshake delivery; or, If they still want to come in and purchase their milkshake, make it a hassle free experience -- give members the ability to swipe a card and serve themselves. Perhaps you offer ½ price child-sized milkshakes for those who regularly purchase milkshakes for their children. Offer flexibility as well as savings.
But one thing you shouldn’t do is over promise, or misrepresent exactly what value people will derive from their milkshake subscriptions. A fast route to churn is to set up the wrong expectations. So if you don’t plan to offer brownies, for example, don’t give them away for the first week and then suddenly cut them off.
This stage, as the name implies, is where you’re getting your customers set up to take full advantage of their milkshake subscriptions. Don't make the mistake of conflating setup with onboarding. Setup is very different from onboarding. This is the time to help them create their customized experience, one that will deliver the most value. A good approach could be a targeted survey to help them determine which type of subscription would do the job(s) best. Questions might include: When and where do they consume the milkshake? Do they drink it on the way to work? Do they want to buy milkshakes for their children after school?
Questions like these, which allow you to customize the experience, can help ensure that your customers are set up for success from the beginning.
They aren’t extracting value yet in this stage, but it’s still important to make this a pleasant, seamless experience and make sure the customer is ready to move on to the onboarding process without any roadblocks.
Milkshake Monthly Onboarding
Onboarding is your first chance to demonstrate value to your customers. It’s the time to create those quick win, “ah-ha” moments. The best onboarding should catapult a user directly from the hiring decision into a successful “ah-ha” moment as quickly as possible, making it a no brainer for the customer to become an instant engaged user. This can circumvent disengagement entirely.
So make sure, for example, that it’s easy as pie for them to place their first order. Make it painless to set up a standing, regular order. And make sure to deliver a big, delightful “ah-ha” moment the first time they find their perfectly-packaged milkshake waiting on their doorstep before they go to work.
The truth is, usage doesn’t fall into neat little sequential buckets. Instead, it's more accurate to think about the tiers of engagement as a spectrum. On one end lies the malaise of user disengagement; on the other, the actively engaged state of avid usage. There are forces at work in between these two extremes -- circumstances, events, and features that can either pull your users into a comfortably numb state of disengagement, or help accelerate them into gaining momentum towards avid usage.
In fact, engagement can be thought of as an equation which we call (fittingly) the Engagement Equation:
Engagement = progress - friction.
To increase engagement, users must perceive that you’re going to help them make progress towards their goals by removing areas of friction and frustration that are currently standing in their way. Hence, the more friction you can remove, the more you’ll accelerate progress -- and the more engaged your users will become. In the case of a milkshake subscription, that might mean ensuring experiences like reliable, automated morning milkshake deliveries or an easy, painless way to change a standing order. But to get customers to switch to your product in the first place (before they can ever go on to become engaged users) they must perceive your unique value, as we discussed in the Switch stage.
And the opposite of engagement is (of course) disengagement. But you should understand that disengagement is not churn. That distinction matters, because churn equals lost customers. You simply can’t factor churned users into your user base. But disengaged customers are something else entirely: They haven’t left ... yet. They’re still around, lingering and lapsing and not taking advantage of their milkshake subscriptions. But this group can create a false sense of security for you: If you don’t dig deeper, they create the illusion that your customer base is healthier and more robust than it actually is. But rest assured: disengaged customers are likely to churn eventually.
The forces and frictions which cause an undesirable drift towards disengagement fall into four main categories. These categories can be easily remembered using the acronym SLOW, which stands for Struggles, Lapses, Obstacles, and Workarounds. We touched on these earlier, but in a nutshell they break down like this:
- Struggles are caused by consistent roadblocks and frustrations your users experience when trying to accomplish tasks and make progress with the job they’re trying to do. This might include a consistently late or incorrect milkshake delivery.
- Lapses are the most insidious form of disengagement. They are subtly disguised as mere forgetfulness or confusion about what to do next, and often stem from an incomplete understanding of the benefits of your product, and a resulting inability to extract the intended value. Perhaps your customers are confused about how to change a standing order, or don’t understand how to change a delivery time.
- Unlike struggles, which recur often, obstacles are one-time frustrations or barriers to success experienced by your users when they’re trying to make progress with your product. They usually occur during setup or onboarding, as we discussed earlier. .
- In the face of mounting struggles, users construct an elaborate workaround that cuts the app out of their workflow (Or your milkshake out of their morning routine.)
When it comes to trying to get a handle on the engagement numbers, many companies make the mistake of counting useless data that doesn’t really indicate anything when trying to establish the health of their user base. For example, when it comes to software, they may count a log in as use. In the case of your milkshake subscription, that might equate to counting someone activating their subscription card. But that doesn’t tell you anything actionable. Someone could activate their card and face struggles and obstacles right off the bat.
Similarly, some businesses make the mistake of counting the purchase as an activation. But simply knowing how many people have purchased a subscription gives you no idea at all of how many people are using your product. And many of those people who just buy a subscription but never use it have lapsed-- and they’re the biggest danger to your long term growth. In a subscription business, you’ll never make back the recurring revenue you need to justify your CAC, customer acquisition cost, if you don’t address the problem of your lapsed customers. And the more customers who lapse, the worse off you’ll be when you scale.
And remember that activation isn’t a stage of adoption so much as it is a threshold. It’s that moment when a customer swings towards the engagement end of the spectrum -- and, as we discussed earlier, the best onboarding will propel them directly into a state of active engagement. It's up to you to create an early win -- an “ah-ha!” moment -- when your customers first experience the benefits of a milkshake subscription, and then keep those wins coming, to help propel them towards avid engagement and keep them motivated to use their subscription. Perhaps you ensure a stress-free transaction, making the time between their first swipe and the moment they’re in their car happily sipping their milkshake on the way to work, lightning fast. Or perhaps it’s the first time they leave to go to work and see that delicious milkshake perched on their doorstep.
In order to be able to definitively measure whether or not your customers are making progress towards their goals and deriving value from your service -- and in turn, whether they’re on the engaged or disengaged end of the spectrum -- you need to understand how they define success. We call discrete moments of success “progress markers.” Simply put, a progress marker is a description of when and why a user feels like they were able to get something done successfully. It clarifies the purpose of their actions. It shows you what they care about. And in doing so, it helps you truly see which aspects of your product or service your users find valuable. Think of progress markers as tiny “yay” or “aha” moments -- in a word, successes -- that must be written down in the the mother-tongue of the user’s own language.
How do you find out how your users define these moments of “yay”? We recommend doing SLOW interviews with users to dig deep and understand their needs, motivations, frustrations, and goals. We talk about the process in-depth here.
Once you establish these user-defined progress markers, you can then measure your customer’s relative rate of progress between each moment of success. We discuss this type of time-based acquisition cohort analysis in more detail here and here.
You should also make sure to track those subscribers who begin to use their subscription with less frequency -- or, to put it another way, those groups of users who begin to exhibit a slowdown in their rate of progress. For example, maybe you find that a group of users, on average, have reduced the frequency of milkshake deliveries. You don’t want to only track customer churn -- after all, if you wait until your customers never return, it’s too late to intervene. Instead, build a feedback loop into the process to measure the leading indicators of disengagement and customer churn while you can still intervene.
When you notice activity churn -- say, someone who used to get their morning milkshake 3 times a week who has suddenly getting one only once a week -- find out why. As Christensen says, “If we fail to understand why customers make the choices they make, we’re just getting better and better at a fundamentally flawed process. Without the right understanding of the causal mechanism at the center of the innovation universe, companies are trying to make sense of the universe revolving around the earth.”
So in this context, ask: Why has your milkshake stopped doing the job your customer hired it to do in the first place? Perhaps they have started gaining weight from drinking so many milkshakes. Suddenly the circumstances have changed, and they need to hire a product that will keep them occupied on the way to work -- without the extra calories. One response might be to offer a low calorie milkshake that loses none of the thickness of the original product. Whatever the case, a feedback loop will help you determine how to tweak your product so that it will continue to help your customers with the struggles they face every day.
If you’ve been tracking metrics that indicate how quickly customers adopt your milkshake subscription and the rate at which they move between progress markers (as well as qualitative behavioral research in the form of SLOW interviews to identify frustrations they face along the way) then you’re well-positioned to identify the most highly-engaged users to target with upsells and cross-sells. Maybe you offer an upsell where customers can get a brownie with every order, or perhaps you offer a reduced rate if they commit to a year-long subscription.
You can also use this data to identify the customers who are most likely to refer your business to others, and you can target the behaviors to reward and encourage among these users. The users who are particularly receptive to upsells and who actively refer your product fall into the most rarefied upper echelon of users: the avidly engaged user. Perhaps these are the folks who use their subscription to hire the milkshake for multiple jobs. They hire it several mornings a week for their commute; they hire it in the afternoon for a treat for their children; maybe they even hire it on the weekends when they bring all their friends in for a hangover cure.
The buck literally stops here. Renewals are how you stay in business and grow to be profitable. Activity churn and your customers’ engagement numbers are leading indicators of whether or not they will renew their milkshake subscription. It’s a big part of why you’ve been gathering metrics and observing behaviors throughout the adoption lifecycle: to understand what drives engagement with the subscription product, to identify leading indicators of churn, and to see why people drift into disengagement. Understanding these factors and taking proactive measures -- before you lose your customer -- will help your renewal rate.
But once you've implemented your engagement strategy, there's one more thing to think about: Will you scale your monthly milkshake subscription business, or not? To help you think that through, check out Milkshakes & Metrics, Part Three: Scaling Your Milkshake Subscription.