#364 - Cracking the Code on Retention: Recharge CEO Reveals What Best-in-Class Subscription Brands Do Differently

Speaker A: Foreign. This is D2C pod, where the worlds of creators, consumer goods and brands collide. We get behind the wheel to show you how today's biggest products and ideas are made, launched, and scaled. If it's shaping the future of commerce and culture, you'll Hear it here first. Catch new episodes weekly on Spotify, Apple Podcasts or D2C pod dot com. Be sure to check out our newsletter for weekly breakdowns and recaps linked in the show notes. So, before we, before we kick off today's recording, I've got one more for you. E Commerce costs are rising. USPS changes alone could push delivery costs, uh, up more than 25% this year. And to stay competitive, you need a supply chain partner built for scale. And that's what Stored is. A modern 3 PL that unites warehousing, fulfillment and transportation with cloud software for full visibility and control. In 2024 alone, Stord saved customers $130 million in parcel fees and powered nearly 1% of all U.S. black Friday and Cyber Monday sales. Now they're offering a free mystery shopping report. See how your ops and logistics stacks up against competitors with real, actionable insights. Get yours at Stord Link Mystery and scale smarter with Stored. What is going on? DTC Pod today, super excited for our recording. We've got the CEO and founder of Recharge, that is Ashin o'. Connoran. Um, really excited for this episode for a couple of reasons. Number one, um, Recharge is a major player in the subscription space of E commerce. Uh, they recently hit 100 million subscribers and 100 million in annual revenue. So you can think, when you think of subscription and E Commerce, you automatically think of Recharge. And another reason is it's a brand that or it's a company that we've worked very closely with. I myself operate a brand running on Recharge. And, um, you know, it's something that consistently, when we have some of the brands that come on D2C pod, they're constantly, uh, you know, scaling, and they serve some of the biggest, uh, subscription brands in the space. So, without further ado, Ashin, I'll let you kick us off. Why don't you give us a little bit about your background, um, you know, what Recharge is all about and maybe how you got into building the company in the first place.

Speaker B: Yeah, totally. Thanks so much, Blaine, for having me on. Uh, background. So I, uh, went to school originally for art and architecture, then economics. Then I taught myself to program. So I became a programmer, um, had, you know, a Startup in the nonprofit space before recharge. So it was very like minded on. I always wanted to help people and empower them. Like, that was always the core of everything I did. Uh, that startup kind of like, you know, it got to about 10 people. We kind of like put on autopilot. And I got to a point in my life, I'm like, okay, well, what's the next thing I want to do, right? To build out. And this was about 12 years ago. And you know, uh, I met my co founder around that time, Mike, who became my cto. And we were like, okay, why don't we cold call and we hit up all the smartest people we can get a hold of in the world and see if you ask them a simple question, if you were going to start a company today, what would you start? Right? Because they're like, there's a lot of people who have way better knowledge than us of like, what actually is the right thing to go after. Right, Right. And so we went through that process and one early person that we hit up was Harley at Shopify. And at the time, Shopify was only 100 employees. So they were super small, this sleepy company in, in Canada. And he basically sold us on, on commerce, on Shopify, on D2C. And you know, you know, in those conversations, it wasn't just Harley sold us, but it was like half the people told us we should go into commerce. The other half said we should go into crypto. So that was our 12 years. Uh, I really enjoyed that. I went into commerce because I think I like working with entrepreneurs, I like building businesses. I definitely should have put more money in bitcoin, but that's a different story. Um, so anyway, so we got in into Shopify 12 years ago and we were like, okay, we truly believe in this wave. This small Canadian company. We think it could be massive. Shopify was only a hundred or so employees. You know, there was you know, maybe, you know, 10,000 merchants on the platform, right? But we saw it and you know, at the time, the big structural change that we saw was that Facebook was starting to get really good at advertising and targeting, right? And so they started opening up Facebook lookalike audiences. And we realized, like, that created distribution, right, for merchants to actually sell products and scale. Um, so we got in the space and we were like, okay, we believe in the wave, we believe in the where it's going to go, but what do we build, right? And so what we did is we started an agency so that we could actually get really close to Merchants build products for them, um, be partners with them. And we started to launch different software products. So over the course of a year, we launched seven different products. And Recharge happened to be the seventh product that we launched in that year. M. So, yeah, and we did loyalty products, we did email products, we did like an early B2B warehouse product. We just did everything. And the idea was like, you know, we love the audience, we love the entrepreneurs, but what, what do we think was going to be a really, truly big problem and opportunity for us to go after it? Right? And, um, you know, I like to say that I. I'm the one that came up with the subscription idea, but I actually was the one who voted against it amongst the. The three of us. Early days, I was like, ah, ah, who's going to subscribe to a physical product? Can't you just go to the store and buy most of those products? Um, but we were like, fuck it. Uh, Or I guess it can't cost on these.

Speaker A: On these things. Yeah, you say whatever you want.

Speaker B: But anyways, um, you know what, we launched subscriptions and it just took off from day one, right? And it was like, basically people always ask you, like, do you know what product market fit is? And I'm like, if you have to ask that question, you have an issue, right? You just know it's like hitting a vein. And early days, you. You know, when we first launched subscriptions, all the merchants we had were pretty weird, I'm going to be honest. It was like things like cockroaches on subscriptions, Komodo dragons on subscriptions. We had a company that sold. Their slogan was, it's better than cocaine, but it's legal. I still don't know what that company does, but it was one of our top merchants. So we just had all these, like, weird early adopters to the model, but we could tell, like, there was going to be something big there. And so that was kind of our early days of how we got into subscriptions, into Shopify.

Speaker A: And what did that landscape. Look at the time. Right, right. Because, like, you're saying Shopify is like, uh, a hundred people. You know, subscription wasn't super popular on Ecom. Like, what did you need to build to enable it? Where was the opportunity? Why wasn't Shopify supporting it? And, like, what did you guys need to do at like, the MVP level to, like, enable this behavior?

Speaker B: Yeah, totally. So I think the big thing is they're actually. So Shopify had launched their app market like a year or two years before that. And they actually had done this whole competition like spend a couple million dollars in prizes for people to build apps into their ecosystem. And basically there was a bunch of subscription apps, right. So There was like 10 different apps in the market but they all were kind of shitty. And what, what they did is they basically. So Shopify didn't natively support uh, subscriptions. So what you would have to do is when someone buy a subscription you would have to go to a third party checkout that this Apple would control and then people could buy there. And so what every app did is that you could go to this other checkout and you could buy subscription but you couldn't buy the one time items and subscriptions together. Right. And you couldn't also you couldn't have uh, a way to handle taxes, shipping discount codes and a customer portal for, for the end shopper. Right. So there was just like a lot of like basics that a physical product company selling subscriptions would need versus like a digital product. Right. And so we basically build out these like core building blocks and that's what like really differentiated us early days and took off.

Speaker A: Yeah. And I think even just that little distinction is so important because like you want to do both, right? You want to be able to sell it as a one time product for the person who wants to try it out and you want to sell it as a subscription product for the person who's totally bought in. And like even if you can't just do that little thing, it totally changes the equation. Even like us when we were getting set up on recharge, like that was like it's a one of the non negotiables. It's like I don't want to create a different skew for this. And like you've got all the ways it ties into your three pl. Um, I'm like I want one skew and I want to be able to do one time purchases and I want to be able to, you know, for the people who want subscription to be able to do that. So um, that totally makes sense. And then the other thing that you mentioned that was interesting was kind of like the, you know, the funny sort of brands that were like getting set up with you in the beginning. What was your first, what was like the first brand you'd say you worked with where you're like okay, this is, this is the real deal. Like there's something like major here. And, and what did that like transition look like going from like these kind of weird one offs were really willing to kind of take a Flyer on you guys and then you were like, wait a minute, like we actually got something.

Speaker B: Yeah, totally. You know, it was interesting. So this is actually a funny story is, you know. Yeah, we had a bunch of, you know, alternative, different types of, you know, merchants. Early days I uh, would like kind of a niche and out there products. But our very first company that actually ever installed us was a company called Kachava. And they had just started and today they're like a nine figure business. And so we got to see our very like row number one in our database is Kachava. And so to see them and partner with them over the last decade and see their huge success, that's been a huge, you know, driver for us. Because we just saw them, we're like, oh wow, there's going to be a lot more companies like looking, looking like them that will come on. Right?

Speaker A: Yeah. And, and I think that's like kind of the power of subscription and we'll get into that in a little bit. But like just for example, even like this brand Olivia, that we're like bootstrapping and starting to scale up like for the first bit, you know, we were obviously the first thing right out of the gates we did was not like set up subscription. We're worried about supply chain, we're worried about product. We're like at the Shopify store up all of that sort of stuff. But subscription is so powerful as a compounding mechanism. Right. And um, um, you know, we see it in the data. It was kind of like, you know, we'd be doing 3k, 4k 5k a month, whatever, whatever, whatever. But then when we really turned on subscription like all of a sudden you see the business just, just start to like blow up. And like now like 20, 30% month over month growth, you're, it's like expected almost, it's, it's kind of, it's wild what literally just flipping that switch can do to your business.

Speaker B: Oh, 100%. And I feel like people don't start it quick enough. Right. Because like one of course is like the simple math that we see across. Like we have like 30,000 merchants and we see that their one time buyers are worth one fourth of the value of their subscribers. So basically subscribers are worth four times more. Which is crazy, right? So you should be doing everything to push people into subscriptions. But what's even crazier too is like, so you know, we get a lot of like big brands that come to us and I had a big brand that came to us uh, a couple weeks ago. And they had started this brand in the 2000s. So this is, like, Super Legacy. They actually did TV advertising to the brand, all that. And they had stopped advertising in, like, 2005. And the crazy thing is 15% of the customers they acquired in 2000 they still had today. So they've been, you think about that they were making money for two decades now on, um, people they acquired 20 years ago.

Speaker A: That's insane.

Speaker B: Right? And just think about the profit margin, because, like, so much of the. So much of what's broken in commerce is that you basically have to feed money into acquisition, and that's where all your margin gets taken out of. So if you can build this compounding base right. Over a long period of time, and it basically makes your business just so much more profitable and able to outcompete everyone else who's basically surviving day by day by the acquisition.

Speaker A: Yeah, and I think this is a super important point, and it's something we talk a lot about on the pod. It was something, you know, I thought a lot about before launching this business. And even sometimes when people come to me, they're like, you know, when you're thinking about getting things set up, like, how do you think about building a business? And I'm like, look, there's like, a lot of competition. Number one, like, just as a framework that I like to think about, number one, obviously, pick a problem that's something that, like, you want to solve, you want to work on, because it's no fun like, working and grinding on a business that you, like, really couldn't care about. So, like, let's assume that you've got table stakes in terms of, like, founder, like, product or market sort of alignment. But after that, like, you really want to make sure, especially in the commerce space, that, like, the unit economics work for what you're doing. And you can pair up your acquisition flywheel with the unit economics of your product. So that might mean, you know, what does subscription look like for your business? Is this a product that, you know, naturally works with a subscription versus something that doesn't? What's the form factor? Is it something that's, like, light, easy to store, easy to ship, or is it something that's massive, that you're going to have a little bit more trouble with? Right. And when you think through that, it kind of, you know, it's like a good way of thinking through things, because the reality is when you're building out that growth motion, like you were saying, CACs have been going up and up and up on Facebook. The platform stabilized, it's more predictable. But if you want to, if you want to push and you want to scale a budget there, you need to be able to have that LTV or that customer lifetime value that can support that motion and subscription. To your point earlier, you said that, you know, you get the 4X the customer LTV for a subscriber than you would have for a one time purchaser. Well, that all of a sudden increases what you can spend to acquire that customer and how you can do it predictably. Right. So I think, um, you know, when you're thinking about building a business subscription fits really well into the, the tailwinds of this landscape as well, from a business builder's point of view.

Speaker B: Totally. Yeah. And you know, actually, um, last year, uh, we migrated over this company called Guthy Ranker. They were like kind of like old school D to C on um, TV advertising. Right. Uh, so like they did brands like proactive back in the day, they did, um, sold that for a couple billion. So they've done multiple brands, you know, huge GMV levels. And when you talk to them, because I'm, I'm like a big fan of history because I think that kind of gives you ideas of what the future will look like. And when you talk to them about how TV advertising changed, especially direct to consumer TV advertising changed from the 80s to the 90s. They said in the 80s it was a lot more types of businesses that could advertise on tv. Right. Because the cost to the payback worked. Right. But as the market matured, the types of businesses that could actually thrive started to narrow. Right? And it started to narrow to companies that had a high ltv. Right. And you can think about this today, just like objectively, if you ever watch tv, is like the types of companies that advertise, right? It's like CBG companies, it's car companies, it's insurance companies. It's actually quite narrow, you know, alcohol companies, like, it's very narrow. The type of companies that, that thrive.

Speaker A: Right.

Speaker B: And I think we're starting to see this more and more on Facebook and Meta and acquisition is that it's becoming so competitive that certain business models are just starting to outcompete everybody else. And it's going to narrow what type of business you should do. It doesn't mean you can't do a different type of business. It just means you have to know that it's going to be harder with time. Right. Um, and I, you know, we see it in our own data is our merchants are growing Way faster than the rest of the Shopify base. You know, not only because of our partnership and us providing great solutions to them, but also just the category of subscriptions is a better category than most.

Speaker A: Yeah, absolutely. And like we're saying the, the unit economics of the businesses lend themselves to that sort of thing. They lend themselves to growth. So, um, I'd love for you if you can just talk to me a little bit about, um, you know, what do the businesses that get subscription, right? Like what, what do they do? You've seen all sorts of businesses on recharge by now, right? You've seen ones that you know, have like amazing outcomes. You've seen ones that have like less than amazing outcomes. What are the characteristics of the businesses on recharge that you know, do the best the subscription based business? Like what are they doing that? Like what's core to their DNA that uh, you know, really helps unlock their growth?

Speaker B: Yeah, totally. So I think first, like, I mean this is pretty obvious, but it starts with product, right? How good is the product? What does the product solve? Does it solve a recurring need? Right. If it doesn't have that, it's very hard for it to work. Right. You know, so I think that'll be my first point is like you actually have to think about how often do people want to consume this product, right. And if they want to consume it regularly, the next question is, is your product good enough to stay in their daily rotation?

Speaker A: Right.

Speaker B: And you know, when I think about this, is the shopper, you know, at the end of the day buys a product oftentimes to solve a problem, especially in cbg, it's like, hey, I have gut issues so I'm going to buy a probiotic. You know, I, you know, want to work on building muscle mass. I want to buy creatine. Right? And so that problem for the consumer doesn't change, right? It often it stays there. The question is, can you sell into them and then stay with them? Right. Um, so I think that's first, that's core. It's like it has nothing to do with technology, has all to do with the product you sell. Then I think the second is people understanding the acquisition funnel, right? Are they actually optimizing for subscriptions and to keep people in? Right. And I think like, you know, you were, you were saying, hey, you know, you guys, you didn't start with subscriptions right away. You turn it on. It's like a no brainer. Now is it even that level like people have to get to and then people have to get to the level, like wait a minute, I make four times more for my subscribers than my one times. I should optimize every touch point from the product page to the cart to the checkout to the post checkout as a conversion funnel to push them in. And maybe, you know, Maybe I lose 5, 10% of my conversions because I'm adding friction. But the reality is I know that I'm converting X amount of people who are four times more valuable. So it all pays off. Right. So I think then they figure out the conversion funnel. Then after that what I see is people. So you get product, right, then you get acquisition, right. Then you really got to get your analytics right of understanding what is the true value for these people. Right. And once you can understand the true value and what that looks like, then you can pump more money into top of funnel acquisition. Right. Once you got that, then I would start to focus on retention. Right. How do you stop them from canceling? You know, that's either through cancellation flows, either through a great shopper experience, either through rewards, things like that set up as well. But that's kind of the cycle that I think of, you know, and the truly great ones kind of master it all.

Speaker A: Yeah. And I think that's a great framework in terms of thinking about it. It's cause like you don't need to do everything all at once. Like think about it in phases and even like us when we're getting set up on recharge, I told you like first was like build a good product, figure out, make sure it sells, like make sure it's something that people want. And then we can start, we can add the subscription. And now we're actually in the phase of like starting to optimize for CRO. So that's kind of my next sort of point. You, you mentioned the conversion funnel. What does a conversion funnel look like for a really high performing brand? How do they think about building the funnel for uh, subscribers to like, you know, got into that experience. What components of PDP cart, Like how does it all play together from anywhere from the top of funnel to the place the experiences in the cart or the checkout to um, create a great conversion experience.

Speaker B: Yeah, totally. And I think number one, the best people test, right? The best people try multiple different things. Right. So it's not like one size fit all. I would say first the best ones I've seen go subscription by default. Right. So that is the default and I think you can even go to Amazon now when you buy a lot of products that are like you know, CBG products or things, cosmetics or beauty or whatever there could be on subscription. It's subscription by default now for a lot of them, right. Because they know that defaults matter, right. People like have, if people have to think about going into something, they're way less likely to do it than, you know, already being in it. So I think that's first, subscription by default. Second, I think it's the offer, right? Is like, what. And we, you know, we all know this is like, hey, what is the great compelling offer, why they should subscribe, right? You know, hey, is it like a special like one time discount versus one time. Is it. They get all these benefits, you have to give the right offer. Right. And test that offer. Um, and then I think once people are in your funnel, then the cart, it starts to become like, it all starts to become either upsells or cross sells.

Speaker A: Right.

Speaker B: And that really depends on your products. So it's like if you got them subscribing now, do you try to upsell them to higher frequencies for bigger discounts?

Speaker A: Right.

Speaker B: Um, you know, basically, or quantity breaks, uh, or do you want to cross sell like, hey, you know, they're, you know, they bought toothpaste, now I'm going to sell a floss on subscription into them. Right. That's where the, the cart comes in and then the checkout again, same thing. Cross sells and upsells and post checkout as well. So I, and what I see is people get more aggressive in the funnel. Um, so you might start with a smaller offer on the, on the product page. And then by the time it gets to post checkout, that's your most aggressive offer because that's when you're really trying to convert the last group that's holding out.

Speaker A: Yeah. And it's cool to see that like, you know, you start this sort of stuff, you start getting emotion, that sort of six. And then as you start to scale like we're talking about on the acquisition side, you're like, wait a minute, I can actually through these improvements that I'm doing on the CRO and the conversion and the cart and the subscription, all of a sudden I can really drive aov, which gives me more money to pour into that top of funnel. So those first two parts of the entire customer sort of experience are sort of solved for. Um, the next thing I want to talk about is it's because it is something you mentioned is, uh, and this is a great thing also, like anytime we're talking to the recharge team, like, you know, you Guys are always super helpful in terms of like, pointing out, like, hey, here are the benchmarks you want to be hitting. Um, you know, uh, if you are in this category, you know, here's the, the Churn numbers you want to hit. Here's ways that you can reduce Churn. So I want to think about, like, let's assume that, you know, we've got a brand spun up, we're starting to like, do well. We're starting to, um, you know, get subscribers. And then now we want to say, okay, let's uh, uh, you know, let's make sure our numbers look healthy. What is, what does healthy look like in terms of, uh, you know, general benchmarks? I, I know it may vary across categories, but generally for a subscription brand, what's a healthy number that you like to see? And then, um, you know, what are some ways that brands, uh, that are successful at like, reducing that Churn element? How do they, how do they tackle it?

Speaker B: Yeah, totally. So I think, you know, if you want to be, have healthy, you want your second order to be 70% or above, right? Like, that's the benchmark of. And the second order really matters the most because that's the biggest delta of Churn, right? The biggest group churns out in that one to two. And I think you're also in this period where people have just tried out your product for the first time, right? Let's say they try your olive oil supplements. You need. It's your job then to educate them and keep them in on the journey with you, right? So the first 30 days is really important from like the onboarding sequence of how do they feel connected to the brand, how do they feel educated around the problem space that you're going after, how your product solves it and what is like, things like the benefits and usage and when should they see those things, right? So I think that's, I really tell people, focus on order one to order two. Right? And then you can order like order three. Should be like 45% or plus, right. And onwards. But if you fix those, like the first one, say a couple orders, that has huge impacts because what. By then you have a group of people who like the product, have been using it for a while, and they'll stay with you at a high, way higher clip than if you hadn't fixed those groups. So that, that's what I would go after first.

Speaker A: And then the other question I was going to say is, how do you, like, how do the best brands who do this, how do they tackle it, right? Like, do you. What tools does recharge have in there to like, you know, kind of monitor it? The an like you mentioned, analytics are such a big piece. So like, how do the brands actually tackle this? Assuming that, you know, okay, I see that my numbers are maybe a little bit below that 70 mark or that 45 mark after month two and three, I want to get in there. Um, you know, do you guys integrate with other tools so that people can like, like a klaviyo or something? Like, what is the, what does the picture look like to say, okay, now we want to take action here. How do we improve it?

Speaker B: Yeah, totally, totally. Yeah. And I think our goal is to be like the best partner to help you retain your customers. Right. Fundamentally, like, that's our mission. And by doing that, we want to be that retention platform in a lot of ways with subscriptions at the core. And so for us, it's like one, we got to give you the analytics so that you have the data to understand, like, oh, hey, here's my cohorts that I'm acquiring. Here's how they're, you know, churning out month one, month two, month three, or between orders. Right? Um, two, once we give you the data and then we also give you the benchmarks to understand, okay, here's what your business looks like, what's happening in your business. Here's what, uh, you know, you know, the industry looks like within your category. Right. And we have 30,000 merchants, so we can give you a pretty clear view of that insight. We then give you the tools then to help retain. Right? And so like the key tools are, here is like things like cancellation prevention. So when people go to cancel, how do you deal with that? Right. How do you get. Use that as a push point to gather data to educate the shopper to potentially give offers. So the cancellation flows, um, things like the upcoming order emails, we actually launched those out so that they're first class in the user experience for the shopper to manage subscriptions. Um, we have a lot of, you know, 90% of our customers use other email solutions like klaviyo for like more campaign based things. Um, but we see more and more people want to use our email pages because what happens is, let's say you email a customer about their upcoming order, you really want to make it so that it's easy for them to skip a date or to change the product and not have to like log into a website to figure that out.

Speaker A: Right.

Speaker B: And so because it's congruent, it's in one place we allow you to do that. Um, another thing that we allow you is rewards. Right. So another big tactic that people want to do is as people get to order 2, 3, 4, how do you reward the person so they feel connected to the brand and they feel locked into the program.

Speaker A: Right.

Speaker B: So we also provide that loyalty suite as well.

Speaker A: Yeah. And another cool one that um, you know, we've had the pleasure of leveraging is the, the Automate flow. So maybe you talk about that a little bit in terms of like. So I mean at least on the logistics side, you know, when you're dealing with 3 PL or something like that. Ah, maybe, you know, in our case we've got a certain type that goes out in the first order of a subscription and then afterwards there's a second type. And if you don't have ways to, you know, make adjustments like that in an automated fashion, your3PL is going to get really mad at you. So can you just tell us a little bit about like the flows and the automated side of things that you guys are doing?

Speaker B: Yeah, totally. So we, yeah, we have a whole Automate product which is like, basically like very much like Shopify Flows where it helps all the back end processes of like swapping out products, changing tags, the stuff, the nuts and bolts to make your subscription program work. So that's also really important. Um, and then one actually that I didn't mention that we're really excited about is that we've launched uh, an AI concierge for shoppers. So the biggest issue that we see in retention is the end shopper has a hard time managing orders. Right. And um, we can all think about this as a, as a shopper ourselves is oftentimes the issue. You subscribe to these physical products, you end up getting too much of the product or you get versions of the product you don't want and then you get frustrated and you cancel. Right. And we see this in the data is like people that log into the customer portal, over 40% of them want to cancel. When they cancel, you know, two thirds say either it was a, you know, basically they weren't on the right product or they had too much of that product. And so what we actually have launched out now is um, a, the AI concierge is as you buy the product and you subscribe, you get notifications via SMS and then you can chat with the SMS to manage everything. Right. Which is being a game changer on uh, not only retention of these cohorts for shoppers, but we've also seen like when we Survey shoppers using this tool, 93% of them say it's essential. Like they wouldn't order or manage subscriptions without that tool.

Speaker A: Wow. So basically the way it works is you guys are integrating with the sms. So like orders go out, what it can SMS text the customer and then you have an AI layer that's like interfacing between recharge, uh, and like the actual subscriptions and behaviors that they have set up and the customer in a super, super easy to, to deal with.

Speaker B: Like if someone says hey, you know, I'm out of town for a week, can you change my order? It'll be like, oh cool, I pumped your order a week. Or you're like, hey, you know, this flavor isn't working out. Whatever flavors you got, it gives you recommendations and you can choose your recommendations. Like, cool, I've updated your upcoming order, things like that.

Speaker A: Yeah. And this area is super. And this is what always like gets me about like the E commerce enablement system is like there's so many like customer touch points and they always like overlap and you've got like this overlap between what's happening in subscription, what's happening in support, what's happening in conversion, what's happening at the Shopify level. Like it's also like intertwined like in this example, right? Like um, you know, so much of like when customers reach out, it's like, hey, can you update my subscription? Or hey, can you help me here? And then the, the customer support, real person or agent has to go take action. But you know, developing tools and giving the merchants the way that like they can, uh, you know, the AI can handle this like that. You're saving so much time just by being able to, to do something like that with the customer, right?

Speaker B: Uh, a hundred percent. Yeah. So like definitely like you know we see significantly drops the customer support tickets that merchants have, right? So that's a cost and that's like time also. It just delights the end shopper, right? And like, you know, when I talk about like, you know these like when I see these like more legacy subscription companies that move to us is the fact that they still have these cohorts, you know, 15, 20% of people that are, that are buying decades later, that is the true value of these subscription businesses, right? And that's the true uncompetitive dynamic that uh, they build up. And I think so many people in commerce are really short sighted because they've been built on this model. Like I do a Facebook ad, I make a sale, I make a bit of Money. And they're thinking day to day, which they have to because they have a hard time to get cash flow and so competitive. But I really think that the one, the businesses that I see are going to be like, you know, like, truly great companies are thinking decades outwards of like, oh, cool, we're going to build up this brand, we're going to have all these subscribers. We're going to build a great, delightful experience where people just won't change, turn, turn off them, and they'll be using us for decades. And we, we paid, you know, whatever, 50 bucks, 70 bucks for acquisition upfront and we make everything else as grainy.

Speaker A: Yeah, no, it's awesome. And then I think the other point there that's just so important is like, uh, you know, customers or people, like, they don't really care about software, like, even recharge like before it was like, oh, you've got a customer portal where they can go in and they can update their frequency. But like, at the end of the day, like, when a customer wants their thing updated, they just want it updated. They don't want to like, they're like, oh, uh, yes, you can have a support agent tell them, hey, go into your portal and do this. But if they get a text and they're like, yeah, update it. Like, they're happy, the brand's happy. Less work for everyone on both sides and better experience, right? Yeah.

Speaker B: You know, and it's so funny. It's like, I think people in our industry need to think more about their own shopping experiences and what they like, you know, and geared towards that because it's like, it's that simple. It's like, we are the end consumer and we all get frustrated when things are hard to manage. Right? Like, I can tell you right now, if I'm on a subscription and they ship me a bunch of products I don't want by order three, I'm like, forget this brand. I'm out. Uh, I'm done. You know, and maybe I'll come back to it at some point, but what happens is I then like, rage quit. I go into the personal portal, I quit. And then I'm on my Instagram or TikTok and someone starts talking to me about the same product or same problem with a different product, and I buy from them. I'm like, oh, I'll try these guys out. Maybe the experience will be different. And, uh, yeah, it's just really interesting. It's like, I think the, the truly big, great companies on us really think about customer experience a lot Maybe that's also something just at the core.

Speaker A: Yeah. And when you think about customer experience, it's, it's everything. It touches every platform. It's not just the product, it's also the email communication from the top of funnel stuff you might be doing from when you acquire them to like the email campaigns you might be running in something like Klaviyo to the, the experience, like you know, subscription. Such an important experience because like there's, everyone knows, like there's nothing worse than dealing with a subscription that you don't want to be on that you're getting charged for. Right. So like. But that's part of the customer experience. I think that's, that's a uh, that's, that, that's a super spot on. Take the next thing I want to ask about and just get some clarity on because like we were talking about, it's like this landscape is so complex with all these different tools. They all have functions that sort of overlap even in the subscription space. Right. Like you guys aren't the only player. You guys are scaled up. You know, congrats on hitting the 100 million subscriber and, and, and ARR. Milestone. Like that's amazing. But like, tell me a little bit about the subscription landscape. What is it that you guys do? Where are the other players? How do you guys see this landscape evolving?

Speaker B: Yeah, totally. So I think number one, we always want to be the best partner for brands and entrepreneurs and builders to scale. Right. And to start in scale, really. Right. And so I think part of that is we want to be the best on innovation and R and D because you need the best solution. But we also want to be the best in support and guidance. Right. And so I think when I think of those, those pillars, right. Of like innovation, support and guidance, I think from a innovation perspective, you know, the reality is we, we power 75% of all subscriptions on Shopify and we're the one, you know, our next biggest competitor. We're probably 10x the size of them. So we just pile more money into innovation and we're in it for the long run. Right. We're, you know, we've been doing this for a decade. I love working with entrepreneurs and builders. I want to do it for decades forward. So we're in that long run part long term partner for people. Right. So that's our goal. And then I think on the guidance side, because we have so much data and because we see so much, it's my belief that we can also then become the best partner in Giving you guidance on what you should do. Because we just see everything, right. And then support, we have to be great support, just like everybody else. So I'm always, I'm never like focused on competitors because I think you need to be focused on the, the problems of the brands and the merchants you serve. Right. But I think competition helps you become stronger. Right?

Speaker A: Yeah. And it might push you in different ways and give you the nudges that, you know, this is something that the market wants. But like, to your earlier point, I think that what you said about guidance is like so important because a lot of times brands like you guys, it's almost like, you know, like when you're operating, you said you guys started almost like as a little agency. Well, even when you're an agency versus one brand, you're seeing like 10 brands and how those 10 brands are like doing things. So you've got like more data points to operate versus one. And you guys at recharge, you scale, you said you're serving 30,000 brands across like 100 million subscriptions. So you see it. And like, I think one of the cool parts, like even when, you know, we chat with the team, they'd be like, hey guys, here's a benchmarks, like, here's a couple like quick wins that, you know, you guys obviously aren't doing. Just turn them on. And we'd turn them on and all of a sudden like revenue would go up. You know what I mean? So like just having that like data and perspective and confidence to be like, this is kind of what you need to do and this will help you and this is best practice. Um, it goes a long way.

Speaker B: Totally. Yeah. And I think, and then we, because we see everything that's happening, we're then able to innovate faster because we then take the best practices and we bring it into the product, you know, because, and you know, it's been interesting. I was looking at the data today of all the products that we've launched in the last year. The incremental lift on, uh, merchants has been over a billion dollars.

Speaker A: That's insane.

Speaker B: Right? But, but all those products at the core started with us seeing what our merchants were doing, what was working, what was not, and then bringing those into the product so that we could better help accelerate the ecosystem. Right. And I think in a lot of ways that's how we want to be the best partners. We want to be not only hands on from support perspective, but also that guidance and then also that innovation and product.

Speaker A: No, absolutely. And the other questions I Have for you is like where do you see this space, um, evolving to like what's next for recharge? You know, you talk about innovation, different products that like excite you, solving these customer points, like where are we headed in subscription? Like, you know, call it like the mvp. Like you said it was like, oh, someone just wanted to be able to differentiate between uh, a one time product and a subscription product. And now you hit these complex like Landers with all sorts of customizations and personalizations. Um, where do you see subscription going and what's kind of like on your roadmap as you think about continuing to uh, you know, uh, build in the space.

Speaker B: Yeah, totally. So I think like first I look at where merchants are and where they're going, right? So that's like my first, My North Star is the brands, right. And the merchants. So I think right now it, life is hard, right? Like everybody has a million things, they gotta figure out a million different systems. You know, especially in our categories, a lot of people have to like not only get D2C, right? They gotta get Amazon, right. They gotta get retail, right? So things are just really complex, right? And I think what I, what we see is people want more of a partner in that journey, right? More from a hands on perspective from you know, uh, product innovation, all that stuff. And I think from ours is not. They don't want to partner just like, hey, can you handle my subscription billing? They fundamentally want a partner of like, hey, how do I retain customers? You know, how do I keep my customers in for the long run? And what can you do to solve that? Of course subscription is at the core of that, but that's the relationship they want with us, right? And so then when I think about that is like from us is like, hey, what do we need to do from a you uh, know, our account managers and guidance perspective, just like hands on like people almost like giving them more services to help them and support. Two from the product is we've been bringing in more of the data, right? So we brought in, we have all the, your one time data, uh, and your subscription data. Our goal is to bring in more data to give you that full picture of what retention looks like, right? So you can know what's going. And then we also want to bring in the tools that drive retention, right? So you know, we've launched a suite of tools around how do you convert people into subscriptions from the product page, the cart to the checkout, to the post checkout. So we want to help you better convert. We also launched A bunch of tools on basically how do you retain people, right. Which is like loyalty and churn tools and fill payments and all that stuff. And then now I think with the AI concierge, how do you communicate to your subscribers to lock them in better. Right. On that journey. So I think that's our goal is to be the retention platform and there's many pillars that lead into that.

Speaker A: Yeah. And it's so cool how you started as like the subscription platform and that's like your core thing. But at the end of the day, that's what you're serving is like retention, which drives growth and it's like a key part of the business. So the last question I have for you is, um, you know, for founders, right, who might be like thinking about launching a brand, Maybe they have a brand. Um, well, actually, I have two questions. The first one is like, what is the biggest mistake that founders or brand operators typically make when it comes to subscriptions?

Speaker B: Um, well, I think first is they don't get that product. Right. So I think first, first focus on the product. Right. That you're making do Customers love it all that is it repeated formula. Um, then I think the after that again, it's acquisition.

Speaker A: Right.

Speaker B: Like how do you create the funnel to push people and subscriptions. Right. And I actually think when it comes to acquisition, what people do is they over discount for people to subscribe oftentimes and they don't make subscription by default. Right. Those are like the two easiest things and it's actually interesting is like we look at the data is if you make subscription by default, it converts 3x more people into subscriptions. If you move from a 10% discount to a 20% discount, it only improves it by 2%.

Speaker A: Wow, that's wild. I. I had no idea. I'm. Our, our products, we're 20% for. For subscription.

Speaker B: I mean, now what you've done is you now have given a 10% discount margin to these people forever for the lifetime when you didn't have to do it. So. Yeah.

Speaker A: Um, no, that's super fair. Yeah. And the second thing that I was going to ask, that like kind of pairs up with, with what we're just talking about or what kind of experiments. Um, you know, if you had like a one or two sort of experiments that founders should be running or testing with recharge, like what would those be aside from like turning on subscriptions in the first place?

Speaker B: Yeah, I mean, I think the experiments I would be. First I would focus on top of funnel. I'd be like Subscription by default. I would add upsells to subscription. Uh, you know, use it. You can use our car checkout, post checkout tool or another one for that. So that'd be my first. Right. And then I would be looking at the data of what the retention is and lifetime value of that. I then would experiment on how to keep people in the program, right? Because like, you don't want to scale the thing up too quickly and have a leaky bucket. So then I would experiment with like, okay, cancellation prevention. When people go to cancel, how do I educate them about the product? Right. And like tell those founder stories. I would also experiment with the first 30 days, how to educate the person as well.

Speaker A: No, I love that. Super, um, sound advice. Appreciate, um, you coming on. And for anyone who's looking to learn more about yourself, follow along. I love the content that you've also been posting, uh, on LinkedIn. Like, where do we connect with you? Why don't you just shout out your socials and where people can find out more about you and recharge.

Speaker B: Totally. So feel free to always hit me up on LinkedIn or X. So, um, LinkedIn is just my name. Pretty unique. So, um, and X, it's a O I S I N O um, I always have my DMs open, so always love to hear from entrepreneurs, builders, uh, people, you know, scaling businesses. I also keep my Fridays open for just calls with merchants, um, because that's like the lifeblood of like, why we exist and who we want to help and partner with. So always down to chat, always down to like, give back to the community and.

Speaker A: Yeah, that's awesome. I love that. And even as just like a builder, like thinking about it, like keeping Fridays open and staying close to the customer, that's uh, that, that's a great one. So appreciate the time. Cool.

Speaker B: Awesome. Thanks so much.

Speaker A: If you enjoyed the show, we'd love your support. A rating and review would go a long way as we continue to host the best builders in DTC and beyond. Follow and subscribe to the show and make sure to check out our show notes where you can find our socials and weekly newsletter. Visit us on dtcpod.com to join our founder community and access resources from every episode. We'll see you on the next pod.