Thread by @brettbivens

Helpful report on the consumer subscription market although I disagree w/ this chart.

The consumer subscription winners over the next decade will have metrics that look a lot like good enterprise SaaS, specifically around net retention.

cc: @joshelman

gpbullhound.com/research/gp-bu…

2/ One of the first business axioms I remember learning is that it is cheaper to keep an existing customer than it is to acquire a new one. In an era defined by unlimited consumer choice and dynamic consumer preference, this statement rings truer than ever.

3/ If retention is the currency (@2PMinc / @tracewall) of this new consumer era, the outperformers over the next decade will be the ones who invest that scarce resource to feed a flywheel of growth that favors deeper relationships over more relationships.

2pml.com/2018/12/10/ret…

4/ Another way to describe this depth > mass appeal approach to growth is "clustering" which I came across recently in this great piece from @digitallynativ.

medium.com/swlh/why-are-d…

5/ Within this context, I expect that the best consumer subscription companies will start to resemble Enterprise SaaS companies & a material portion of growth (the most efficient growth) will come from negative churn.

Great data here from @afc ⤵️

medium.com/@alexfclayton/…

6/ You can think about this as "climbing the revenue retention ladder".

A great SMB SaaS company has net retention characteristics of a good mid-market or Enterprise SaaS company.

Great Consumer Subscription companies will have Net Dollar Retention of 100% +.

How?

7/ In Enterprise SaaS, negative churn tends to come from from 3 things:

1. Seat Expansion
2. Cross Sell
3. Resource Expansion

Drivers of negative churn in consumer subscription are similar but it is worth looking at a couple examples.

tomtunguz.com/negative-churn/

h/t @ttunguz

8/ Seat Expansion - Peloton & Spotify

Obviously, there is a lower limit on "seats" when it comes to consumers but both companies have used family packages to charge higher prices over time and drive stronger retention by engaging more users.

9/ Cross Sell - Peloton 🚴‍♀️

Selling a treadmill existing bike owners (or just digital-only members more likely to buy a tread than a bike) or launching physical studios and exposing users to the in person experience.

trueventures.com/blog/peloton-r…

10/ Resource Expansion - Spotify + Calm

My favorite fantasy M&A scenario. The Gimlet buy hinted at a move towards exclusivity & Calm provides differentiated value that consumers will pay more for (given that 2m of them already subscribe!)

stratechery.com/2019/spotifys-…

@benthompson

End/ I was in the process of writing a blog post called "The Negative Churn Consumer SaaS Company" when I came across this report (released today I believe) and realized a thread might be more efficient.

👋