The New Recurring Revenue Model...and how we have less than 1% churn... ūü•© Ep 77

Summary Notes


In a dynamic discussion, Alex breaks down the traditional recurring revenue model's pitfalls and introduces a revolutionary approach that has led to less than 1% churn in his high-end program, Legacy. He emphasizes the importance of treating recurring revenue like a launch model, where constant engagement and innovation are key to retaining customers. By continuously creating value through new content and genuinely solving customer problems, businesses can significantly increase customer lifetime value. Alex shares actionable insights on leveraging customer feedback to develop solutions that resonate, fostering a cycle of communication and trust. He also highlights Netflix's success in maintaining a robust recurring revenue stream by regularly introducing fresh content to keep subscribers invested.

Summary Notes

Introduction to Recurring Revenue Model and Churn Rate

  • Speaker A introduces the topic by expressing excitement about sharing a "massive secret" of their low churn rate in their recurring revenue model.
  • The common approach in recurring revenue models is to focus on customer acquisition and hope customers continue to pay without much further engagement.
  • Speaker A criticizes this approach as ineffective and a reason for high churn rates.

"So the new recurring revenue model and how we have less than 1% churn." "So pray that they stay and pay until they die, right? That's the goal." "And it's silly and it's dumb. And that's why most people don't have really good recurring revenue models."

  • The quotes highlight the topic of discussion, the importance of a strong recurring revenue model, and the typical, yet flawed, strategy of minimal customer engagement post-acquisition.
  • The quotes also set the stage for Speaker A's alternative approach to the recurring revenue model that has led to their success.

Legacy Program and Low Churn Rate

  • Speaker A's program, Legacy, charges $3,200 a month and boasts less than 1% churn with over 500 gyms participating.
  • The program's success is attributed to not following traditional models of hoping customers "stay and pay."

"So in legacy, which is our highest end program, people pay $3,200 a month, maybe more than that, for us to not give them ads." "Less than 1%. Right now, we have over 500 gyms that are in that level."

  • These quotes provide specific details about the Legacy program, including its pricing and customer base.
  • The low churn rate is emphasized to underscore the effectiveness of their unconventional approach to the recurring revenue model.

Reverse Recurring Revenue Model

  • Speaker A introduces a reverse model to traditional recurring revenue, likening it to a launch model used in internet marketing.
  • The launch model involves building up content and goodwill over time, then hyping a new product before selling it.
  • Russell Brunson's story is cited as an example of moving from a launch model to a recurring revenue model.

"And so in the Internet marketing space, there's something called a launch model, right?" "Russell even talks about this as part of his story to how he decided he wanted to get into a recurring revenue model."

  • The quotes explain the launch model concept and mention Russell Brunson as someone who transitioned from launch to recurring revenue.
  • The relevance lies in setting the stage for how Speaker A's approach to recurring revenue borrows from the launch model strategy.

Treating Recurring Revenue Like a Launch Model

  • Speaker A believes that treating a recurring revenue model like a launch model is key to their low churn rate.
  • This approach requires continuous effort to provide value to customers, akin to the marketing and content creation in a launch model.
  • The promise made to customers must be met each month to retain them, negating the notion that recurring models allow for passivity.

"Fundamentally, the reason that our recurring revenue model has less than 1% churn is because we treat it like a launch model." "You have to keep making new stuff, just like a launch model, right, where you provide content, you provide goodwill, right?"

  • These quotes encapsulate the philosophy of treating recurring revenue with the same energy and innovation as a product launch.
  • The emphasis is on the necessity of ongoing effort and fulfilling promises to maintain low churn rates.

Netflix as the Best Recurring Revenue Model

  • Speaker A cites Netflix as the best example of a successful recurring revenue model.
  • Netflix's strategy involves continuous content creation and excitement, similar to the launch model approach that Speaker A advocates for.

"But who's got the best recurring game out there? Netflix."

  • This quote identifies Netflix as the exemplar of an effective recurring revenue model, supporting the previous discussion about the importance of ongoing effort and engagement with customers.
  • It serves as a real-world example that reinforces the speaker's argument for a proactive, content-driven approach to retaining customers in a subscription-based business model.

Importance of Creating New Content for Recurring Customers

  • Continuously creating new content is essential even with a recurring customer base to maintain their interest and engagement.
  • Without new content, customers may perceive the business as inactive or not growing, leading to a loss of subscribers.
  • Creating new content can significantly reduce churn rates and increase customer value.
  • Engaging with customers through new content builds communication and affinity, fostering a stronger relationship.
  • Regular content creation leads to better understanding of customer needs, resulting in improved marketing and problem-solving.

"You have to make new stuff on a regular basis, even, or especially if you have recurring customers, because you have to continue to sell them on the fact that they should still be with you."

This quote emphasizes the necessity of regularly producing new content to reassure recurring customers of the value of staying subscribed to a service.

"The reality is that if you have not created new stuff, they're right, they have gotten everything that they're going to get from you and they should move on."

Here, the speaker underlines the consequences of not providing new content, which justifies customers' decisions to unsubscribe if they feel they have exhausted the value of the service.

"The difference between 5% churn and 1% churn is five x. It's not 4%, it's five times the customer value."

The speaker is highlighting the exponential impact that reducing churn rates can have on the overall value of a customer to the business.

Recurring Revenue Model and Customer Engagement

  • The recurring revenue model relies on regular content creation to succeed.
  • Businesses that avoid complacency and prioritize customer engagement through new content can outperform competitors.
  • Frequent interaction with customers through content creation leads to increased likability and trust.
  • Understanding customers' needs through engagement allows for more effective marketing and product development.

"The recurring revenue model and the launch model are the same. And the people who get that and don't get lazy are the ones who will win?"

This quote draws a parallel between the recurring revenue model and product launches, suggesting that success in both requires continuous effort and innovation.

"The more communication you have with someone, the more affinity they have for you."

The speaker is stating the direct correlation between the frequency of communication with customers and their fondness for the brand or business owner.

"You're going to be engaged with the customers more. And then the side benefit is that once you're engaging with them, you're understanding their needs, which means you understand your customer better than everyone else because you're actually talking to them."

The speaker points out that customer engagement not only fosters a relationship but also provides valuable insights into their needs, which can inform better marketing strategies and product development.

Leveraging Customer Insights for Business Growth

  • Direct communication with customers is crucial for truly understanding their problems and needs.
  • Businesses that engage with their customers can create more targeted and effective solutions.
  • Customer feedback can guide the development of products and marketing, leading to better customer acquisition and retention.

"I cannot tell you the amount of times people message me cold and say, I could solve so many problems for your gym owners. I have this great opportunity for you. I'm like, really? How many gym owners have you talked to? None or one."

The speaker is critiquing the approach of offering solutions without having engaged with or understood the target customer group, emphasizing the importance of customer interaction for effective problem-solving.

Social Media Engagement and Networking

  • The speaker encourages listeners to connect with them on LinkedIn for networking purposes.
  • Tagging relevant individuals in posts is suggested as a way to facilitate connections within the industry.

"Hey, mozanation, quick break, just to let you know that we've been starting to post on LinkedIn and want to connect with you."

This quote is an invitation to listeners to engage with the speaker on LinkedIn for networking and industry connection opportunities.

"So send me a connection request, a note letting me know that you listen to the show and I will accept it. There's anyone you think that we should be connected with, tag them in one of my or Layla posts, and I will give you all the love in the world."

The speaker is offering to accept LinkedIn connection requests from listeners and is encouraging them to facilitate introductions to other industry professionals through tagging on social media posts.

Customer Engagement and Product Development

  • Engaging with customers allows for a better understanding of their needs, leading to more effective marketing and product development.
  • Asking customers about their problems helps create a product pipeline that addresses their specific issues.
  • Revealing the product pipeline to customers can help retain them, as they anticipate solutions that are relevant to their interests.

"So if you ask your customers what they want, you engage with them. They like you more, you have better knowledge of them, so you can write marketing for them, and then you actually make stuff that they actually want."

This quote emphasizes the importance of customer engagement in understanding their needs, which in turn informs targeted marketing and product creation that resonates with the customer base.

"Now, the second piece of why this is awesome is that once you have a list, a menu of all the problems that your customers have, then you go ahead and make stuff and you give them the pipeline of all the things that are coming out next."

This quote highlights the strategy of using customer feedback to create a product pipeline that addresses their problems, thereby keeping customers informed and interested in future offerings.

Future Pacing and Customer Retention

  • Future pacing involves informing customers about upcoming products or services, which can build anticipation and loyalty.
  • Knowing what is coming next can keep customers engaged, even if they are not currently interested in the latest offerings.

"Future paces people. It gives people the opportunity to see what is coming."

This quote explains the concept of future pacing, which is the practice of showing customers future plans to create anticipation and maintain their interest.

"And so if you're a gym owner and you're in legacy, you know what's coming."

This quote illustrates how future pacing can be applied in a practical context, such as a gym owner being aware of upcoming advertising strategies and therefore remaining engaged with the service.

Innovation and Problem-Solving

  • Actively seeking out the challenges customers face allows businesses to innovate and stay ahead of the market.
  • The human body and psychology have not changed significantly over time, making it easier to innovate in areas like fitness where the fundamentals remain constant.
  • Showing genuine effort and intention to solve customer problems can enhance customer loyalty.

"And that's why all of our gyms are on the forefront of the marketplace is because they're finding out the new new of what's working right now."

This quote suggests that by continuously solving customer problems and innovating, businesses can lead their market.

"But you can still solve problems for your people and they see that you're trying, right? And if you actually are trying and putting an earnest effort in, right. They can appreciate that."

This quote underlines the value of effort and intention in problem-solving, which can foster customer appreciation and loyalty even if the results are not immediate.

Implementing Solutions and Measuring Success

  • After identifying customer problems, businesses should prioritize which ones they can solve effectively.
  • Solutions should be tested with customers who struggle the most before rolling them out to the wider customer base.
  • Sharing success stories can be motivational and provide a template for addressing similar problems for other customers.

"Ask them the next problem that you can solve. Get all of them, consolidate them. Figure out which ones you think that you can solve the best."

This quote outlines a methodical approach to problem-solving by gathering customer issues, consolidating them, and focusing on the ones the business is best equipped to address.

"Here's what Susan, Sarah, and Jake did when they struggled with emotional eating and overcame it. Let's take that, and let's Give it to JESSICA, LAURA, and LILY."

This quote demonstrates how sharing successful problem-solving strategies with customers can provide a proven solution and inspire confidence in the business's ability to help.

Customer Engagement and Retention Strategies

  • Providing solutions to customer problems can create loyal customer advocates.
  • Customer advocates can generate organic hype for new products.
  • High customer retention and low churn rates contribute to business growth.
  • Understanding and implementing superior acquisition systems can elevate a gym to a "super gym" status.
  • Engaging with customers and solving their problems can be more rewarding and profitable.
  • Leveraging staff and trainers to create content can save time and engage customers.

and then give it back to them. Or give it to three new people who are struggling with emotional eating. I promise there's more than three at your gym.

This quote suggests a strategy of providing solutions to customer problems, which can foster loyalty and word-of-mouth promotion.

And now you have customer zealots who are telling everyone about how amazing you are and how the fact that you went above and beyond to solve their problem.

The quote emphasizes the value of going beyond expectations to solve customer problems, which can turn customers into zealous advocates for the business.

You don't need to hype it because they're going to say, this changed my life. It was awesome. You guys will dig it, right?

Here, the speaker illustrates how genuine customer testimonials can be more effective than traditional marketing hype.

And for those reasons, we have less than 1% churn and we have the growth rate that we have and all that stuff.

This quote links customer satisfaction with low churn rates and business growth, highlighting the importance of customer retention.

If you can never lose a customer, you can pay whatever you want for acquisition.

The speaker is making a point about the economic advantage of high customer retention, allowing for more investment in customer acquisition.

And so that's why they need a different acquisition system. Now, if you have a superior acquisition system and you have the lifetime value, then you become a super gym.

This quote speaks to the necessity of having both a strong customer acquisition system and high lifetime customer value to achieve significant business success.

This is the secret. This is how you do it. And if right now, you don't have this process in place of continuing to mine your customers, to keep them engaged, to show them that you care, which you should, then you're leaving a lot of money on the table.

The speaker is revealing the "secret" to success: a process that involves continuous engagement with and care for customers to maximize revenue and customer satisfaction.

And honestly, the job of serving customers gets way more fun when you talk to them and actually solve their problems, and that they know that you're trying to do that, too.

This quote highlights the enjoyment and fulfillment that can come from actively engaging with and solving customer problems.

What a better way to build stuff than build stuff for the people who are paying you already, right.

The speaker suggests focusing on creating solutions and products for existing customers to foster loyalty and repeat business.

They're constantly trying to solve our problems. You don't hear that from people who are going to normal gyms.

The quote contrasts the proactive approach to problem-solving with the experience at typical gyms, setting the business apart from competitors.

You can leverage other people. I'm not running the Legion betas, but I oversee what the pipeline should look like.

Here, the speaker discusses the concept of leveraging others, such as trainers, to contribute to content creation and customer engagement, without the need for direct involvement in every aspect.

Content Creation and Team Utilization

  • Delegating content creation to passionate team members can be effective and efficient.
  • Engaging customers through content helps in solving their problems and keeps them interested.
  • Team members can create videos or other content that addresses customer needs and desires.
  • Leveraging team skills allows business owners to focus on strategy and oversight.

Asking questions doesn't take time. Thinking about the problems and coming up with potential solutions doesn't take a lot time.

The speaker points out that the initial steps of content creation, such as ideation and problem-solving, are not time-consuming.

And then the execution, you can always hand off to someone else who's passionate about it.

This quote suggests that the execution of ideas, such as content creation, can be delegated to team members who are enthusiastic about the task.

Go make videos around this and then give it to the customers that ask for it and then have them get excited.

The speaker is giving an example of how to use content creation to engage customers and generate excitement about the business.

Encouragement for Action and Community Involvement

  • The speaker encourages listeners to engage with the content and share it with others.
  • Audience engagement is seen as a way to help the industry and support fellow gym owners.
  • The use of social media reactions and comments is encouraged to increase the visibility of the message.
  • The speaker aims to foster a sense of community and collective improvement within the industry.

toss a like up if you want to, so that other gym owners can see it, so that Facebook thinks that this is a good post, that people should actually watch which if you do care about the industry, then double thumbs and drop a comment for somebody in your gym or your trainers

The speaker is encouraging actions such as liking and commenting to boost the post's visibility and support the broader gym owner community.

Anyways, have an awesome day and I'll catch you guys soon. Double content Tuesday. Two time Tuesday.

This quote concludes the conversation with a positive note and a playful reference to the frequency of content sharing, fostering a sense of community and regular interaction.

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