Dan: Stripe has what I would call, I
don't, I forget their official name
for it, but I always call it Dumb
Ries, which is basically, it will
just try on a certain daily cadence.
So we'll try like three days
after a payment fails, five
days, seven days, et cetera.
Everyone who's good at payment retry.
Uh, they use machine learning algorithms
to try to guess when it's happening.
'cause what's happening in the background
is like things aren't either correctly
or incorrectly getting flagged as fraud
sometimes like within the card networks.
So the time of day you try the data that
gets sent with the API calls, et cetera.
Jacob: Hey, Dan, super excited to have
you on the podcast today and to chat.
Uh, really, really glad,
uh, you're able to join.
Dan: Hey, what's up Jacob?
Thanks for having me.
Jacob: You write subscription
index today, but you didn't start
in subscriptions or consumer.
You started at JP Morgan
and then moved into product.
When did you start to realize that
subscription businesses really operate
under different math and different
rules than traditional businesses?
Dan: Yeah, that's a great question.
I think it was kinda like a, a bit
of a long and winding journey for me.
So, you know, I started my
career in management, consulting
and finance in New York.
You know, uh, realized I
kind of didn't like it left.
I started my, actually my own
ad tech company first knew like.
Laughably little about growth and product.
We actually made some money,
but like not enough to survive.
Shut that down.
And then I got to Code Academy
in probably like 2016 or 17.
Uh, and kind of, I was there for maybe
a year doing kind of a catchall job.
Uh, you know, little bit of operations,
little bit of customer support, kinda
anything I could do to be useful.
And then I got a tap on the
shoulder saying, you know,
you could be good at product.
And that's really where I started
to learn subscription businesses.
I think partially
subscription businesses are.
You know, fundamentally different than
a lot of other, uh, technology types,
but also like startups are fundamentally
different than big companies, startups.
It's like, you know, it's a very much
a, you need to do whatever you have
to do to make the business perform.
Whereas a giant place like JP Morgan
is, you know, it's much more like
you're in corporate culture and
you're trying to be efficient inside
a gigantic machine In startups.
It like, you know, we'd rather
not have meetings, but anything,
just make money somehow is kind
of the answer in the startup game.
Jacob: Yeah.
Yeah, that, that makes sense.
And so I think when you started at
Code Academy, you still had, you
know, quite a, quite a large number
of users, but I think you guys are
still figuring out monetization.
What did the
Dan: Yeah, a hundred percent.
Jacob: you started?
Dan: So Code Academy
starts in probably 2011.
It's kind of an early
Y Combinator company.
You know, this feels like ancient
history at this point, but kind of
in like the mid and early 2010s.
Like learning to code was the big
like tech wave happening at the time.
So like our CEO, Zach
was on TV all the time.
If you're, you know, old like me and
remember the Colbert Report or any of
the late night shows, like he was on
those shows talking about like, why.
Learning to code was important,
whereas that seems like
trivially obvious at this point.
So Code Academy rode, uh, kind of that
wave really, really well in the early
2010s, and it was hands down the best
product online for learning to code.
So when I get there in probably like 2016.
We have like millions of free users on
the site, but we hadn't really figured
out like the business model itself.
So we have a very, very dominant
free product at that point.
Um, you know, this is a little
while ago, but I'm gonna say we
probably ranked overall number
one on Google for learn to code.
I think we ranked like two for
Python, probably like two or three
for Learn H TM L So we're like,
you know, we're dominating the,
the free learn to code space.
At that point, we didn't really yet
like figure out the revenue engine side.
Jacob: Got it.
Yeah, I remember I was, I used.
Academy I rem
Dan: Same with me.
It was the best
Jacob: was there, there wasn't
another really good choice.
It was, you're gonna use Code Academy.
And, and so it sounds like you had
great, um, great brand presence
and, and great organic acquisition.
Um, did you have a subscription model?
What, what was, what was working,
what was, what was broken
in the subscription model?
Dan: I'd say we had Pro at the time,
which was the name I think still is
the name of the subscription product.
Um.
It's ironically looking back like
it's a thing we didn't understand
that well about the subscription world
is subscription products like one
take longer to grow because like the
incremental size of revenue was smaller.
You know, you sign like multiple.
$20 a month users, instead of closing
like multi six or seven figure
contracts like a B2B company would be.
So it takes a while for, uh, growth
to compound the subscription product.
The real problem at the beginning
is like we just weren't converting
free users to paid users.
So in the game of a freemium product.
Freemium products are great 'cause they
attract a ton of people and they keep
your acquisition cost really, really low.
But they only work if you can
sustain the business to convert
enough free users to be paid users.
I'm gonna, you know, I'm gonna, again,
it's a little while ago, but I'm gonna
say the, our conversion from free to
paid was like well under 1% at that time.
I'd say in the current, you know, world
of freemium products, probably like
solid, free to paid conversion is 3% good.
Probably starts at five.
Like great is like 7% ish.
Um, so we were like way, way,
way below the benchmarks.
Jacob: Yeah, where you
just, you're just a.
All these users, no one's paying you.
People are using your product, which is
Dan: Yeah.
Jacob: a great place to be.
So it means you have something
because a lot of, there's a lot of
like faux freemium today, right?
Where it's, there's a trial or it's a
freemium, but it's not a, there's not
really anything behind the free version.
It's all just trying to drive
toward, towards conversion.
So it's a little different where you
had like an amazing product and user
base, it's just no one was paying you.
Dan: Yeah, code Academy is like a
real true mission driven company.
So I think, you know, being mission driven
is more common now, but Code Academy like
really put that line in the sand early of
like, we never wanna really cannibalize
the free product or take free value away.
From those users.
'cause one, it's like the traffic
acquisition of the business, and two,
it's just what we thought was the right
thing to do with the business at the time.
We'd help like millions and
millions of free people every year
get started, uh, co in coding.
But whereas now I think there's a lot of
what I would call like trials in disguise
where like it's a, it's a free product,
but you get maybe five uses total of the
free product, which is really a trial.
. Jacob: Yep.
Got it.
And so, you know, I think there's,
um, there's a lot of stuff out there
on monetization, converting users,
so I don't wanna focus on that today.
I wanna focus on churn today where I
think you, you guys figured out a lot
of interesting things around churn,
how to fight churn, um, uh, and.
So I, I'd love to dive into
the article you wrote on, on
the four Horsemen of Churn.
Um, and I think you, you did an amazing
job on, uh, breaking down churn into
these actionable, actionable sub problems.
Uh, tell me about like the gap you saw
in, in Code Academy or, or just in, in
teams in general, how you were approaching
churn that led you to develop this.
Dan: Yeah, a hundred percent I think.
You know, why churn is so important,
you know, should be obvious, but
maybe I'll belabor the point for a
second on why churn is so valuable.
Uh, so if you think of kind of
the math behind subscription
businesses, there's really like two
frameworks that are super important.
One is called the growth Ceiling, which
is the point at which like your, your
acquisition numbers and your churn numbers
show you the maximum number of subscribers
you can ever have before they equalize.
And you hit a growth plateau.
So if you take the number of new
users coming in every month and you
divide it by your monthly churn rate.
You end up with like the ceiling
of subscribers that you can have.
So let's say you're taking a
thousand new users in a month
and you're churning 20% a month.
You can have a maximum of 5,000
subscribers before the inputs equal
the outputs and your growth stops.
This honestly is a framework I didn't
understand when I was at Code Academy.
I learned it afterwards.
Um, but it really churn dictates like
the ceiling of your business as a whole.
So also if you take, uh, the number
one and divide it by your monthly churn
rate, again, you get the maximum number
of months a user will stay around.
So again, if you have a 20%
churn rate, one divided by 0.2
is five.
Like your churn number really
like ladders up to exponentially
impact your businesses overall.
So breaking churn apart, like, I
think the mistake most companies
make, and like I see companies
make a lot, is like they kind of
scattershot, uh, solutions on churn.
They'll take kind of like one a quarter.
Or they'll kind of like cherry pick
a number and like throw a couple
projects at it, assume it doesn't
work, assume this is like just a part
of their business and then move on.
When in reality, like churn kind
of breaks apart into four major
buckets, I would say there's kind of
like payments and technical churn.
So this would be cards failing, uh,
your app crashing, something like that.
Uh, what I would call like
selling to the wrong persona.
Something's happening in your
marketing motion that's pulling
in a less than ideal ICP.
So someone who doesn't feel the problem
you solve that materially or for which
like you are not a great solution to.
After that, I'd say it's kind
of activation based churn.
So this is one of the most powerful
forms of churn to fight with.
The best place to fight.
Churn is high in the funnel.
So the better people activate and get onto
the product, the less people fall away.
And the fourth one is what I
would call happy user turn.
So we'd a lot of these at Code Academy
where like someone comes in to learn sql.
It probably takes 15 hours
of dedicated time to do sql.
Uh, they came here to learn sql.
They now know sql.
They leave super happily.
So it's like they loved code to Academy.
They had a great experience.
Our SQL content was awesome, but we
solved the underlying problem they
had and now they're just leaving.
Another good example of that is
like I met my wife on Bumble.
We're super happily married.
We have three kids.
I'll never use Buble again.
Like I had a great experience.
I probably, in retrospect, owe them more
money than any product I've ever used.
'cause it's where my family came from.
But like under no circumstances
will I use Bumble again.
Jacob: I, uh, I met my wife on Hinge.
Uh, uh, so I'm with you there.
Uh, but, and, and it's, it's, it's
interesting thing to think about.
There's, there's positive churn
there, there as well, and so Well,
and so let's, we, we've got, um,
These are your four horsemen too.
These first, so we've got activation,
uh, we've got payment failures.
I think you, you, in the article you
had like pricing and plan mix and then
voluntary, uh uh, voluntary churn.
Voluntary cancellation.
Was there, was there some moment at
Code Academy that made you realize
this framework or made you break it
down or just over time you kind of, uh,
uh, created this framework and, and,
and focused on these different areas?
Dan: Yeah, I'd say this is something
I came to more after Code Academy.
I think we were both very.
Code Academy was a hard business
to scale and it was also like
an awesome business to scale.
'cause I got to work kind of like end
to end on the whole subscription model.
So Code Academy when I got there, was
probably 20 people and when I left
there was about 250 people there.
So I really saw the growth from that on
the headcount side and probably about.
10 million to 50 million on the a r side.
So really it allowed me to like touch all
the parts of the subscription journey and
figure out kind of where the levers were.
The horseman framework that came after,
after I'd done a bunch of consulting.
You see that like most companies
have the same problems and there's
really like a certain set of
solutions that work for most of them.
I'd say the mistake that I see
a lot of companies make is they
start a lot of things in parallel.
Like it.
It's a very comforting feeling when you're
kind of a product person at a company.
When you go to present your roadmap to
leadership and you have 10 things going
on in parallel, like the team looks busy,
it looks like we're ambitious, like I
have a lot of stuff to talk to to fill
a meeting up, et cetera, et cetera.
But it's almost like the exact opposite
of how you should work on that problem.
Like projects don't produce
any value to their live.
So what you should do is like throw all
your energy at the things you can get
outdoor the fastest and like get points
on the board so they stack up over time.
Subscription companies are kind of
like a, a snowball rolling down a
hill where like it takes a while
to gain momentum, but once they're
moving, they're super, super powerful.
So like a, a really painful mistake
you can make in these businesses
is spend six months on something
and then have a dud happen.
You lose half the year in terms of gains.
Jacob: And that might be true
with any business, right?
Dan: Yeah.
Jacob: we're focused focus wins,
uh, uh, move quick and iterate.
Um, yeah, so I, I think that's a
good, uh, a good segue into kind
of how do we prioritize these?
How do we focus on the right.
Items at the right times.
And so of activation issues, payment
failures, your pricing plan, mix,
voluntary, uh, uh, cancellations.
How do we, how do we figure
out what is the right thing
to focus on first or, or now?
Dan: Yeah, it's a great question.
I'd say in most companies I've ever
like worked in or consulted for in what
I would call like a vanilla scenario.
So like nothing is on fire.
The business just like isn't growing
as well as it should, or isn't
monetizing as effectively as it should.
I, I'd say I use what's called like
a bottom up optimization framework.
So when you, you wanna start at
like the bottom of the funnel.
The user experience and work up.
The reason I do that is like the best
practices are really, really clear at the
bottom of the funnel and within payment
processing and as you get like further
up into activation and like conversion,
you hit more bespoke problems that are
kind of like unique to that company.
So you wanna put points on the board,
like as fast as you possibly can.
The first place I check in every
single company I've ever worked
for is their strike settings.
Do they have the right auto retry?
Are they auto updating cars?
They have smart retry turned on?
Is it set aggressively enough?
Are they sending dunning emails?
Do they know they're
involuntary churn rate numbers?
All those changes I just described, if
you know, the stripe settings can probably
be done in 10 minutes and like maybe
you're winning like 5% of churn back.
But from an ROI perspective,
like we could do it on this call.
Hi, right now.
It's the easiest place to
win things back after that.
I'd say it's the cancellation
flow in what I would call like
shorter lifecycle products.
So EdTech is definitely one of them,
where like the underlying product that
the, uh, the underlying problem that
the product solves is a temporary one.
So the things like education, things
like dating, things like fitness,
things like weight loss, these are
like kind of periodic habits that
people jump in and jump out of.
Versus like insurance, utilities,
rent, like these are never ending
problems that human beings have.
For the shorter lifecycle, uh,
products, which is most subscription
products, the kind of trio of pausing
subscriptions, getting temporary
discounts, upgrading and downgrading or
connecting to people, does a good job of
maybe knocking like 20% future number.
Like these things are not
that hard to implement.
So I think they're most successful when
the solution you're giving them solves the
underlying problem that they're having.
So a good example is like, I used
Clear the, you know, go through
airport security faster thing.
Uh, and I went to cancel it 'cause, you
know, it's like 300 bucks for the family.
Uh, and they offered to let me pause
it for two months and that was just
long enough that I was traveling again.
And it's like, yeah, I don't wanna take
three kids through airport security
in a slow line if I can avoid it.
So Paul has like won me back for another
year for them, whereas normally I
would've canceled and not, you know,
signed up again when I was traveling.
Jacob: Got it.
Something I, I, I've seen is the,
um, sometimes cancellation flows or
upgrades, downgrades, it's actually
kind of complicated to kind of put
these together, it with good structure.
Dan: Yep.
Jacob: Is this, um,
based on that, is this a.
A, a later thing that if you're, if you're
a good size company, this is something to
think about, but it's probably not a early
growth lever, that it's a later term.
How do you think about when or
what, what type of company should
think about, you know, uh, a heavy
optimization for cancellation flows?
Dan: I'd say there's no like true one
size fits all pattern, but I'd say maybe
for 80% of companies they should at
least be trying the pause and discount.
Jacob: Okay.
Dan: Every company's a little different.
Like if you are a giant company with a
20-year-old code base and no one really
understands the billing system anymore
and like, you know, this is gonna
be a six month journey fraught with
risk, uh, maybe that's not a good fit.
But I'd say for the average
younger, newer startups especially
that do checkouts on web.
You have more of these tools available
to you off of the i, the iOS and the
Android store, uh, things like this work.
And if you can knock 20% off of churn
based on those formulas we talked about
at the top, you raise your gross ceiling
20%, you raise your LTV 20% and you raise
the enterprise value of the company 20%.
For our project, that will take like
two to three months maybe at a midsize
company that's like really, really good.
ROI, uh, and I think.
Companies typically like
abandon these too soon.
Like if I was running a giant
subscription company, we'd be
running ab test these flow monthly.
'cause like every increment, every
incremental point of churn went back like
raises the value of the whole company.
Jacob: That makes sense.
Yeah.
And, and it's, it is a good distinction
on the ability to do this with in-app
purchases versus web subscriptions.
You have different options
with in-app purchases, you can
still offer a discounted plan.
You can still offer
offer win-back campaigns.
Uh, uh, and, and then also what's
become a, a pretty common, or maybe not
common, but, but more possible today
is trying to move people from your
in-app purchase to a web subscription.
So if you see that someone's
going to, uh, cancel.
Uh, in your app you can try to
have an intervention, or if you see
someone's canceled, send an email.
Offering a web subscription where
you have much more flexibility with
offers, payment options, you can
get pretty creative with those.
You know, pausing, win back and,
and there is some depends on, on.
early you are.
'cause I think if you're, if you're
just in app purchases, you don't
always have the billing logic.
You just rely on Apple.
And so you have to abstract it.
And so there, there's kind of
a first step you do to be able
to access the these unlocks.
But even so, like.
backs in terms of offers that,
that anybody can do those.
And, and so,
Dan: Yeah, definitely.
Jacob: I think it's a good point
that people just do have nothing
or just do the basics and forget
about 'em and don't realize that,
um, every single point there is is
pretty meaningful because subscription
businesses are built on retaining users.
So if you're not
Dan: Yeah.
Jacob: but you're not building a business.
Dan: Yeah, a hundred percent.
I think there's like, there's,
I'd say, I'd say there's three
like choke points that all your
users go through, and you should.
Do as many of the best
practices you possibly can.
So it's the cancellation
flow that we talked about.
It's your payment processing and your
like win back logic on failed payments.
And it's your checkout page,
Jacob: Yep.
Dan: a hundred percent of your
traffic goes through those things.
Every marketing dollar you
spend goes through checkout.
The purchase funnel and like when
I buy products online, I find like
a staggering number of problems of
like, uh, PayPal popups that get
blocked by browsers, bad error copy,
uh, lack of mobile payment methods
on MO for things driving me from ads.
Like it's, you know, 1% increase
in checkout page conversion is
a 1% increase in the revenue.
'cause a hundred percent of
your revenue goes through it.
Jacob: on, I think on
the mobile side, people.
All people talk about is paywalls, right?
It's ab test this paywall.
So, so people probably maybe hyper-focus
on the paywall and forget about, um,
activation and cancellation flows more.
And maybe it's the inverse on web
or, or maybe on, on web products.
People just don't focus
on even, I don't know.
So, but, but so, um, okay, so
we've got cancellation flows.
Um, figuring out how to win back.
So we talked about pausing,
upgrading, downgrading as levers.
Maybe it's not the first thing you
do as a, as a small business, but
don't underestimate the impact there.
Dan: Yeah.
Jacob: and.
And then if you are, um, let, can,
can we give some quick advice for,
um, you know, payment failures and
dunning flows for apps that maybe have
recently launched web subscriptions
Just don't understand that world.
Like
Dan: Yeah, sure.
Jacob: checklist of like, what
do you, where do you start?
Dan: So I'd say for this might
have changed in Stripe, but every
business I've ever touched their
Stripe account, for some reason,
Stripe doesn't come configured
with the best retry settings on.
I don't know why that is.
Maybe.
Maybe everyone I've ever touched is
grandfathered into the old settings for
this, but every company I work for, I
end up looking at the following settings.
There's something called the retries
within the payment failure screens.
So you want it set to smart retries.
I always set it to.
Eight attempts over four weeks.
It's like kind of the most
aggressive, uh, setting.
They'll let you set it to.
The key thing is like you wanna set
those retry settings so they span
as many pay periods as possible.
Because typically if you're
charging a debit card or if you're
charging a credit card, like every.
14 way days for debit cards and
every 30 days for credit cards, like
the balance will reset and you'll
get another shot at trying it.
Stripe in some plans also allows
you to set more aggressive
dunning cycles for annual plans.
So annual plans are even more important
to done because you know, it's typically,
you know, five to 12 times the price
of a monthly plan, and you can set
those, I think as long as two months.
There's also other settings like the card
updater, so when someone's card changes,
Stripe attempts to Regus the new one.
Uh, that's another big one, making sure
the emails are turned on so that Stripe
is emailing you for failed payments.
There's also, if you use stripe's,
uh, failed payments, emails.
You can also let someone update their
card in your system without having
to re-log into your application.
So you want as little
friction as humanly possible.
I'd say like the levels past that is,
you know, you can turn off Stripes emails
and you can trigger your old emails
and put more like love into the copy
in the headline and things like that.
But I'd say the minimum is
configuring stripe correctly.
Jacob: it Is, is getting just those
things done and those are super easy.
Anybody should just go and
do those, uh, uh, today.
And the the, and the
smart retries, uh, is.
Basically how you solve the
handling multiple pay periods.
That is, if you have that
enabled, it should, Stripe
should handle that automatically.
Dan: Yeah, Stripe has what I would
call, I don't, I forget their official
name for it, but I always call it
Dumb Ries, which is basically, it will
just try on a certain daily cadence.
So we'll try like three days
after a payment fails, five
days, seven days, et cetera.
Everyone who's good at payment retry.
So turnkey's a company that
does it amongst other things.
Butter's another one.
I think Flex pays another one.
Uh, they use machine learning algorithms
to try to guess when it's happening.
'cause what's happening in the background
is like things aren't either correctly
or incorrectly getting flagged as fraud
sometimes like within the card networks.
So the time of day you try the data that
gets sent with the API calls, et cetera.
Jacob: Got it.
Got it.
Cool.
Cool.
That makes sense.
Um, okay, so we've got cancellation
flows, we've got payment
failures and, and dunning flows.
Um, let's, let's talk about pricing and
plan mix, like, so, so what point does
your, your poor plan design show up as
churn and, and how do you diagnose that?
Dan: One of the most, I'd say, impactful
changes we ever made at Code Academy
was getting the ratio of the prices
in our monthly and annual plans.
Correct.
This was like, I'd say a top five
monetization win at the company.
So in those shorter lifecycle products
where the average user is gonna stay
around for four months, five months,
six months, something like that.
So that's fitness, dieting, ed tech,
dating, gaming, like all those things
we figured out, uh, I guess through
random luck that if you price your annual
plans, it's like one or two months more
than your average monthly retention.
You end up jumping the monthly retention
numbers from like five months to
probably an average of like 10 months.
You can like literally double your
LTV and cut churn by just pushing
more people into the annual plans.
So I'm making these numbers up, but like
our, I think at the time Code Academy
was charging roughly 20 bucks a month,
maybe our monthly plan LTV was like.
$85, $90, something like that.
And after optimizing this, our annual
plan LTV was probably like $300 because
you end up getting roughly like 50% of
people per annual plan cycle to renew.
User psychologically commit more.
You end up with less payments based churn.
Uh, you get cash payback faso cycle if
cash is important, especially if you run
a bunch of ads, it's one of the few like.
Plans, uh, you know, rising
ties, it lifts all boats.
And I think, you know, we kind of
discovered this in isolation, but if
you look at any of the really good
subscription companies, such as like
Calm, Noom, Headspace, everybody
aggressively de discounts their
annual plan, I think in relation
to, uh, what their monthly LTV is.
And the reverse is this, like
if you take the ratio of those
plans, you can guess how long
they're retained monthly users for.
Because I think everybody mature
in this space does this trick.
I think the, the normal kind of like.
Ratio everyone locks in.
It is like a 10 or 20% discount for
monthly to annual, but like that really
only works if your retention item is
about the same and you want a small
discount to get more cash up front.
Jacob: Yep.
Yeah, I think, um, I think it
depends if you have a strong.
Subscription business or a, in terms
of renewals, uh, if you have a weaker
renewal rates, um, what I advise companies
to do is you jack up the monthly price.
keep your annual the same,
make annual look like it's 50%
off, get more revenue up front.
Uh, and so I think it depends
on, on your renewal race as well,
because, uh, and in the mobile
app world, um, a lot of consumer.
Companies, they're, they're kind
of subscription businesses because
they're kind of just acquire users
profitably and get them to pay
once and, and kind of keep them as
Dan: Yep.
Jacob: like, are you really
retaining them that long?
Uh, and, and so, but, but I, I
think the, the general, yeah,
the general insight is like, um.
Annual is really, really important
for driving your success.
Monthly churn is always
gonna be way too high.
Right?
And, and, and you can't, it's really,
really hard, unless you're Spotify
or Netflix, to build a successful
subscription business on monthly plans.
Dan: Yeah, I'd say for like a
B2B company, like good churn
is like, you know, 5% a year.
For B2C companies, good
churn is maybe 5% a month.
But if you ever look at a table that
like projects that over 12 months, if
you lose 5% of people every month, you
lose 46% of your people every year.
So you have to do a lot of acquisition
just to keep up with the natural
churn cycles of those business
companies that are really like, uh,
I say confident in the long-term
retention, don't offer annual plans.
Your, your, your car leases don't do that.
Your rent doesn't do that.
Your cell phone plans don't do that.
Like there's no reason to give a discount.
'cause you've been using these
things for years and years and years.
Jacob: Yes.
Exactly.
Exactly.
And I think that's it.
It's a really good point
to think about that.
Um, if you're starting off, you
are not, those businesses don't
benchmark yourself against them.
You need to do everything you can
to get that cash in the door and,
and your annual price anchoring
versus monthly is a huge, huge lever.
Uh, I, I think.
That, um, uh, a Google presentation showed
that if you, even if you discount your
annual plan 50% versus your monthly, the
annual LTV is still like two x higher.
Dan: Yeah, the, uh, if you have the
traffic, a really good AV test to run
is one with the main KPIs, a revenue
per allocated user in the test.
So if you like split your traffic in half
and you take the money earned on each side
and divide it by the users on each side,
the highest numbers should win there.
So, so you can keep
playing with those ratios.
Jacob: Yep.
Dan: quarterly maybe, maybe at least
every six months, and like keep running
tests to make sure you monetize that,
attract that traffic effectively.
Jacob: Yeah.
Yeah, that, that makes sense.
It makes sense.
I think it's, it's such a getting
your pricing and plan mix right?
Such a big determinant of success and, um.
How, how do you think about like,
cadence of optimizing or, or kind of
continuing to improve pricing there?
I think a lot of people, um,
don't do this frequently enough.
Dan: I'd say by not frequently enough,
I'd say most people don't do it, period.
Um, so I'd say like if you
are running pricing tests at
all, you're ahead of the game.
I think in an ideal state, like you should
probably be running them once every six
months, and that doesn't mean you have
to overhaul your whole pricing structure.
You can change like the discount ratio,
you can change one country's price mix.
You can change like lightly where
features are, but again, it's like
there's very few choke points that
go into businesses and like everybody
who comes in pays you something.
You know, your LTV is your,
the price you charge times how
many months they stay around.
That's the main determining factor of
how much money you make in the business.
So it's like you wanna
touch one of those things.
Pricing also, to be honest, like those
tests scare the shit out of everybody.
Like I've never worked at a
company where everyone is a little
panicked around pricing tests.
So it's almost like recognize that
in yourselves, especially if you're
the founder of a company, it's one
of those kind of like shrugged cat
moments where like you really figure
out if the thing you're building is
valuable versus you can always make the
assumption that you could charge more.
These tasks are really what
show you where you can.
Jacob: Yep, exactly.
And, and quick plug for Botsy, this
is part of the value we offer dynamic.
Pricing, figure out the right
price to pay for every user.
Uh, it it's to, to your point,
you know, this is what we saw that
just, um, this is where, where the
largest gains always came from.
If we could get pricing
and packaging wins.
And so there's gotta be
a better way to do this.
Figure out the ability to pay,
uh, uh, for, for each user.
Um.
Yeah.
Very cool.
Um, and so the last point we, we didn't
talk about on, on kinda your four horsemen
are, uh, activation, early engagement.
This is a, a little
different type of churn.
Uh, a little different ways of thinking,
but still kinda the same, same principles.
Um, what, what behaviors correlate with
long-term retention, but, but are often
mischaracterized as maybe vanity metrics.
Dan: That's a great question.
I think.
This is one of the
horseman, I say likes fight.
Not last, but second to last because
this is very bespoke per product.
So like if you, there's a framework
in product management called kind of
like engagement and retention almost.
Sorry, knocked my mic over.
Um, there's a, a framework in
engagement in retention, which Reforge
put out, which is kind of like uses
the following metric structure.
There's kind of like a, what's
called setup or sorry, sign up,
which is registering for the product.
There's setup, which is like
the actions you need to take to
receive value from the product.
There's the aha moment, which is the
first time that you experience the value.
Then there's kind of like
early stage activation.
Then there's long-term retention.
So when I was working at Uber Eats,
kind of like sign up is kind of
downloading the app setup is like you
put a card in, you put your address
in, you find restaurants you could
be interested in, and AHA is like you
get the first successful delivery.
So like you get good food at a
reasonable price that's defect free
quickly to your house and that's when
you like, you see the value of it.
Uber like many delivery service
is not perfect, but you know,
that was always our goal.
Every product has kind of
a different aha moment.
You typically need like a lot of
data science, horsepower, and data
to definitively prove what it is.
But you, you as a founder, can probably
make a lot of educated guesses and
that's probably good enough to start.
Most people don't measure this at all.
So even putting like some
rough guesses out there.
So if you're running a fitness app, you
know, you could debate if it's selecting a
workout, the end of the first workout, the
start of the second workout, or like when
you see yourself getting in better shape.
Regardless, you should probably
track a bunch of those and make
sure that each cohort you work
on is getting progressively
more successful at activating.
Jacob: I, I give advice of, you're,
it's gonna be tough for you to prove
causation for these metrics, but
correlation is really easy to start.
Just put a bunch of these on a
graph and see which correlate
with longer term retention.
the one that strongest correlation
is gonna be pretty close to what
you're, you're what is a decent aha
moment or decent activation metric?
Um.
Dan: say the, the key point too is
like as you work on product projects
that you think will improve, that you
should measure at the end of every
project to make sure that the work
you're doing is actually working.
But like, uh, a thing that never gets
talked about much in startup land is like,
if you don't measure things, not only do a
lot of your projects not produce anything,
some of them actually hurt your metrics
and you don't figure that out until much,
much later when the damage has been done.
Jacob: And, and this is, I think the, the
only true way to prove causation, right?
To move from that
correlation to causation.
Well, you, you start to form
really good hypotheses about, okay,
this is our activation metric.
Well, have you tried to move it?
And it does, if you move it,
does that improve retention?
Well, okay, well then not you try that.
Oh, it didn't work.
Well then that's not
your activation metric.
Uh, go keep, keep thinking there.
So I think, yeah, it, we, we, um, a lot
of times we do a great job at measuring
things, uh, but we don't always check
back if what we did actually changed
what we're measuring or, or kind of
how, how, how you map those things back.
Dan: Yeah, it's hard too 'cause it's
like you, you invest in this thing.
It's tough to like look at things
in the cold light of day and try to
especially open up to leadership and
other founders if you're right or wrong.
Like everybody wants to show like
a volume of work that goes out.
But what matters is the results.
Jacob: Yep.
Going back to your original point of,
it's great to put together a roadmap
with 10 different initiatives, work
on all these things, but what drives
the needle is focus on the right
Dan: Exactly.
Jacob: Yeah.
Yeah.
Okay.
So, um, thinking about
activation engagement, I, I
love the framework of Yeah.
Sign up, set up, aha.
Or activation and then habit moment.
Um, this is what I, this is
what I tell everybody too.
I, I think, uh, uh, it, it's, there's
different variations of it, but, but it
usually, it's the, it's the right path and
allows you to focus on the right areas.
Um, how should.
How should companies think about their
onboarding sequences so that they
actually, you know, reduce churn?
How, how do you, um, how do you
connect that activation to, to the
churn and, and improving that as well?
Dan: I think that is tough, like I think.
This is an ironic problem of
subscription businesses that like
the better you are at retention, the
harder things like that are to prove.
So like if no companies and
myself included, probably have the
patience to like improve activation
and then measure for six months.
Like see that in the long tail of
churn, the best, the best way of doing
this is looking at churn on a, like
a cohorted month over month basis.
So if you look at each cohort, you
should see the early stage of each
cohort get better at retaining.
I would also not measure churn just
from a payments perspective, but
also from an activity perspective.
So if people start using the product,
they will eventually stop paying.
Making sure you, you're measuring
churn from both like a, whatever
you consider the core, you know,
activity of the product to be.
So Code Academy, like submitting
exercises, if someone stops
submitting exercises, they
will eventually stop paying us.
Jacob: And so re in, in, in the
realistic sense, waiting for annual
churn or waiting for, uh, uh, the end
of kind of monthly lifetime of a user.
When you focus on activation experiments,
it just could take way too long.
And so what are those?
Early proxy metrics that
correlate with long-term trends
that you can measure quickly.
Um, for, for example, with, um, in-app
purchases, generally a, uh, a regular or
or consistent percentage of people cancel
immediately or in the first seven days,
you, you start a subscription and in those
first seven days after you've converted
from the trial or purchased something, you
have, uh, a regular percentage of people.
Cancel auto renew for the subscription.
A lot of times that's a
great pro proxy metric.
If you can reduce the percentage of people
canceling on day one or in the first
seven days, generally that correlates
pretty well with, with long-term renewals.
Dan: Exactly.
Yeah.
Another helpful framework within
product is North Star metrics.
So like some strong overlap in some metric
between user value and business value.
So at, uh, you know, um, I'm
trying to think of a good example.
Like at like, you know, Instagram,
it's probably like story views,
either from like in some sort
of time box, average account.
If people stop viewing stories,
they're probably slowly
falling away from the product.
Those are typically like
good leading indicators.
Jacob: And I was, um, I was in the,
the food tech world for a bit as well.
So I assume at Uber Eats it was something
like, uh, you know, three orders in seven
Dan: Yeah.
Jacob: two orders in seven
days, something like that.
Or, or the number of orders per week.
Active users, you know,
drive active eaters probably.
You probably had some cool,
uh, uh, fun name for it.
Dan: I forget what our metric,
we loved acronyms at Uber, but,
uh, so what, what exactly was
called is escaping me, but, um.
Jacob: Yeah.
All, all good.
All good.
Um, and, and, and when we're thinking
about the design of the onboarding flow
from or strategies to psychological
tricks, how, how do we think about setting
the user up well to, to reduce churn?
There's the, there's the quantitative
side of how we measure this, but,
but what do we actually do here
that, that usually aligns with?
And, and eventually
better reduction in churn.
But at first we're measuring
that through proxy metrics.
But what, what are we actually do?
What are we actually doing here?
What have you seen work.
Dan: I think the best onboarding
experiences I've seen, like onboard
you onto like the problem and
how they solve it, and not just
technically how to set up an app.
So like I, I won't name the product,
but it was, you know, a, you know, a
family management application and it
was literally just like device setup.
As opposed to like,
what's your wife's name?
What are your kids' names?
Like, what schedules do they have?
Like I don't need you to show me how
to set up this thing that I bought.
Like I can figure out
how to set it up to wifi.
I want you to like get me to give you
the information and help me understand
why I am giving you that information
and give me like helpful payoff cycles
Jacob: Yep.
Dan: you know.
Jacob: so.
Moving that activation or aha
moment earlier into the onboarding
flow where like onboarding is not
teaching you how to do something.
Onboarding is like showing
the value, really getting
Dan: Show value.
Jacob: ma making it emotional,
making you really understand
what what you're getting.
Dan: Yeah, exactly.
And I think like the, there's a tendency
in onboarding to try to remove all
friction, which I don't think you, you
definitely want a low amount of friction,
but some level of friction is necessary.
Like the know my, my retorted, this in
the conversion world was always like if
we just wanted to eliminate all friction,
the homepage would be the checkup page.
People would just understand why
they wanna buy the product, but
like obviously that doesn't work.
You have to do like a level of
education and handholding to get
them invested enough to buy it.
Jacob: Yeah, that makes sense.
That makes sense.
And I think, um, yeah, you know,
don't underestimate the impact of
these activation flows or onboarding
improvements where, like you said
before, um, anything that touches every
single user is inherently impactful.
Dan: Yes.
Jacob: Yeah.
And so when we we're thinking about
the these four Horsemen, um, know, you
said that a lot of times, you know,
payment failures, this is a quick win.
Uh, and can be in terms of ROI,
it can be really great just 'cause
of the speed of improvements you
Dan: Yep.
Jacob: Um, but.
Maybe it's not the highest impact
thing you can do, but then we,
we've talked about cancellation
flows, that may be the next, um,
next highest thing in terms of ROI.
If you wanna get some quick wins when
you're starting a new company, you can
probably find some of the cancellation
flows or win backs or, or opportunities
there, but a little higher effort, uh, uh,
to kind of, you know, get some wins there.
Then, you know, what,
what do you think is so.
we've got pricing and plan
mix and activation issues.
How do you, how do you think about
prioritizing and how do you figure
out, 'cause those are, both can be high
effort, they're scary, they're ambiguous.
Um, with pricing and plane, you have
a little more revenue data activation.
It touches everybody, but it's kind
of hard to figure out where to start.
How do you think about prioritizing
between focusing on activation
or kind of pricing and plan mix?
Dan: I think if I had to choose,
let's say like it's a startup
that's doing 5 million in revenue.
It's three years old.
You know, they have a distribution
channel, uh, they have product market fit.
I lean more towards immediately
doing more pricing work.
Probably 'cause startups like
that typically have not touched
pricing since they launched.
So there's probably like more immediate
revenue impact that can be had there.
And then pushing harder on activation.
The more like political product manager
answer is like you do both on the roadmap
and you wait them in terms of the hours
you're putting into each accordingly.
Uh, but I think key in frameworks like
this is like you've already done the
low hanging fruit and easy stuff, so
that's producing value for you while
you're tackling these harder problems.
Jacob: Yep.
Yeah.
If you have a business that's
working, you've figured out
activation in some sense,
Dan: Yeah, exactly.
Jacob: staying, they're, they're.
They're purchasing your product.
There's something there if you're,
maybe if you're very new, like
the price doesn't matter if no
one makes it to the price or no
Dan: Yeah.
Jacob: the product.
Uh, and so, so if you're very new,
pricing is, is maybe less important.
Figure out how to actually engage
users and activate them and
stop them from churning at all.
But then if you're, if you're a
little later stage, there's huge
opportunity with, with pricing and plan
Dan: Yeah, exactly.
And like activation can be tricky.
Like we probably ran, um, I'm gonna
say like 20 AB tests on the Code
Academy homepage, and none of them
worked with the exception of changing
the CTA from start coding to sign up.
It was the only test that worked, but
partially like you come, most people
come organically, they know what it is.
It's a trusted brand and
it's free to get started.
So it's like there's not really
anything we're gonna say on that
homepage besides Code Academy.
It's going to materially change
people's motivation 'cause it's,
there's no cost to the next step.
So like, activation is
like a little tricky.
Jacob: Yeah, and I think it differs
if you have, um, organic users that
have high intent versus paid users
who have to convince or, you know,
Dan: This is why.
Jacob: who acquired.
Yep.
Yep.
A hundred percent.
A hundred percent.
Um, you know, one, one thing I was
thinking about when we were talking
about cancellation flows is that,
um, you know, there's new legislation
around like, you know, click to cancel.
There's tons of ethical conversations.
How, how do you think about that?
How, how do you build a ethical
cancellation flow that actually improves
churn and works, but is still, you know,
it's still not manipulative to, to users.
Dan: I, I, I think there's
a balance to strike.
I don't like those dark patterns.
I feel like those catch
up with you with time.
Um, we, we interviewed some guy at
Code Academy as a head of marketing,
and he worked for like a, I won't
say what it was, but it was kind of
like a, um, box e-commerce product.
And they're kinda like,
oh, we solved cancellation.
Like, how'd you do that?
It's like, you have to call to cancel,
and that guy never picks up the phone.
It's like, yeah, I'm sure your
numbers look good now, but like
this will catch you with time.
So I like, like transparent, uh,
entry points for cancellation.
I think the best way of thinking of a
cancellation flow is like if you map
the universe of why someone is going to
cancel, you get kind of like one or two
shots per reason and why they're leaving
and then you have to let them leave.
So the New York Times is a really, really
good example here, uh, which I can dig
up and I'll put on my site someday,
where like they get a good shot at like
the universe of reasons why you cancel.
Then they try to like connect you
with someone or give you a temporary
discount or let you unsubscribe to
the bundle and just keep like, you
know, the athletic or like, uh,
the games or something like that.
Jacob: Yep.
Amazon Prime does a good job here
Dan: Yep.
Jacob: flows if
Dan: these big companies
do this for this reason.
They have entire product teams
who just do this because like the,
the churn metric is so powerful.
Jacob: Yep, a hundred percent.
And so we talked, you talked, you, you,
you talked about cancellation reasons.
Um, how do we, how do we
figure out those reasons?
What, how do we know what, what
those possible cancel reasons are?
Dan: Yeah.
I'd say in an ideal way, like if I could
do this any way that I wanted to, I would
use just an open-ended form to start.
The data that comes into cancellation
forms is like notoriously unreliable.
Like someone is at their lowest
intent with your product.
They don't like you enough
that they're just gonna leave.
So the data that comes outta cancellation
flows is like never that good.
Um, but if you do it anyway, I would
use an open-ended form to collect
like the universe of reasons.
They typically tend to be things like
price, time, like the use cases over,
but like you might have some specific
ones depending on your use case.
Then like if you're going to change
that to be a structured form,
definitely like, you know, resort the
results every time someone cancels.
So you don't get someone just choosing
the second one every time, even if you're
collecting perfect cancellation data.
I've never found it to be that useful.
The best case scenario is you're
like, you're tracking it over time,
you're making changes and then
you're seeing like the, the relative
order of each one change as you're
hopefully addressing some objections.
But most of them like price and
time, are one and two for pretty much
every product I've ever worked on.
To me, all of them are some
measure of like doesn't see value.
Jacob: Yeah, I.
Everything I've seen is, you know,
price is 50% of the responses.
Everyone says it's too expensive.
Well, that's really a, a, um, a
coverup for what's actually going on.
The price does not align with
the value you're getting.
Are there good ways to try to dig deeper
into that, to actually understand.
Dan: Never been successful
with that, to be honest.
Like we, I think we tried like
paying people with Amazon gift
cards to get them on the phone.
Um, yeah, I think the, probably the
people getting the best data are like B2B
companies who have an offboarding call.
Jacob: Yeah.
Yeah.
Dan: Uh, in the consumer use case,
like I think it's a little bit finger
in the air, like, uh, you know, we,
I forget the name of the service.
You can now use the LLMs to like aggregate
the open source data for you, which
is like, it's an input into product
management, but I've never found like
a smoking gun in cancellation data.
Jacob: same because like you said, the
people that are canceling don't want
to talk to you, don't care about you.
No incentive to give you good information.
Dan: These things.
I don't even read them or type in
anything like when I cancel products.
So
Jacob: Yep.
Yep, a hundred percent.
Um, any, any advice on like,
personalizing, cancel, cancel
flows, or dynamic cancellation
flows that you've seen work well?
Dan: I think if you, if you were
in a more complex product that
has multiple tiers of service.
I think there's some value
in personalizing that.
So if you are, you know, zoom, you
shouldn't handle, like me canceling
a $20 a month account, the same
as someone canceling a $25,000 a
year account, like, I think that
that matters more in like the PLG.
Jacob: Yeah.
Dan: I've seen some companies try to
pipe in like, uh, course data from
EdTech products into cancellations
instead of you're canceling.
It's like, don't give up on technical
SEO learning or whatever you're taking.
Um, I don't know if that's
worth the complexity.
Jacob: Yeah.
Yeah, I've, I've seen some
simple personalization work well,
where it's like, you know what?
What type of content a user consumed
most, or you know, what type
Dan: Yeah,
Jacob: they have.
And it's, it's more like, you know,
simple string or copy personalization
that like resonates with them better.
Um, yeah, I was curious if you've
seen anything on kind of, we talked
about, you know, upgrades, downgrades,
and pausing and, and, uh, uh, I was
curious but, but if, if you haven't seen
anything work well there, that's fine.
Dan: yeah.
The biggest personalization.
I guess when we had a code academy,
there was, when we raised prices and
you were still paying a non-public
price, so an old price plan, we would
let you tell you that and then offer
you to pause in the cancellation flow.
That was super effective because like
if you cancel it nine, you know, 19.99
a month, it's now 39.99
a month.
Like you're never getting this price back.
Jacob: I think that's a good
one, that that's a, um, and I
think that can be applied to
people with discounted plans too.
Dan: Yeah, exactly.
Jacob: that, that making sure they
know that they're, they're not gonna
be able to renew at this price.
Um, maybe you want to keep
it, maybe you wanna pause.
Uh, I think that's, that's probably, um,
a great easy tactic for a lot of people.
Dan: Yeah, that was super effective.
I think I canceled YouTube TV the other
day and it's like they didn't so much as
personalized, but like, let me unbundle.
The content I was paying for.
So I forget, in Texas YouTube
TV is like on 80 bucks a
month or something like that.
But like, do you wanna
just keep stars for six 90?
Do you wanna just keep ESPN for
40 bucks or something like that?
My guess is like those are a
little bit personalized based on
the content I've engaged with.
Jacob: Yeah.
Yeah.
And your potential value, maybe what they.
Think
Dan: Yeah,
Jacob: your use.
Dan: they have the
horsepower to do that math.
Um.
Jacob: yep.
Um, cool.
And, and so we talked about a little,
about this, about the beginning, but,
um, if someone kind of feels stuck,
you know, chasing acquisition, they
don't have sustainable monetization,
their, their churn is too high.
What's, where do they start first?
What's like this first practical step
they could, like, take this week?
Dan: I'd say it's a thing I do
when I consult, which I almost
always find problems of like.
Sign up for your product, paste every
screenshot into a mirror board and like
ask yourself like, does this make sense?
And like, where might
I be confusing users?
It's like, typically this might change
in the age of ai or it might get worse.
I think, uh, a hidden growth, uh,
detractor on products is like the
quality is just not good enough.
Like product isn't good enough,
it's confusing, it's buggy in key
places, like I'd say the average.
20 million ar company that I look at
that's like five or six years old.
You find just big quality
problems everywhere.
And like quality is really
easy to fix because there's no,
there's no like product management
discovery risk on what's right.
You already know what's right.
You're just not doing it.
Like it, it's risky to build new features
'cause your underlying hypothesis can
be wrong, but like, you know, part
of a page doesn't load correctly.
Those are typically
really, really easy to fix.
Jacob: Yep.
Don't, don't underestimate the
power of sitting down with the, uh,
Miro, whimsical whatever, Figma, and
taking a day worth of screenshots
of everything in the product, just.
them all on a page together.
And, and, um, it allows you to take a
step back of, step into a user's shoes
and actually, you know, it's so easy
to get close to the product right?
And just not, uh, uh, get blindness to, to
what's actually people are experiencing.
'cause you know it too well,
you assume people know things.
Yeah.
I think that's, that's great advice.
Dan: Yeah, it's, it's, um, it's a
hard thing to do because like you, the
person who built it, like, you know,
why you made all these decisions, but
like the user in the end doesn't care.
Like a lot of companies I'd say that
I've talked to that aren't doing
well, like they users give them very
valid objections and they try to
explain why those problems are there.
It's like the user doesn't care, the
user's just gonna use the products.
That's the best.
Regardless of like the technical debt you
had to go around to build this, this way
or like that's in the old design system or
like, you know, you know, we used to have
a feature there that we hit it and then we
just kind of never came back to fix this.
Jacob: Yeah, you, they don't care.
Just make it better.
Make it, yeah, make it easier.
Make it better.
Uh, add more value.
Make it higher quality.
A hundred percent.
Um, I think, I think you shared
some things in, in the beginning,
some quick wins, but is there,
what's a simple turn lever?
You know, almost every team can improve
within a week or, or a few weeks.
Dan: Turn your monthly receipts
off is the easiest one.
Like that's a like a, not everybody
knows that, but if you sub, especially
in the us, if you subscribe to Netflix,
Spotify, Amazon Prime, like no one
sends you monthly euro receipts.
You get the first one.
And then they turn it off after that.
This might depend legal lead a little
differently in some companies, but in the
US I know it's a common practice annuals,
don't still send them and send them a
reminder that they're gonna be charged.
But monthlys, I would turn off.
Jacob: Is a are, are you
obligated to send the annual one?
Is that a legal thing or is
that just basically people are
gonna hate you if you don't.
Dan: Yeah, I don't know it to be a
legal thing, but I do think it's,
it's different if you're gonna
hit someone up for 200 bucks.
Jacob: Yeah.
And 'cause then you're gonna get,
um, uh, uh, they're gonna go to
the credit card and, and deny the,
Dan: Yeah, you get charge back.
You have to deal with it.
It's annoying
Jacob: Yeah.
Dan: I think it's more of the right
thing to do, but I'd say in a, it's
a very common best practice not
to send monthly email receipts.
Jacob: Yep.
That, that a hundred percent makes sense.
Uh, okay.
This is awesome.
All right, so we've got a few more
questions in our lightning round.
Dan: Do it.
Jacob: ready.
Uh, we, it's only two questions,
so it's not, it's not a
crazy, crazy lightning round.
But, but first question, uh, what's
the subscription growth belief
that most founders hold that you
think is fundamentally wrong?
Dan: I'd say it's that like you
need to be all things to all people
like that you need to like keep
expanding the product into new uses
versus getting better at one use.
So I'd say like the founders tend to
think very, very, very far ahead of
where the product is, and most companies
spread themselves way too thin.
I consulted for a company that had
maybe four engineers and six product
lines and like, yeah, there's great
reasons all these product lines exist,
but you can't cover this with the team.
You have need one
excellent product to start
Jacob: Yeah.
And your time is always gonna be better
served, just focusing on this one thing.
And the more time you spend there,
that's gonna get more value than
just trying to expand and expand and
Dan: even at.
Even at Uber we had 4,000
engineers, but you have a
hundred really, really good one.
What are the really, really good ones
working on and is it the right thing?
Jacob: Yep.
Yep.
A hundred percent.
Makes sense.
Um, okay, so last question.
Uh, what's the most surprising pricing
or packaging win you've seen in
terms of, uh, uh, subscription apps?
Dan: Yeah, I think it's probably
the annual plan pricing trick.
Like I, I really undervalued
how powerful that was Exactly.
Jacob: the math on that again?
How do we, how do we back into that?
Dan: Oh, take your monthly
average, uh, retention.
So if it's five months price, your annual
plans at six months or seven months.
Jacob: Got it.
So we make sure that it's always
a better, uh, better for the
business, uh, for people to go
Dan: Yeah, exactly.
And like I've seen that, um,
you know, the plan mix matters a
lot in subscription businesses.
So what's the ratio of monthly to
annual plan prices in the user base?
You know, I've seen that
go from five to 50%.
By optimizing it and it just like, it
dramatically stabilizes the user base and
you know, like, come, you know, the, this
month you have this much cash coming in.
And in a healthy subscription business
you can say like, if we do nothing,
we're growing 30% next year based
on our historical churn numbers.
Jacob: It's pretty amazing.
And then if you, if you're driven by
paid user acquisition, this is also
Dan: Oh yeah, huge speeds up the cash.
That's my goal.
Like, I think, I remember at Code
Academy we, maybe we, we had one
month where we went like all out, try
to make a million dollars a month.
We like signed a big check to ourselves
to commit to it, and then we missed it and
then like cut to three years later, we're
making a million dollars a week without
like even really doing anything special.
It's like if you get the snowball
going, it's super, super effective.
Jacob: And that's, that's the
beauty of subscription businesses.
If you get it
Dan: Yeah.
When they work, they're,
they're super durable.
They grow, they compound.
You get crazy valuations.
Jacob: Yeah, amazing.
But if you don't fix your
churn, you'll never get there.
Uh.
And so, yeah, I think that that's,
uh, really great, uh, very tactical
lessons that people can go apply.
So, uh, this was super, super
helpful and I think I learned a lot
on, on kind of the, the web, uh,
retries and web subscription side
where I'm not as knowledgeable here.
So I think, I think people will
really find this valuable and
have some really great takeaways.
Dan: Yeah.
Awesome.
Jacob: you coming on Dan.
Um, we'll link to, uh, uh, the blog post
on subscription index and the show notes.
Uh, and anything else we mentioned
and maybe some other posts we
can, we can send people to.
We'll see if we can find that
Reforge framework, if they still
have it public, that, that people
can go, uh, see or, or check out.
Um, but yeah.
Anything else you, you wanna
promote and, and send people to?
Dan: That's really it.
So I give my blog is
subscription index.com.
Uh, I have a growth ceiling,
uh, calculator tool.
So if you wanna know your future as
a company, plug in your acquisition
and your churn numbers there.
And that is like the current
ceiling that you can hit.
Dropping your churn is the easiest way
of moving that number up with time.
But yeah, I write roughly every week.
Uh, you know, I don't, I don't have any,
you know, goals on building an agency.
I do side consulting.
I have a full-time job somewhere else,
so most of the lessons I just write
down and ship out on my blog as a,
you know, I don't have the time to
work with everybody, unfortunately.
Jacob: And Dan has some
very great lessons there.
I've learned a lot from,
from reading his post.
So definitely go, uh, check
out subscription index.com.
Go subscribe.
Uh, you'll more than
likely learn something.
Dan: Yeah.
Hopefully.
Jacob: Hopefully.
Um, cool.
Well, well thanks again Dan.
This was awesome.
Uh, and yeah, really appreciate
you coming on the podcast.
Dan: Yeah.
Thanks Jacob.
Jacob: Alright.
Talk to you later.
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Hope you enjoyed.
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