The Automatic Customer Book Summary - The Automatic Customer Book explained in key points

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The Automatic Customer summary

Name: The Automatic Customer
Rating: 4.3 (30 reviews)
Author: John Warrillow

John Warrillow

Creating a Subscription Business in Any Industry

4.3 (30 ratings)

18 mins

Topics

Small Businesses Entrepreneurship Success

Table of Contents

The Automatic Customer
Summary of 9 key ideas

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Key idea 1 of 9

What’s in it for me? Find out why more and more companies are turning to subscription models.

Sometimes trends aren’t trends because of buzz or visibility, but because they actually work. Sometimes those trends work so well, they start spreading across all industries.

Enter subscriptions, the “new” business model that’s actually been around for centuries. It’s always been standard practice for newspaper and magazine customers to pay for their products on a periodic basis. Although the subscription model diminished at the onset of the internet, it’s come roaring back.

All you have to do is look at WhatsApp, the messaging app that built a 450 million-strong customer base with ZERO advertising. How? Because their subscription service was so genius — $1 a year after the first year — that friends starting getting other friends to sign up by the millions. Customers had become automatic!

These blinks explain how you can learn from WhatsApp and dozens of other companies, both big and small, that have used subscription models to improve their bottom lines and outpace the competition.

In these blinks, you’ll discover

why Dollar Shave Club names its razors;
what painful lesson gamers taught World of Warcraft; and
how Amazon used subscriptions to go after Walmart and Target.

Subscription-based services are a major part of today’s business world.

You may have noticed that a lot of the companies you’re familiar with are suddenly offering subscription services. Subscription services are certainly very hot at the moment. Why?

There are three main reasons the subscription model is going through a renaissance.

First, there’s the rise of the access generation. The access generation favors access to material rather than ownership of it.

Second, people aren’t afraid to make financial transactions online anymore. In the dawn of the internet most people only trusted big companies with their credit card information. Those days are long gone.

Finally, data has become a key asset in today’s economy – and subscription-based companies rely on data collection even more than most other businesses do.

These changes have convinced a number of the world’s most successful companies to shift their business strategies and make more use of subscriptions. Apple, for example, launched Joint Venture in 2011. Through Joint Venture, Apple helps companies transition to using Mac products in exchange for a yearly subscription.

Microsoft did something similar by offering their Office software through subscription rather than distributing it in stores.

The new subscription economy also allows businesses to offer specialized services, which adds new competition to the marketplace.

Amazon, for instance, has had a lot of success with subscription through Amazon Prime. Amazon Prime allows subscribers to pay $99 a year to stream movies and get free two-day shipping on most purchases. Prime subscribers often prefer to buy a pair of running shoes on Amazon instead of at the local sports store.

They’ve also just opened a grocery service called AmazonFresh, where customers can have grocery purchases over $35 delivered to their home with no shipping charge.

Amazon’s subscription services allow it to compete with small businesses and big businesses alike. They can now compete with major companies like Walmart and Target.

Subscription-based models make your company more valuable and enjoyable to run.

The financial perks aren’t the only reasons to shift into using subscriptions. Subscriptions actually make your life as an entrepreneur much easier.

First off, subscriptions significantly increase your company’s financial value. For potential investors, subscriptions are a predictable stream of cash flow.

If you work in e-commerce, try the consumables or surprise box models.

If you sell goods online, there are two models you can follow to implement subscription services: the consumables model and the surprise box model.

In the consumables model, a company offers a subscription for a product that customers need to replenish regularly.

If you want to build a community, provide networks for people to use.

There are different models to follow if your goal is to build a community around your product or service.

In the private club model, a company offers a special service or experience to wealthier customers. The customers benefit from the network, goods or services it provides.

If you specialize in easing your clients’ lives, keep it simple and focus on offering peace of mind.

Some companies focus on helping their customers in times of need. You might be surprised, but such companies can offer subscription services too.

This is where the simplifier model comes in. The simplifier model aims to ease the lives of busy (and relatively affluent) customers by helping them with various ongoing tasks.

If you sell content, use memberships and all-you-can-eat models.

What if your company is based on offering something less concrete? If you sell content or information, the following models might be right for you.

If your customers come to you because of your expertise, you can use the membership website model. In this model, you make your expertise available behind a paywall.

Use subscriptions to offer elite customers priority access.

Have you ever seen people go to the front of the line at airport security because they’re part of an elite group of flyers? They benefit from the front-of-the-line model of subscriptions. In front-of-the-line models, a company offers priority access to something for people who subscribe.

This sort of offer is particularly attractive to people who can’t solve certain problems on their own. Salesforce.com, for example, provides support to its customers, but prioritizes them by the kind of package they’ve bought. Customers who bought the most expensive package get a response within fifteen minutes.

You need to learn a new set of metrics for subscriptions.

If you’ve ever subscribed to something yourself, you’ll know that while there are plenty of benefits, subscriptions can be complicated. As a subscription provider, one of your biggest challenges is learning how to measure progress.

Traditional metrics don’t work with subscriptions. The profit-and-loss statement (P&L), which displays the amount of money a business retains after its expenses are paid, will become misleading. In a year, the clients’ payments will be a fraction of the original amount (1/12), while the expenses will stay the same.

Use tricks to convince potential customers who may be reluctant to buy subscriptions.

So if you’ve assessed your situation and decided you want to incorporate a subscription model into your business plan, what’s the next step? How do you acquire new customers and limit their loss?

Subscribing to something is a serious commitment, but there are a number of tricks you can use to convince even the most reluctant potential customers.

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What is The Automatic Customer about?

From groceries to ski-slope access to MP3s – today all kinds of businesses operate by subscription, and everyone from giants like Amazon to small local firms are benefitting. The Automatic Customer breaks down the multiple models you can use to tap into the power of subscriptions, explains how to measure your new success, and gives you tips on keeping up the good work.

Who should read The Automatic Customer?

Entrepreneurs and anyone interested in business
Anyone interested in implementing a subscription service
Anyone who wants to understand the subscription economy

About the Author

John Warrillow is the bestselling author of Built to Sell: Creating a Business That Can Thrive Without You. He’s also the founder of The Value Builder System, a company aimed at helping businesses improve their value.

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