Zero To $500k Part III: The Rise of Black Netflix

By Daniel DiPiazza

Over the last week, I’ve been sharing the highlights and challenges of the first year at Strength of Seduction. 

I did a video recap of the entire year that breaks down everything and more from the last few posts. If you like seeing “behind the scenes” you’ll love this deep dive:

Click to watch

These blog posts are like atonement for me.

I’m recounting all my painful failures for your benefit so that you can skip some of the bullshit. Hopefully, you read this, glean a few gems and get to where you’re going just a little faster. 

(And if you really want to get right to work, you should probably grab The Strategy Toolbox from the Alpha Mentorship store while it’s still %50 off okkkkkk)

Today, let’s talk about a few strategies we tried, how we got them wrong and what we learned. 

Our “Netflix Style” hero image

The Rise of Black Netflix

One of our primary objectives going into Summer 2020 was attempting to convert our core offers — which are one-off digital and DVD purchases — to a “all you can eat” subscription memberships model.

We were trying our hand at going from a scrappy DVD slinger to Black Netflix, with a fully digital subscription model.

Our logic for making the switch was the following:

  • Shipping DVDs is costly in comparison to digital fulfillment
  • All digital fulfillment would streamline the user experience
  • Subscriptions would create MRR for the company so that we wouldn’t be dependent on one-time purchases
  • Who the fuck really wants DVDs in 2020?

Seems logical. Right?

Well, we were in for a rude surprise as our customer base responded with a resounding “NO THANK YOU!”

We tried a few different variations of the subscription offer:

  • $9 mo

  • $19/mo

  • $49/mo

  • $49 “sign up” fee + $9/mo

What we found was that subscription makes sense on paper, but trying to go subscription too early is stupid.

5 Major Lessons (In No Particular Order)

 

Testing the subscription was one of the reasons why revenue dipped from August through October (aka The Hockey Stick of Death). Here’s what we learned.

1.) Not Enough Content: We didn’t have enough content to support a subscription offer yet. There were only 5 programs in the library and our production schedule is still forming. Before we can offer subscription confidently, I’d like at least 10 programs in there and a consistent shooting schedule. 

2.) Not Enough Incentive: Customers did not have a real incentive to buy a subscription over a one-off purchase and the model was a little confusing to them. There wasn’t a preexisting demand. Nobody asked for the subscription, it just appeared one day. Eventually there will be demand for a true subscription, but we have to build that interest with great programming first.

3.) Customer Acquisition Cost: CAC is too high to test a subscription model if you don’t have cash in the bank to burn. If it costs $20 to acquire a $10/mo customer, we’d need to retain them for a minimum of 3 months just to break even. That’s not even talking about profit. Next time we test this offer on the front end, I want at least a few hundred grand set aside as a buffer.

4.) Unnecessary Complexity: Implementing the switch to subscription created confusion with the web design team and broke some back end Shopify functionality which hurt website conversion for a few weeks, adding to a Q3 2020 sales slump.

5.) Subscription Fatigue: We found customers would rather pay $120 for 4 DVDs than $9/mo for unlimited access. This blew my mind. I think people gradually grow tired of subscriptions over time and become more selective about what they’ll sign up for long term, even if it’s cheaper in the short term. Go figure.

Gotta give it up for these DVDs. They pull their own weight.

 Sticking To The Strategy

Last year, we proved our own hypothesis wrong re: what our customers really wanted.

Let me explain…

Before we attempted to consolidate our offer to one monthly subscription (aka “Black Netflix”), we had three main offers:

  • One-off streaming digital purchase ($49)
  • DVD bundle purchase ($69)
  • DVD+streaming combo ($99) 

Most customers purchase the streaming package for $49. Not hard to understand why: it’s the cheapest and easiest option. But then, we started digging in and doing research.

After talking to many of our DVD+streaming combo customers, we realized they weren’t buying the bundle for the digital access. They were primarily interested in the DVD and liked the streaming access as a “bonus.”

These were DVD customers we had incorrectly categorized in our heads!

Before making our decision to go all in on subscription, we didn’t consider that even though DVD bundle sales did not make up the majority of sales, DVD+streaming combo sales also needed to be reported as DVD customers for the purposes of evaluating product demand. 

This change in perspective meant that DVDs made up damn near 50% of all purchases — so cutting DVDs was a bigger deal than we thought.

We tried to make a leap and become “Black Netflix” overnight. It didn’t work.

The main problem was that we weren’t sticking to our original strategy. 

We went back to the very beginning with our assumptions and looked at our notes.

The vision was never to model Netflix. From Day 1, we’d set out to model our success after similar companies like Beachbody, who drove sales through mega-successful home workout programs like P90X and Insanity for two decades before going subscription. They took a long time to build up that catalog before going “all you can eat.”

I realized we’d tried to move too fast. I reeled it in. Back to the plan.

Once we saw that we were veering off course from the original plan, we cut the subscription initiative off and began putting better strategies into place by focusing on doing more of what was clearly working before. 

The Strategy Toolbox

One of the ways that we got realigned and on track was by reviewing The 90 Day Vision playbook inside of The Strategy Toolbox.

The Strategy Toolbox is a collection of digital assets and google docs to help you set measurable 90 day objectives for the business and execute with clarity. 

Click here to see a preview of what’s in the toolbox…

If you’ve ever…

>> Been overwhelmed by all the “priorities” in your business and wished there was a simpler, more effective way to manage your time.

>> Felt unclear about what your business goals were besides “bigger, better, more” and wanted to understand the “why” behind what you’re doing…

>> Had difficulty breaking down big, ambitious ideas into more digestible action steps that can be implemented on a daily basis

>> Wanted to learn the “productivity secrets” that make the world’s most successful and creative people 10x more effective than the average Joe…

…then The Strategy Toolbox is just what the doctor ordered!

Next Up: The 7 Mechanics of Profitable Business

I hope you enjoyed the Zero to $500k Series! It was exhausting to live it the first time and a little bit less exhausting to write it out for you.

The first year at Strength of Seduction taught me so much more than I thought I’d learn.

I distilled a few of the biggest gems into a short essay you’ll like. 

>> Check it out: The 7 Fundamental Mechanics of Profitable Business

Free guide

21 Essential Questions For Entrepreneurs

21 Essential Questions On Sales, Marketing, Systems, Operations and Finance That Entrepreneurs Must Answer in 2021 + Daniel’s notes on how to improve each area in your business

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