Michael Hurnaus previously worked for Microsoft and Amazon before founding Tractive – market leader in GPS Tracking and Health/Wellness Monitoring for cats and dogs. Michael also angel-invests in B2C subscription businesses.

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Guest Resources

Michael’s LinkedIn – Connect with Michael on LinkedIn to learn more about subscription businesses.

Tractive – Dog and cat trackers. Follow every step. Every minute. Everywhere.

3 Value Bombs

1) Around 95% of success hinges on executing an idea well. The idea contributes only about 5% to startups and endeavors, while most of the outcome is determined by effective execution.

2) Pricing is vital for subscriptions, whether in your business or as an angel investor in others. “The Choice Factory” book is a great resource.

3) Reducing churn is crucial, perhaps even more than pricing. To lower churn, start by offering a fantastic product that engages users.

Show Notes

**Click the time stamp to jump directly to that point in the episode.

Today’s Audio MASTERCLASS: How to Win the Game of Consumer Subscriptions with Michael Hurnaus

[1:24] – Michael shares something he believes about becoming successful that most people disagree with.

He believes that around 95% of success hinges on executing an idea well. The idea contributes only about 5% to startups and endeavors, while most of the outcome is determined by effective execution.

[2:20] – Michael talks about how his passion for subscriptions, specifically the recurring revenue model, came about.

Around 10 to 12 years ago he was working at Amazon, where he got introduced to subscription-based businesses. This was during the early stages of Amazon Prime, coinciding with the rise of Netflix.
This concept of locking customers in through hardware intrigued him.
In 2012, he co-founded Tractive, a company selling GPS-tracking devices for pets. From the outset, he was drawn to exploring the subscription model.
Customers buy hardware (like pet trackers) for about $50, and then subscribe monthly. Over the years, they have worked diligently to refine this approach in their pet tracking products.

[3:59] – Pricing is a crucial part of subscriptions that many struggle with; what advice can you share on this?

Pricing is vital for subscriptions, whether in your business or as an angel investor in others. “The Choice Factory” book is a great resource.
Offer three options to customers, and they tend to choose the middle one. It is critical to have various pricing tiers to test what resonates. Even minor adjustments can affect customers’ choices.
Present the most popular option, stay below critical pricing tiers (like $99 or $10), and consider longer subscription terms for cash advantages.

[6:57] – How can you reduce churn to the smallest amount possible?

Reducing churn is crucial, perhaps even more than pricing. To lower churn, start by offering a fantastic product that engages users.
Monitor churn early and ensure a simple sign-up and cancellation process. This creates a positive impression of your business.
When customers want to cancel, ask why and offer solutions that might retain them.

[12:15] – A timeout to thank our sponsors!

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[15:23] – Can hardware businesses add or change to a subscription business?

Not all hardware businesses are suitable for a subscription model, but many have succeeded.
In Michael’s case, their device has a built-in SIM card with Tractive, making the subscription understandable.
Successful examples include Peloton, which offers hardware and content subscriptions with low churn rates.
- Blink cameras and fitness bands like Whoop or Aura also excel with subscription models, sometimes even offering hardware for free upfront.
- Food subscriptions and models where subscriptions make sense naturally, such as for recurring services, tend to work well.
- Beware: attaching a subscription to a product without a clear rationale can lead to failure.

[19:22] – What are the key metrics you need to look at?

Michael gives vital metrics to monitor in a subscription business:
- Signup Rate and Conversion
- Churn Rate: Keep an eye on the rate at which customers cancel their subscriptions.
- Involuntary vs. Voluntary Churn: Differentiate between payment-related churn and active cancellations.
- Growth Rates and Cohorts: Analyze year-over-year and month-over-month growth rates, and study customer behavior in different groups over time (cohorts).
- Dollar Churn and User Churn: Measure revenue and customer retention separately.
- Upsell Opportunities: Identify chances to upsell customers to premium services for increased revenue.
- User Engagement: Monitor how many paying customers use the product over time.
- Product Usage: Focus on ensuring customers find value in your product to boost retention.
- Customer Behavior: Assess how long customers continue using the product after initial signup, especially on annual subscriptions.
- Optimization and Comparison: Continuously optimize your metrics and compare your performance to other successful subscription businesses.
Remember, understanding these metrics and conducting A/B testing is crucial to refining your subscription strategy and achieving success.

[24:37] – Michael’s call to action.

Michael’s LinkedIn – Connect with Michael on LinkedIn to learn more about subscription businesses.
Tractive – Dog and cat trackers. Follow every step. Every minute. Everywhere.

[25:47] – Thank you to our Sponsors!

HubSpot: Put your sales team on the fast track to winning Q4 with Sales Hub! Learn more at HubSpot.com/sales!
FranBridge: Many EOFire listeners have launched franchises in a variety of industries outside of food – and FranBridge Consulting has guided them to these premier opportunities! Sign up for a free consultation with Jon – or get a free copy of his book, “Non-Food Franchising” – at FranBridgeConsulting.com!

Killer Resources!

1) The Common Path to Uncommon Success: JLD’s 1st traditionally published book! Over 3000 interviews with the world’s most successful Entrepreneurs compiled into a 17-step roadmap to financial freedom and fulfillment!

2) Free Podcast Course: Learn from JLD how to create and launch your podcast!

3) Podcasters’ Paradise: The #1 podcasting community in the world!

How to Win the Game of Consumer Subscriptions with Michael Hurnaus

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Guest Resources

3 Value Bombs

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Show Notes

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