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CMO Confidential
Prof Daniel McCarthy | Door Dash and Food Delivery - The Case For Building a Subscription Model
00:36:27
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Mike Linton
The CMO Confidential Podcast is a proud member of the I Hear Everything Podcast network. Looking to launch or scale your podcast, I Hear Everything delivers podcast production, growth and monetization solutions that transform your words into profit. Ready to give your brand a voice then visit iheareverything.com welcome to CMO Confidential, the podcast that takes you inside the.
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Dr. Dan McCarthy
Drama, decisions and choices that go with being the head of marketing.
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Mike Linton
Hosted by five time CMO Mike Lind. Welcome marketers, advertisers and those who love them to Chief Marketing Officer Confidential. CMO Confidential is a program that takes you inside the drama, the decisions and the politics that go with being the head of marketing at any company in what is one of the most scrutinized jobs in the executive suite. I'm Mike Linton, the former Chief Marketing Officer of Best Buy is ebay, Farmers Insurance and Ancestry.com Today's show is brought to you by Props. Props is a performance driven content platform which combines the attraction of creator content with the results of paid media. Instead of impressions and posts, Props takes responsibility for leads and customers. I'm here today with my guest, Dr. Dan McCarthy. Today's topic, DoorDash the case for building a subscription model. Now, Dan recently became a fully tenured professor at the University of Maryland. Go Terps. Or turtles or whatever I'm supposed to say about Maryland. Yeah, it's a fierce terp and scares everyone. Yeah, okay, whatever. Previously he was an assistant marketing professor at Emory University where he created what may be the first customer lifetime value course in business schools. He also built a predictive analytics firm called Zodiac, which he sold to Nike in 2018 and founded Theta Equity Partners with this partner, Peter Feder of Wharton, who has also been on our show. Now, Dan's specialty is the application of statistics, statistical methodology to contemporary marketing problems. What a long business card. That Must say, he has been one of our most popular guests, having previously discussed the customer value concept and the rise and fall of peloton as seen through cltv. So it's great to have him back the third time to discuss his research on subscription models and whether they profitably build the business. Welcome back, Dan.
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Dr. Dan McCarthy
Great to be back.
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Mike Linton
Good to have you. Let's start. Let's start. Just go back. Before we really get into the case, let's ensure everyone is on the same page and refresh our listeners on the concept of cltv.
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Dr. Dan McCarthy
Yeah. So what is cltv? CLTV is this number that's kind of over every single person's head that represents the basically the net value of that customer to a particular firm. So there's the amount that the firm spent to acquire the customer in the first place, the Facebook ads, the billboards, what have you. And then after they're acquired, they're going to make some number of purchases until they end their relationship with the firm. And so each of those purchases will have with it some amount of variable profit. So the amount that the company got in revenue from the spend, minus all of the cost to make whatever it was that was being bought. And so if you kind of take into account all those future purchases, the profitability of them netted against how much was spent to bring them in the door, that is the value of the customer to the firm. And obviously you want that number, all else equal, to be as big as possible, because companies want to make as much money as they can. Yeah.
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Mike Linton
And this has translated in a lot of your and Peter Fader's research into a good gauge on where the stock really is going to end up, especially in certain businesses. So I think that's great. Now. So you're taking this and you now are extending it in other areas like subscriptions, and tell us how you went about looking into subscriptions. There's so many loyalty and subscription programs out there. So, you know, why don't you give us an overview of why you even started looking at this and, and then set the stage for it.
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Dr. Dan McCarthy
So the broad overview. So we've looked at kind of using this CLV lens and applying it to subscription businesses for. For a while now. Actually, our very first, the seminal paper that we wrote, it was how you can apply this framework to understand the valuation of subscription businesses. I think the research that I've been doing more recently has been asking this related question of. All right, so this is how much the firm would be worth kind of in the base case. But imagine that we do this thing. How is it actually changing the value of the consumers? And that's kind of a very important question for marketers because obviously they want to know, if we kind of continue to work as hard as we did in the past, how much is our firm going to be worth? But there's this related question, well, what could we do to actually bend ourselves off of that trajectory and make things better than they could have otherwise been if we didn't do this thing?
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Mike Linton
Oh, go ahead.
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Dr. Dan McCarthy
Yes, that's like the million dollar question for the market.
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Mike Linton
I think it is a super important question because your goal in marketing is to bend that curve, as you said, and get more out of each customer, particularly one of the things you look at is churn of customers. And, you know, there's so many models out there, you know, Netflix, Amazon Prime, Uber. I, I was at Best Buy when we created the Rewards on loyalty program. And all of that was designed to bend that curve, either by getting customers to buy more or stay longer and not leave the franchise. And, and, but of all these things, you took a look at the food delivery business. Why food? And you know, what companies and offerings did you start with? And then how did you get the data on that?
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Dr. Dan McCarthy
Yeah, I think actually it almost kind of came data first in the sense that we had this idea that subscriptions, you know, if you had some firm like Amazon, they launched Amazon Prime. Well, what did Amazon prime do to people's purchase frequency? And obviously it has a direct effect on the margin because the way that Amazon is encouraging people to sign up for the subscription in the first place is they say, hey, you pay this fee, but we'll waive the shipping fees. And obviously Amazon prime does a lot more than that. But they're kind of giving something and they're getting something. And so the question becomes, where can we be able to get a good read on the change in behavior for customers when they sign up for a subscription like that and restaurant delivery? It's a great area for it because the data is really good. If you're doordash or you're a subscriber to one of their competitors, that means that whenever you make a purchase, you're typically making the purchase on a credit or debit card. This data set that we have access to, it has data for something like three or four thousand different merchants. And the key is that we can see all of their activity across all of their possibly multiple credit and debit cards. So if we were to look at grocery purchases for some brick and mortar grocer, well, that would be tricky because the ability to track that customer over time is a little bit harder.
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Mike Linton
It's more like if they pay cash, you can't.
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Dr. Dan McCarthy
Yeah, if they pay cash, we won't be able to see it. It's more likely that you might kind of your wife goes in one time, you go, and the other time here, oftentimes you have your account and you kind of always just kind of, you just go into your account. And so it kind of defaults you to using the same payment method every single time. So it becomes just a very nice clean setting through which we can just focus on the analysis of the impact of the subscription without having to worry about, you know, just Kind of weirdness coming from the data source and then.
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Mike Linton
This data source, it's public or how did you even, how do you even.
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Dr. Dan McCarthy
Get it the, the data source? So it's coming from data from Earnest analytics. And they. I would definitely strongly recommend anyone out there who operates in a, an industry where you could have good trackability through their data set, definitely speak with them. Um, they typically would not. So their data, it's actually, it's very valuable data that is not, not cheap, but it's, it's highly valuable. And so I'd come to, to start interacting with them and we've had a great kind of mutual relationship where I'll do kind of cool stuff like this and say, hey, look at this cool stuff that you can do with this data set. And, and I genuinely, I just, I love what they do. So it's been just kind of a great mutually beneficial relationship over the years.
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Mike Linton
Well, thanks for that. And you do all this cool stuff and then you put a super great marketing title on it, like analysis of data sets which indicate blah, blah, blah. We can help you with that marketing stuff if you want. So give us an overview of your findings. You take this all apart. You're looking at food delivery. Tell us what you learned.
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Dr. Dan McCarthy
The big thing is there's a few big things. So imagine you're a consumer of DoorDash and then you sign up for the subscription. So now you're using DashPass, you're paying a $10. Actually, we, the focal analysis in this paper was Postmates. And then we kind of separately analyzed DoorDash. What we found is that in both cases, both with postmates and with DoorDash, when people sign up for that subscription, they do genuinely place a lot more orders after the subscription because of the subscription, not because they had been a good customer previously. It really was the subscription. The act of signing up for it caused them to make more purchases. But importantly, what we found was that there's really big competitive effects. So there's kind of two ways that an increase in purchasing can come about. The first is they're just doing a lot more purchases within the restaurant delivery category. You know, the second is they're doing the same amount of purchases within restaurant delivery category, but more of those purchases are happening with that. That delivery provider that you have the subscription with. Yes. Imagine that you previously had ordered through uber eats and DoorDash. Now you've got this door, this Dash Pass. He said, well, you know, I'm not going to get free Delivery on the UberEats. Purchases I get free delivery on, on my purchases through DoorDash. Obviously I'm going to try within reason to place as many orders as I can through, through DoorDash now.
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Mike Linton
So this is either either grow the market or steal share. Right. So when you do this program, you do that and then a third longer term thing, at least for, for me would be. And then hopefully people don't leave the franchise because they've already invested this like, you know, frequent flyer miles or whatever where it's, you don't want to forfeit your stuff, so you just stay.
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Dr. Dan McCarthy
Yeah.
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Mike Linton
Is that right?
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Dr. Dan McCarthy
So, so yeah, both, it's actually both factors are at play. You know, when you sign up for a subscription, it grows the, the overall market and more of the share goes to that focal firm. But what we found was that if you were somebody who had kind of been playing the field, that you bought not only at that focal restaurant delivery service, but also a few of the others, much bigger effects that you spent a lot more in total. And a lot more of the effect came from stealing share from those competitors. The interesting thing was if you went to people who what we called single homers, so you exclusively shopped at DoorDash, sign up for the subscription, you still saw a boost, but it wasn't nearly as big. And in fact your competitors also benefited. So you imagine that you're Uber eats. You've never had a relationship with this particular customer of DoorDash. That person signs up for DashPass. Yeah, they're spending so much more that ultimately I actually end up making more revenue from that customer than if that person had not signed up for dashpass. So if you were to kind of abstract away to a setting where most people had been kind of a customer of one firm, what that would suggest is that the competitors may actually want people to sign up for subscriptions with.
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Mike Linton
Their competitors because it habituates everybody to the market and it grows the total addressable market. Can we talk about some of the variables in here in detail in your study? Because some of that, you know, there's the whole total addressable market or tam, which you just talked about, which is a subscription model, can actually add to the whole category. In addition to the single brand, you talk about monogamous customers, promiscuous customers, multi homers, and then the cost of the program and you started to kind of talk about how this works. But could you go down to it in a little bit of detail in terms of. All right, you know, because, because the way I'm reading it is this is Good for everybody involved, and you can grow the whole category. But. But also, we can talk a little bit later about what it does to grocery stores or, you know, generally eating out and everything else.
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Dr. Dan McCarthy
But.
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Mike Linton
But tell me about. Tell me just about the dynamics within the category. Then we'll expand.
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Dr. Dan McCarthy
Yeah. So if we take Postmates as kind of an example, people pay 10 bucks a month for the subscription fee. And the deal was if you spend more than 20 bucks on that order on the food, then you have the delivery fee waived. And typically that delivery fee is about four bucks. So if you think, all right, I'm spending ten, I get four off every time I order, I break even at about two and a half orders a month then. And so that's kind of, you know, one order every other week. You know, I think about my own ordering, actually, during COVID it was way higher than that. So you can kind of do that math, like, who's the sort of person who would actually find this to be an attractive deal? Um, now what we found was most people actually lost money on the subscription. Yeah. So there's kind of this exercise then. If I know that the consumer breaks even at two and a half orders. Yeah. How many more orders are coming to the people? How many people are actually making money on their subscription? And we found that most people don't make money on the subscription.
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Mike Linton
As in most consumers or.
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Dr. Dan McCarthy
Yeah, most consumers. Yeah. That's. They break even to two and a half on average. If you take all of the subscribers, they might be doing like, one order, you know, or one and a half orders. So.
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Mike Linton
So they don't actually even get the savings they want. They're still. They're giving the company more profitability. Why they feel better about it.
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Dr. Dan McCarthy
Yes. We talk about who wins, you know, who. I won't even say loses, but you know, who's. Who's making the profit off of that. It does seem like doordash is kind of coming out a little bit ahead because they're getting this new steady stream of subscription revenue. But the number of purchases that have this foregone delivery fee, they are getting more orders, but they're not having to pay out that much on foregone delivery fees. It certainly. It's not completely offsetting the increase in subscription revenue.
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Mike Linton
And I want to make sure everybody gets us. And with that, I want to make sure I'm hearing it right, which is so my expense as a company for running this just in the absolute versus all. I have to have people. I have to have all this. But if I just look at it pure. I'm actually making money off the subscription model. It's it like I'm not losing my $10, you know, I'm making money and I'm getting. I'm expanding my share of the piece for having this program. Is that right?
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Dr. Dan McCarthy
That's right. Now, I think everyone, in theory, everyone can win with a subscription like this. If the subscriber was just ordering like crazy, they're placing tons and tons and tons of orders. And then the deal becomes, well, you know, you're doordash, you're making more money because you're getting so many orders that even though the margin's a bit lower, you're still coming out with more total profit at the end of the day, you know, and the consumer can still come out ahead, too, because they're placing so many orders that they're more than recouping that subscription fee. And here what we find is it's not quite like that. That at least with Postmates, you know, they just didn't quite place enough orders for the consumers to come out ahead. So in some sense, you know, Postmates was kind of making more on that than, you know, than the consumer is.
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Mike Linton
So I have this whole category, and it is essentially doing subscription models. And then within it, it doesn't sound like anybody lost, really. People won to varying degrees. Is that. Is that a fair way to look at it?
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Dr. Dan McCarthy
Among the firms? Yeah, among those firms.
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Mike Linton
But then somebody has to lose market share because people aren't eating more. Maybe, or maybe they are, but there's grocery stores, there's Instacart, there's all the restaurants that you go eat out for. If I expand my total category purchases, what happens to the other businesses around me or, you know, in this category, the whole category is winning, I think. What is what you're saying? At least the guys you measure. But somewhere in here, you know, people are. Somebody's eating still the same amount of meals. What happens to the Instacart and grocery store folks?
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Dr. Dan McCarthy
Yeah, the way I put it is the whole category was winning in the sense that, you know, Postmates, they were the very first company to start a subscription. DoorDash was number two. And back then, the. The whole category was new, you know, and so kind of by construction, people weren't. They weren't shopping at many places quite to the same extent. Right now, if you look at the restaurant delivery category now, much more mature. Yes. Much more likely that people are having. People have shopped at kind of multiple restaurant delivery firms. So back Then what we found was that there was much more kind of total category expansion and much less like winning at the expense of your competitors. Now because many more people are multi homers, they're kind of shopping at multiple services within the category. There's actually less category expansion and more gains coming at the expense of the competitors. And so I agree, I think there's some aspect now where when that person who signed up for DashPass today, the whole category is not winning as much and it's coming much more at the expense of UberEats and Postmates and all the other, you know, Grubhub and the like.
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Mike Linton
So there's a, there's first pig to the trough kind of thing here which is be early and, and it's helpful. It truly was like that for, for me when we launched rewards on a Best Buy. But how do you do. Right, right. Some marketers in the story now, how do you know this is going to work for you? What if all your competitors have it and you don't? And I'll give you an example of a category that looks super mature. You know, Amazon Prime's been out there forever. You have now Target with I think it's Circle plus and Costco and Walmart, everybody kind of entering into this larger thing. How do you start thinking about this if you're not first or even if you're last?
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Dr. Dan McCarthy
It's a good question. Yeah, I think, you know, we don't really dive into that with this specific paper, but I think it's an important question of, you know, if you're the fifth person to the market, you know, what, what does this imply for you? I think that the, hopefully the, the effects would be similar. I think there would be more competition. So maybe people wouldn't hold on to their subscription for as long a period of time. Yeah, but, but certainly I think, you know, one of the, if I'm a consumer and I think about you, do I want to sign up for a subscription or not? Imagine that I had a really good relationship with that company that did not yet offer the subscription. When you think about what this subscription is really catering to, it's catering to the high frequency consumer. The consumer who they love that firm enough that they say I'm placing so many orders with this company that even if I have to pay up front for the subscription fee, they're prepaying their subscription fee, basically.
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Mike Linton
Yeah, like Costco really, really does.
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Dr. Dan McCarthy
Yeah, I'm okay with that. And so I think that becomes the litmus test is even if I'm the fifth company to the market in terms of this subscription. If I have a whole bunch of consumers who are kind of buying with a high enough frequency that this subscription would be worthwhile to them, then I think it could be good to the consumer and it could be good to me. If I have a whole bunch of people who are kind of light buyers.
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Mike Linton
Then you called them promiscuous people. I think in the, you know, when we were talking.
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Dr. Dan McCarthy
Yeah. Now, promiscuous, it's kind of. It's similar but a little different in the sense.
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Mike Linton
Okay, let's talk about both of these because I didn't mean to throw you off that answer, which is, okay, there's a bunch of people that don't buy so much and then we'll go on to the promiscuity from there.
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Dr. Dan McCarthy
Yeah, if you're promiscuous in theory, you could be buying a whole bunch from all of them. You know, if you're just kind of like buying restaurant delivery, you know, two, three times a week, and even if you're spreading those purchases across many companies, each of them could still be getting a good amount of purchases from you. But, yeah, I think there's an element truth there that if you're spreading your purchases around, all else being equal, you're making fewer purchases with one particular company. So. Yeah, but yeah, I think, you know, the. From that one company's perspective question is, do you have a whole bunch of very light buyers or are there enough people who buy with a high enough frequency that that could justify the creation of that subscription plan? Because those are the people that, when you talk about target market, it's as if there's the applicable market for your business as a whole, and then there's the applicable market for that specific subscription program that you might launch. And I think one can think about the applicable market for the subscription program as being kind of everyone who buys with a reasonable or higher purchase frequency. Those are the people that you're really kind of going after. So if there's a whole bunch of people there, then it could justify all the overhead associated with starting up the program in the first place. But if they're not there, then, yeah, you could start it, but there's just not a whole lot to work with. You know what I mean?
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Mike Linton
So give me. I think you just did this, but I want to drill a little deeper on it. What are some situations where a subscription model will likely fail and you feel free to name an industry or something? Because. Because I think there's a bunch of people out here listening to the show thinking I should probably do a subscription model if it doesn't cost me that much. But maybe there are some industries where I shouldn't or some situations where I shouldn't.
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Dr. Dan McCarthy
I think if purchase frequency is very low, you know, like you're a direct to consumer business and you're selling a good. That people just, most people buy at one time and there aren't really people who buy it a whole bunch of times. So I would say in most categories most people will buy one time and that's it. But in some they got this click of people who are just buying with very high frequency. And then others it really is mostly, you know, kind of one and dones and you're not really getting much more from that, even from your really good customers, you know, the top 5 or 10%.
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Mike Linton
Yeah.
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Dr. Dan McCarthy
So yes, if I'm a business that has mostly people who don't really do all that much purchasing from me, it can still be a good business. You know, if you kind of keep your cac down, the selling price is really high, you got good margin, it still could be a very fine business. It just might not be a business that would be amenable to this sort of subscription.
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Mike Linton
Oh, if I'm thinking like vacuum cleaners or washing machines or car or something like that. Is, is that what you're, is that what you're talking about here?
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Dr. Dan McCarthy
Yes.
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Mike Linton
Yeah, that by the time the consumer actually thinks about it, it's just the loyalty and subscription model is just not worth it to anybody.
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Dr. Dan McCarthy
Now I would say with the vacuums, the one.
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Mike Linton
Here we go.
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Dr. Dan McCarthy
Yeah, it's the one copy I'd give is like the Roomba type of vacuum. Like if you, well, you have to.
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Mike Linton
Bust out all the pieces and replace them all the time.
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Dr. Dan McCarthy
You know, you bought the thing the one time, buy another thing for another five, 10 years. But you know, you still have to replace the bags and you got this and you got that and, and so there could still be like service revenue that, you know that, that would kind of accompany the, the hardware peloton. Obviously their whole model is subscription. So. So there is that kind of caveat. Does the hardware sale and how frequently that happens. But then there's also kind of the ongoing engagement and whether there's, you know, potential service revenue that could be put onto a subscription.
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Mike Linton
So lots for our listeners to think about. Tell us, you know, in, in our chats you talked about industry sleepers. Tell us about the concept of industry sleepers.
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Dr. Dan McCarthy
An industry sleeper. I'm actually not sure.
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Mike Linton
Is that a. I think that's what you're talking about. These are surprising businesses that, that might actually rise up and make a subscription model great. But you never thought about it.
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Dr. Dan McCarthy
You know, I, I need to think more about which industries would be, you know, like you wouldn't have thought about it, but this would be an amazing area for a subscription. So I have to come back to you about that.
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Mike Linton
Yeah, I would draw the question, as they say. So if I'm looking at your research just cold, I will say it's, is it true that there will be a lot more subscription models in our future? Because the math will win out. And then I want to talk about how AI changes these models. But when I read your research, I think when in doubt, you should probably have a subscription model or make a run at it. Is that a fair conclusion?
- [27:46]
Dr. Dan McCarthy
I think you should at least think about it. Yeah, I think, yeah. As we kind of said, the, the categories that would do the best would be ones where your customer is also a customer of your competitors. And so there's all this potential share of wallet gain that you can get if you can just get them to do more with you. And so if you dangle, you know, something you're kind of giving away for free, you know, I kind of put that in quotes because in truth they're not getting it for free, but you give them a deal to sign up for the subscription to make them monogamous. And that's a category that we ripe for starting up a very successful subscription. Again, assuming that you have that clique of people that are also buying enough with you that they would say I'm doing enough with you that it would make sense for me to sign up for the subscription because I'm going to come, I could potentially come out ahead.
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Mike Linton
So, so you mentioned earlier cac, which is, you know, customer acquisition cost. And one of the things you see as AI emerges, search is declining in power, which changes the whole CAC equation. As AI becomes more dominant, will there be more pressure to go to a subscription model because, you know, you just don't have as many marketing tools maybe to acquire customers.
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Dr. Dan McCarthy
That is a good question.
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Mike Linton
Wow. I'm getting a lot of good question comments from you today. So I feel very good.
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Dr. Dan McCarthy
That's a tough one. It's funny, I was just listening to this startup that is now, you know, their whole business model is to help companies think through how do we basically, how do we get in on the output of the LLMs, you know, so when people Say I want to buy a knife. You know, it'll say, oh yeah, you want to buy this knife, like, and that knife is actually your company's knife. And it's actually, it's quite different. The stuff that you have to do to get, to get yourself more likely to show up on that page.
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Mike Linton
I think that was our podcast with Chris Andrew on Scrunch about if you don't show up in the AI results, you don't exist.
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Dr. Dan McCarthy
Yeah. So, well, I need to watch that much more carefully. I learned a lot just from those conversations.
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Mike Linton
What do you think? What I hear you saying is subscription models are going to continue to rise in importance and you're going to see more and more attempts on you as a customer to become a member of some young sub model.
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Dr. Dan McCarthy
Yeah, I do think to the extent that people can now very easily kind of go into, you know, go into GPT or go into Claude and say, you know, tell me, what should I be buying? Should I be doing this differently? Should I go to a competitor? You know, just kind of evaluating everything and have all the information coming right back at you, you know, very frictionlessly having ways to lock in your consumers once you've got them in the door. Yeah, I think that that is, that that becomes much more valuable. So I could definitely see if you had a cost reduction subscription like this, you came up on the prompt, they ended up going with you. Now you've locked them in through a subscription. You know, hopefully that should make them that much stickier with you over time that you won't lose them to a competitor, you know, which can definitely be possible if you had a, you know, just a totally non, you know, non subscription, totally transactional type of relationship with, with your consumers.
- [31:27]
Mike Linton
So as a consumer, get used to everybody asking you to sign up for these because, well, they already do, but now they're going to even ask for more. So this, this brings us to our traditional last question. Practical advice for our audience. We haven't discussed yet and. Or the funniest story you can share on the air. You can pick both or just one, but you have to pick at least one.
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Dr. Dan McCarthy
In terms of practical advice, I think the, there's like a whole engineering problem of how you set some of the different parameters of your subscription and they can have a really big effect on the success of the program overall. How many people are going to adopt into it, what sort of effect it's going to have on your business. And the big drivers are. We kind of talked about a little bit when we were talking about postmates. How much are you going to charge? What is the implicit break even point then for the consumer? Like how many times do they need to buy for them to pay off that subscription fee? And what is the minimum dollar threshold that you set on the purchase amounts? And if you set the minimum threshold at zero, basically every purchase has delivery fees waived. Even if you're buying, you know, that one eraser and shipping it in the mail, that can have a big downward effect on how much people spend per purchase that they just kind of always buy, you know, even if it's a really small purchase because they know they're going to get delivery for free. For free. The higher you set that bar, the, the less you're going to lose, the less depression you're going to see on aov, but the less people are going to sign up for the deal in the first place. You know, if you set the, the minimum spending threshold at $50, for example.
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Mike Linton
On this, AOV is average order volume. And what you're saying is, if I have to get $50 worth of food or delivery.
- [33:20]
Dr. Dan McCarthy
Yeah, I'm like, I don't see myself doing that, you know, so you want to set it at the, there's like a just right level. And so again, I would just kind of strongly encourage people to think very carefully about those, maybe run experiments. Um, but you, you probably want to be looking at the distribution of the spend amounts of the purchases that your consumers are making to make sure you kind of set that threshold at the right level where, you know, enough people spend above that level for them to say, yep, you know, I could definitely see this as being worthwhile for me, but not so low that you're losing a whole bunch of money because now your consumers are splitting their orders into much smaller bits and you know, you're having to pay that same delivery fee on, on every single purchase.
- [34:09]
Mike Linton
Typically, yes. What I hear you saying is consumer dynamics can be impacted greatly by the design of the program and you shouldn't just assume, you know it. And then there's, there's probably almost a caller to this as well, which I'd love your opinion on, which is if I don't charge you to join the program, you may just join and do nothing, but then I have to keep you in the database and send you all this stuff and, and do this. Any thoughts on that part of the practical advice?
- [34:36]
Dr. Dan McCarthy
Yeah. If you allow them in the door for free, oftentimes what you'll find is that more people will join, but they're just not, you're not going to see nearly as much of a bump. I do like having at least some money on the line that, you know, for one, I think you're going to be selecting into a much better subscriber than if you just let everyone in the door, you know. So yeah, I think, you know, here the subscription fee was about $10 a month. You know, that's going to bring in a much better person than if they just had this deal at $2 a month or even, you know, just kind of waiving it entirely. So yeah, it becomes a reward. Rewards like a basic loyalty program and nothing wrong with those. But you know, I think the sort of structure that would make sense for a loyalty program with no, no subscription fee I think would be quite different from, from something like this.
- [35:30]
Mike Linton
Well, I think a great way to wrap the show which is pay attention to all the details and watch the dynamics and I'm sure we'll be, you'll be back on with some other paper that I, that we would, we would love to talk about. So thank you Dan and thanks to everyone for listening to CMO Confidential. And special thanks to our sponsor, Props. If you are enjoying the show, hit the like button and subscribe and look for all of our shows on Spotify, Apple and YouTube which include the Warby Parker case. I can see clearly now through my CLTV glasses. The Budweiser case, How not to manage socio political issues. It's a bird, It's a plane. Holy It's AI Parts one and two and Dan's earlier shows the case for cltv. Why is this so hard? And the rise and fall of peloton as seen through the lens of cltv. Hey all you marketers, stay safe out there. This is Mike Linton signing off for CMO Confidential. This show is brought to you by Props, our title sponsor. Props is a performance driven content platform. They combine the attraction of creator content with the results of paid media. Instead of focusing on impressions or posts, Props takes responsibility for leads and customers. Check them out at Props Co.