Marketing Podcast for Shopify Merchants: The Ecommerce Coffee Break

Create Subscriptions for Shopify to Transform One-time Buyers into Brand Champions | #191 Gaby Tegen

May 25, 2023 Claus Lauter: Ecommerce Podcast Host | Shopify Partner | Marketing Optimizer Season 4 Episode 54
Marketing Podcast for Shopify Merchants: The Ecommerce Coffee Break
Create Subscriptions for Shopify to Transform One-time Buyers into Brand Champions | #191 Gaby Tegen
Show Notes Transcript

In this episode, we sit down with Gaby Tegen, founder & CEO of, for an insightful conversation about unleashing the true power of customer relationships through subscriptions and a purpose-built app aimed at maximizing lifetime value.

On the Show Today You’ll Learn:

  • How to increase your customer lifetime value through subscriptions
  • How to keep customers engaged and stay within the subscription
  • Analytics to monitor subscriber management
  • The biggest mistakes merchants make when it comes to subscription offers
  • Reasons why customers cancel subscriptions

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Claus Lauter: Hello. Welcome to another episode of the E-Commerce Coffee Break podcast. Today we wanna talk about something that's quite important for all merchants out there. And actually, I read some numbers this morning for the e-commerce overall market, what happened in the last 12 months, and it showed that e-commerce is still growing, but it's mainly growing through increased prices, average order value, lifetime customer volume.

So it's not growing through new acquisitions there and. Merchant should focus more on the business they already have and then obviously increase from there. So that brings me to the topic of today. We wanna talk about increasing your customer lifetime value through subscriptions.

With me on the show today, I have Gaby Tegen. She is the co-founder and c e o of, a leading Shopify subscription app built to increase L T V. As a native New Yorker, Amy began her career in real estate and transitioned to the world of tech startups as a top sales performer. She rose through the ranks of prop tech company startup Reonomy, and Gabby earned her bachelor's degree in business administration, international Business and Marketing at George Washington University.

So let's welcome Gaby to the show. Hi Gabby. How are you today? Good. 

Gaby Tegen: Thank you so much for having us. 

Claus Lauter: Gabby, tell me what got you into the idea of subscriptions and increasing customer lifetime values through that? 

Gaby Tegen: Two different answers. Subscriptions to me were interesting because I thought that recurring revenue meant something different to me than it meant to D two C brands, and I wanted to use whatever platform I could, in this case, smarter ended up being that platform to educate or at least just start conversation around subscriptions and the different types of subscriptions and the different types of recurring billing and how those aren't necessarily the same thing.

Coupled with a really interesting existing tech stack, some really impressive companies, but a lot of pains still felt by the D two C community. And that was the inception of smarter then pivot to L T V driving activities was a pivot in fact, because initially the concept was simple subscription.

So how do we simplify the and management of subscriptions rather than how do we actually innovate and create a new class of tech? And that came after months of research where what we found was really. What you just described, brands needing to unlock that L T V driver. So focused previously on acquisition.

Even two years ago, there started to be a trend where acquisition was becoming unsustainable for these brands and they needed other forms of revenue and more secure revenue, healthier revenue, and I thought it was a really interesting challenge to try to identify ways to give that to them. 

Claus Lauter: Now with Smart, obviously subscription, you did a lot of interviews and you can tell me a little bit more about that in a second, but you took it a little bit further than other platforms do.

So there's a lot of features in there that I haven't seen before. Tell me a little bit about that. 

Gaby Tegen: Subscription building is a beast. , I'm not saying that it's an easy thing to build, but what I think it does not completely grasp is the potential that can be unlocked through recurring revenue as a whole.

And we can talk about just subscriptions, but really that could mean anything. It could mean memberships, repeat purchases, digital experiences, et cetera. I found was that the tech stack became unmanageable for a lot of these brands that. Specifically what was necessary to accomplish the L T B driving behavior that we wanted to help support and because the costs associated with some of the tech options out there are prohibitive for brands because of the integrations required to set up so many different applications were prohibitive for brands.

We wanted to take some of the key actions that we knew would drive LTV for our brands and build them in-house when it made sense. So that's not to say that we are an email provider, for example, but loyalty is an area that we have found a lot of overlap with subscriptions and that drivers that we want to help our brands take on.

So that's why we launched Loyalty, for example, which is rewards, referrals, social feeds, engagement tactics. 

Claus Lauter: Very , important point that you mentioned there. Of course subscription only works with being a loyal, having a loyal customer there. And tell me a little bit about, you have advanced bundles, sequential subscription, giftable subscriptions, all things that I haven't seen before.

Maybe you wanna dive a little bit deeper into these features and tell me what these are about. 

Gaby Tegen: Absolutely. So what I found was that subscriptions were a one size fits all model. Maybe it's because brands didn't have the capacity to really assess different types of models, or because they didn't have the time to look at and educate themselves on the types of subscriptions may or may not make sense for their brands.

But something that we believe is true is when a brand comes to us asking for subscriptions, we don't just. Say yes and turn them on. We actually go deep into their business to really understand what they would benefit from. Sometimes it's not even subscriptions at all, and we'll tell them that, but when it is subscriptions, Ben is the question of are you a good model for a basic subscription offering that is a monthly cadence, 10% off?

Or does your brand actually need something a little bit more custom? And that custom area was, to me, a big opportunity because what you saw a couple years back even were large brands being able to have super custom experiences. Think Blue Apron, think stitch Fix, think Bespoke Post. But smaller brands didn't have that accessible to them.

And. It's really difficult to scale your business when you don't have a fundamental aspect of your business available to you. So we want it to build easy to implement and easy to maintain, but custom subscription offerings, and that's where the Build a Box comes into play. That's where terminal or finance subscriptions come into play that are giftable and end after six months.

That's where Sequential comes into play, which. Is where each month is a different product, , in an automated way. So I think that's essential. I'm still surprised that there are not more offerings like ours in the marketplace. Honestly, 

Claus Lauter: with subscriptions of memberships, the churn rate is the biggest risk for merchant.

So you need to be really on top of your game to keep the people on board. Gimme some ideas, what you see with your clients, with their merchants, what they do to keep their customers engaged and stay within the subscription and membership. 

Gaby Tegen: Great question. This is one of the most important topics that teams should be having right now, internally.

There are some really easy, I say easy. Obviously nothing is easy in business, but light lifts that people can take on that really have a big impact on not just retention, but really creating that bond with your most loyal customer, as you pointed out. That can be collecting birthdays and on every birthday you receive either a gift card for $5 off a purchase or a 10% off code or a free product.

For them to try that means rewarding them. Maybe it's their one year anniversary of being a subscriber. That means, Sending out an email from the founder of the brand. And obviously now technology, all of those things can be automated. But a personal note from the founder, really improves connectivity to the end consumer, of these brands.

Having contests on social media, anything that you can do to motivate and instill a pattern of. Connecting and discussing back and forth, whether it's feedback, reviews, something that they can win, promos, any kind of touchpoint that they respond to is a really great way. A low cost lift for brands to help with retention.

Claus Lauter: Okay. I like the idea was rewarding your customers as you gave example after year of being a subscriber. Now, Most companies already have, or thinking about having a wider tech stack, so that might be email marketing software like CLA and whatsoever. How does that fit into the whole landscape with what you do with smarter?

Great question. So 

Gaby Tegen: we. Pretty much from day one decided to build, an app that was native to Shopify. We're the only completely native to Shopify subscription app, and one of the advantages of that is that we're able to integrate with so many wonderful tech partners with a much lighter lift, which is why we have so many wonderful integrations and are able to help brands with using multiple different solutions in their tech stack for their Shopify store.

So, That is certainly a reason why. But , that is one of the reasons I should say why brands are able to move over to smarter so easily. it's important to not just build with integrations in mind, but honestly for brands to take up more critical look of. Not just picking solutions that will integrate with whatever apps they need, but taking a step back and really assessing what apps they truly need.

It becomes a very cluttered space. We see brands coming to us with a hundred apps installed. One of the things that I feel pretty passionately about is differentiating features with products. and there are so many features in Shopify and, admirable features. but they're not apps.

And so as a brand, what I would look at is not just purchasing software that integrates well with other software, but taking a critical look on, need to have versus nice to have features managing tech stack accordingly. 

Claus Lauter: Good point that you made there. A lot of merchants have a bit of a shiny object syndrome.

I know that's easy to fall for. Just use every app that is out there and, , lowering up their backend until the website becomes very slow. , when it comes to analytics, obviously you want to get, have a good overview of what's happening with your subscriber, so it's not just a fire and forget approach.

It's like, oh, I have a subscriber now and then that's it. And the technology will take the rest so what kind of analytics do I need to look at as a merchant to get an overview what's actually happening with my subscriber management? 

Gaby Tegen: There are some fundamentals that I think brands are pretty regularly looking at, like month over month growth perhaps.

A O v, although one complexity that we've. Paid close attention to is that it seems like every brand has different calculations for how they're measuring these stats. And so the first thing I would say is, Come together as a team and really have a clear vision for how you're going to consistently measure A O V L T V growth month over month.

Are you including churn? Are you not? Are you including all product lines or are you looking just at subscriptions? So that would be the first thing is I would advise everyone to get on the same page as their team, because. Truly, there are so many different approaches that I've seen that our team has seen of brands and the way that they decide to calculate things that it can become too complex too quickly, in my opinion.

The second thing is I would encourage brands and we work with our brands quite closely. We offer QBR, for example, where we'll actually go in and benchmark your business to the networks, the Shopify ecosystem and similar companies, and then give some actionable feedback as a result.

But one thing that a brand can do that's. That's relatively simple, is even just doing a product by product analysis. What we find a lot of the time is that brands will summarize their entire business with a stat. So a O V was X, or churn last month was y, versus looking at it from a product lens, which would then signify other decisions that you could make as a business.

So my blueberry flavored granola bars are. Selling five times more than strawberry. At the surface, that looks like a better product, but in fact, strawberry is retaining at a 20 time large. I'm making up the numbers obviously, but 20 times better than blueberry, indicating that people actually are more likely to buy blueberry but prefer strawberry.

And that kind of analysis that seems simple and obvious is something that a lot of brands are , flying over. 

Claus Lauter: Okay. That brings me to one of my favorite topics, the 80 20 rule, the 20% of products that give you 80% of your revenue or that cased most out of your subscriptions. Now, what do you see with Mauritians when they come to you?

And I think you touched a little bit on that, but what are the biggest mistakes when they approach to implement a subscription into their business? 

Gaby Tegen: There are a few. I think one is what you spoke to just a moment ago. Set it and forget it. Subscriptions by nature sound great, right? Recurring revenue, predictable revenue.

That sounds great, but what I think is. Sometimes forgotten is that it's a living, breathing part of your business. Just like your products, just like the promotions that you have on your site and your email marketing and your ad spent, it's living and breathing and it changes and you need to be reflecting on ways to improve it all the time and what could be done to influence whatever action you want your consumers to take.

In this case subscriptions. But maybe it's the difference between picking a six pack and a 12 pack, for example. The other I think, is. Back to the data part, honestly, is not fully immersing yourself into. The analytics of your business and really just understanding the core business metrics enough to make those quick decisions.

Oftentimes it's after a board meeting or an end of year sprint that we see brands coming to us with ideas of how to evolve their subscription offering, but it should be a proactive, of your business for sure. 

Claus Lauter: There's a bit of a learning curve and the intervals on how many or how often a product should be delivered.

Because I heard that overdelivering, your subscription, the interval is too short. People get too much of the same product in just a short time and they then cancel. What's your take on that? How do you find out how to set a subscription interval? 

Gaby Tegen: there are a couple of things. One is. Again, back to analytics.

Taking a look at what types of intervals are more successful, similarly to how you can look at products and assess what is retaining customers at a higher rate from a product perspective. You can do the same thing on frequency of intervals, right? 80% of people are subscribing to a monthly subscription, but churn is four times higher than those who are subscribing to a quarterly subscription.

Let's figure out a way, and every brand can take the same data, but reflect on it differently, which is why I caution anyone to give broad advice. Every business is different, but you can take that finding solve for it. In a way that is custom to your business. The other thing I think is while you're in that learning phase, there are certainly ways that technology can help your business.

So for example, we launched several months ago now, something that we call smart cancellation, which is basically the idea that. In that event where I'm canceling a product because, for example, I have too much product, it's my subscription because I have too much product. The brand actually has the custom flow through smarter, through the white labeled account portal where I don't just cancel my subscription.

I select from multiple choice list. The reason I'm canceling a brand can customize that list completely for whatever reasons that are particular to their brand. And then smarter will actually give you alternate actions. So if I say I'm canceling, cuz I have too many products, not only does smarter than collect that data for the brand to assess at the end of the month, but I'm given the option to skip this month or to gift the product to a friend instead.

And just having launched that, our brands on average have seen a reduction in churn by 50%. my point in telling that anecdote is to say yes. You should be carefully looking at intervals, for example, and seeing what resonates with your consumer and what actually data shows is the interval. But also there are so many opportunities to help prevent that cancellation even when someone is actively trying to cancel that.

I definitely encourage brands to implement. 

Claus Lauter: you mentioned customer portal, so basically your customer can go and self-service the interval, the frequency. What else can they do? 

Gaby Tegen: really a million different things. So from a subscription management standpoint, they can pause, skip, delay, frequency, , they can change the items in their boxes, you said.

But a step further than that, which we try to. Incorporate into the product as much as possible is getting consumers not just to engage with the portal when they need to, for example, skip or swap, but to engage on a more regular basis through positive activities as well. One example of that would be directly correlated to sales, which is upsells.

We have a really clean interface that allows people to add on items Now a brand. And again, each brand has their own experience, their own product line. Everything is custom to what they're selling. But high level, a brand could say, here are five new features that we launched last month. We want to promote those specific five products.

We can highlight those as products of the month, or we can say, Here is a product that you really love, that you have purchased for 15 months. I'm going to give you, as the consumer, 10% off your subscription if you gift that product to someone to try. Another element of kind of interacting with the consumer post sale through embedded Instagram and Facebook and Twitter feeds in our account portal.

So you're encouraged to go in and. Activate a relationship with the brand on social, which obviously has many benefits. And then the last one that I'll touch on is loyalty. So you're moving the needle with that relationship by embedding into the customer account portal, which has never been done before.

Typically, Shopify has a rewards loyalty page, and then they have your subscription account management page, but nothing that is one universal holding place for all of this information where I log in to see how many points I have and whether or not I can redeem something this month. And except further from that would be a brand emailing me, saying Your order's going out in three days.

By the way, you have 338 points. You can actually redeem one of the following products, and now I'm engaging ahead of an order and I'm adding more products and so on and 

Claus Lauter: so forth. Okay. I begin to see why you are called smarter. There's a lot of smart things involved in there. Let's talk a little bit about the implementation.

immersion comes to you, what are the technical steps and how long does the onboarding or training take to get them up and running? 

Gaby Tegen: Honestly, a really wide variety , and the reason why I'll answer this question, probably in more words than you want, is the same thing as all my other answers.

There is no one size fits all with subscription. Every brand is different, and honestly, as a result, our business is pretty agile to the type of business that comes to us. So we offer a self-serve no-code option. Typically, smaller brands will take advantage of that, where they can get started. Literally minutes.

We also, however, cater to a more developed brand that maybe has a hundred thousand subscribers already, and then anything in between, right? And so what that typically looks like is. Depending on what the brand wants our involvement to be, we're going to customize that experience to their needs. So if you have an agency that you're working with that we're partnered with, that agency is gonna be proficient and smarter.

So they can set up smarter for you with all the bells and whistles, and we're happy to be a part of that. But I think where we really shine there is through the QBR R activity. While we might not do the technical implementation, we go through and analyze your business to really help understand what will be successful for subscriptions, and then if a brand comes to us and says, Hey, we need a maybe more complex, unique setup, and we don't have that dev resource and we want help with that.

Then we offer our implementation team. It's a completely complimentary service where we go in, do that same business analysis, but then staff our engineering team to setting up smarter for you and creating that super, super custom white labeled experience. 

Claus Lauter: Okay, sounds great. Tell me a little bit about the pricing.

What's the structure on that side? So we 

Gaby Tegen: have three kind of buckets that someone would fall into. We have a entry level package that starts at $99 a month and a percent of gmv, and then we go all the way up to custom pricing depending on the. Brand at hand. We do not, unlike the other players in the space, we do not actually charge a transaction fee.

So we try to be as good of partners as possible to the brands that we work with. So it's just the 1% and uh, monthly fee. 

Claus Lauter: sounds great. The, statistics from last year, from the last 12 months show that customer lifetime value is one of the most important KPIs in the actual economic situation that we are in.

So I think subscription is definitely , a very valuable part of, or should be very valuable part of a business. Where can people find out more about you guys? 

Gaby Tegen: SM A R t r Happy to chat with anyone directly as well. , biggest advice I would say is honestly, not every business is a fit for subscription, but that doesn't mean that you can't capture l t v the same way, or through similar channels really, and every business, regardless of whether or not you're a obvious fit for a replenishable service.

You should be focused on what is ultimately a very, very important metric of your business, l t V. So whether or not you have a clear fit for subscriptions, that's okay. I definitely encourage people to still reach out. We can talk, I'm happy to refer other tech solutions that might be a good fit, but taking a hard look at what that relationship with your consumer is, co-sale is certainly a really valuable exercise.

Claus Lauter: No, that's a great advice and I hope that a lot of merchants would reach out to you. I will put the links in the show notes as always, and you just won't click away. K, thanks so much for giving us an overview of what you do and why customer lifetime value together with subscriptions is such an important factor.

Thanks so much. Thank you 

Gaby Tegen: so much.