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Episode 7: Facebook Ads for Subscription Businesses

MuteSix recently did a webinar with ReCharge Payments about Facebook ads for subscription businesses. In this episode, Steve answers the same questions.

Episode Transcript — Facebook Ads for Subscription Businesses

00:02 Stewart Anderson: Hey there, everyone, I'm Stewart Anderson, here again on the Spend $10k a Day podcast. I'm joined by my colleague and good friend, Steve Weiss. Today we're gonna be covering subscription advertising on Facebook, how to advertise a subscription service. This is gonna actually be a follow up to a webinar we did with a good partner of ours, ReCharge Payments, which is the number one billing app on Shopify.

We're gonna be running through 10 questions, and I'm gonna be getting the expert answers from Steve. Steve has a deep, deep background in Internet marketing. He knows, honestly, more about marketing things online than anyone I've ever met. So it's gonna be really great to get his opinion on all these very, very important questions for subscription services. Whether they be subscribe and save on an ecommerce store or a subscription box service, or something similar.

We're asking 10 questions today of Steve. These were all sourced from the ReCharge customer base...they had a bunch of questions about advertising online. So let's get started. So Steve, first question we have for you, "What do you recommend as a minimum advertising budget for testing the waters on a new subscription box service?"

01:16 Steve Weiss: It's a good question, there's no one size fits all number for every single client or every single company that markets, on Facebook. I think you really have to go in there looking at what your goals are. I always like to write down my goals whenever I launch a new product, "What do I wanna prove in my marketing? What is the end goal?" So if the end goal, which for most stores is, "I wanna drive a low cost user." You can go in there with a marketing budget of $10,000 and say that, "Listen, I'm gonna use this $10,000 to, first, start up and learn what my users are responding to and get a prove market fit on Facebook." So what I would say is that you could start off spending $10,000 and you just cap your daily budgets at between $200 to $400 a day.

02:05 SA: Yeah, I think that's a good starting point. Anything less than that, you could get a little bit of results but you're not gonna get a lot of really valuable data.

02:13 SW: It's not about just getting results, I know everyone wants results, everyone wants a Holy Grail of how to spend profitably. On Facebook you always hear these stories about these companies that, "Wow, they went from zero to millions of dollars all from Facebook." Well, the trick is is that you have to start somewhere, and you have to get data that's statistically significant to your marketing. So for instance, what you prove on $50 in spend is not significant enough to say that that's gonna be the same if you spent $5,000 or $10,000.

02:41 SA: That's a really, really good point, very good point.

02:43 SW: And I think another thing is to really understand it on Facebook, it's not about how much you've spent. The hardest thing about Facebook is one word and that's scale. It's easy to spend $10,000 a month profitably on Facebook for some stores, but for most companies the hardest thing is, "How do I spend $50,000 and keep that same cost per action?"

03:04 SA: It's hard, it's very hard. The next question we have is actually related to this one, so let's say we're dealing with a small budget. Let's talk about the $200 to $400 ranges we just talked about or maybe even something a little bit less. What can someone do on Facebook with that budget? What are the things they should really focus on at a small budget level?

03:24 SW: So number one, I would focus on the lowest hanging fruit, people that you know are gonna convert, your most productive, and your happiest, customers. So I set up my custom audiences around people who've added stuff to cart and have purchased, so I run ads directly to that audience. I run ads directly to my email list trying to reactivate.

If you're a subscription company, I'll try and reactivate people who've already subscribed and who have dripped off your subscription. I'd run ads to them, I would try to exclude every single person who's already a part of my subscription. There's no reason to keep slamming them with marketing.

03:58 SW: Then I would start building lookalikes around that, I would start focusing on the top of the funnel. So you have your stuff, that's A, that you know is gonna work, most likely is gonna work, people who've showed purchase intent, people who already bought the product and then B, I dedicate a little bit of budget toward the top of the funnel trying to convert new users who've never heard or seen me before. I'd use different value props. I'd understand, "Why is someone purchasing my product? Is it based on price? Is it based on a specific element of my product that's interesting?" Maybe it's a health product and we have an ingredient that's brand new to the public. I really wanna understand, "What is the hook? What is gonna hook a new person in?" And I think with your initial budget you wanna figure out what that hook is.

04:44 SA: Yeah, that's a great answer. The next question we wanna ask... New subscription store, regardless of what it is, just a generic answer here. For most businesses, what would your top three tips be for getting started on paid ads or setting up the proper conversion attribution?

05:03 SW: Number one, no one wants to hear this answer but it's the absolute truth, understand your customer. When I used to launch a variety of affiliate marketing campaigns on Facebook, the first thing I used to do is I'd read Yahoo! Answers and I'd read all these different question and answer sites to figure out what people's pain points were to buying similar products. I'd start really researching reviews on... Maybe there's companies that are bigger than me that are doing a lot of Facebook marketing. Well, I wanna read their reviews. I wanna see what the customer pain points are. I wanted to see the elements of my competitors products that people are most interested in. 'Cause that'll craft my marketing strategy of what I'm gonna do when I launch. So number one, basically just digging deep and understanding your consumer, very, very important. Number two, setting up Facebook ads. You wanna make sure that everything is set up properly, because if it's not, the data that's gonna come in is not gonna make any sense to anyone, it's just a total waste of time.

06:00 SA: Yeah, you really have to have your tracking in place and make sure it's working properly.

06:03 SW: So make sure that the Facebook Universal Audience Pixel's set up right. Make sure that whatever you deem a conversion is passing back the correct conversion value. Make sure that everything's tied in correctly to Shopify. Make sure that everything is just set up properly so you know... Make sure your email lists are uploaded. You know that whatever data you're getting out of Facebook is actually making sense. Number three is I would look at, it I'm a subscription company, I know that there are specific boxes that are more productive than other boxes. Let's say the box changes every month or it stays the same.

06:47 SW: If your box changes every month, I'd like to get people into the funnel with the best box. I'd like to understand what's our best box, and then I'd like to use that as a new customer acquisition tool. If its the same box every month, I would like to build... I start iterating and coming out with creative... Start producing maybe a short video, like a lifestyle video on the box, start with that. And with the video, it doesn't have to be a crazy make video, and we're gonna go into the video in a second but you really wanna optimize captions in these videos. Because, remember, Facebook doesn't have sound on these videos so, I would start the initial process of creating that video.

07:27 SW: So number one, just to quicky recategorize, number one, understanding your customer, understanding who your prospective customers are. Number two, setting up Facebook, making sure all the audience... Making sure all the pixels are set up properly, everything's tracking properly, making sure GA is working properly on your site. Then number three, I would focus on creative, I would say get a short video made, you could even record the video on your iPhone, we've done that before.

07:53 SA: Yeah, that's great, great tips. So, next one is about international. How should subscription businesses be targeting international customers on Facebook?

08:07 SW: I get that question a lot now. Ad prices in the US are going up. Ad prices in a lot of English speaking countries are going up, from the UK to Australia to Canada, it's all getting very expensive to market to the English speaking markets. So, number one, I would get a really good translator onboard, someone who can understand what specific marketing messaging works in specific countries. I would get both a translator and a copywriter in a different country. And I'd get that person onboard just to kind of consult 'cause remember you're gonna have to change up elements of your website. It's not just Facebook ad, you gotta come up with a different version of your website. So number one, I would get a marketing copywriter onboard. Number two I'd understand the supply chain side. I'd figure out, "What can I pay?" And I didn't mention this on the first, on the last part of the initial set-up of Facebook add but this is also very important. "What can I pay for a conversion to make me profitable? What can I pay?" That's very important. Understand the economics of your business.

09:15 SW: So for doing internationally, what I really wanna understand, besides hiring this copywriter, this translator is, "What is my break even cost per action?" With shipping, fulfillment, customer service, having a Brazilian speaking, or Portuguese, speaking customer service team. "What is all this gonna to cost me?" And those are the two things I really look at with international. Number one, "What is my break even CPA?" Number two, translation, "How do I translate my website and translate my ads, to prepare?" And then number three, it's testing. It's really just doing rigorous testing in these different markets. Figuring out which messaging is gonna arouse and get someone hooked into your product. I'd also again, do some user research, start reading a forum in specific countries, just trying to understand, "What are the pain points of the people that I'm marketing to?"

10:15 SA: Absolutely. The next question we're gonna tackle is specific to businesses that are doing traditional ecommerce as well as a subscription component. How can a business convert people who have repeat purchases, like single purchases, how can we convert those people into subscription customers? What are the best ways?

10:38 SW: A lot of people always ask me that question. "So now I'm trying to build a subscription box out of people who buy one off products." So number one I would say, value. You have to show value. You have to show more value in your subscription service than buying the products one off. The value could be convenience, it could be price, it could be new features or new products that you're gonna add to the box so I would say, number one, value. Number two, I would say scarcity. If I were to convert a significant amount of people from products to subscription boxes, I wanna start off with my best customers. I wanna try and see... I wanna do it on a very low level.

11:26 SW: Maybe even reach out to them over the phone to start and just ask them, "Is this a box that would be interested?" 'Cause remember, you don't wanna disrupt your current business, a lot of companies are so quick to try and turn the subscription box on without being very sensitive to the people that are already buying their product. What they're doing is they're hurting the other side of their business, so I'd roll it out on a very small level. First, I would just talk to current clients to try and understand their pain points. And number two from a Facebook side, I would market the subscription boxes. I'd run a small test marketing the new subscription box and excluding all my WCA audience, all my website custom audiences and all my current customers. So I don't wanna touch my current business. I don't wanna hurt my current business. So I would be very careful and exclude people from one to the other.

12:21 SA: Yeah. So the next one, this is just a very high level advertising question. Main differences between advertising traditional ecommerce products versus subscriptions. So obviously, the one off sale versus a subscription. What are the main differences, let's focus on Facebook, what are the main differences in advertising those two different types of transactions?

12:47 SW: I think the one big difference that just runs in my mind is that you have a lot more leeway, when you market subscriptions, to discount and do different deals to get people into the funnel because you're calculating the subscriptions on an LTV. Whereas if you're marketing one off products, you're marketing them... You're marketing just this one off product. Your sale amount is the amount of money you get paid one time and you don't want and you're very careful in the market to do any type of discounting on the one off product 'cause that could hurt the rest of your business whereas you can discount someone to get into your subscription funnel. You can run different types of hooks where their money is the pain point, you can run different types of hooks to get people into your subscription box funnel.

13:33 SW: Also number two, is products are usually... You're gonna change up your products. Month over month maybe you don't change up your products. But with subscription boxes if you change up your subscription box you really wanna go with the box that is the most popular box to get them inside.

So I think with subscription boxes, you really have to keep iterating a lot more of changing up the way you bring people in because remember that you're charging them every single month, so you gotta keep changing up your hooks and bringing people in. Just from my experience based on Facebook ads, your ads per subscription box companies go stale a lot quicker than product ad.

14:12 SA: Very true. Very true.

14:13 SW: So you have to really keep iterating hooks to bring people in 'cause it's not gonna be... The ad that works last week is not gonna work this week on subscription boxes.

14:24 SA: Awesome. So the next question is a pretty straightforward one. What is the best way to target people who are most likely to become customers?

14:33 SW: Best way to target... So they're not customers right now?

14:35 SA: Yeah, what if I'm going out and trying to find an audience, let's say on Facebook, obviously, there's a lot of ways. What are the best ways to find lowest hang fruit for my next customers?

14:47 SW: Alright, number one, website custom audiences. "I've never purchased from you before, but I've been on your website." Number two, even more granular, "I've added something to my cart, I've been on your website." You wanna target that person? Hopefully, you have live chat on your website, so you could talk to that person when you drive them back in live, but if you don't, two biggest audiences. Number two, take your current website custom audience list, or your current... And go the lookalike. Lookalike 1%, very key. What this means is Facebook is gonna get the people who look the most similar to this audience. I'm sure you've seen lookalike 10%. That's a much larger audience of people who look less similar to your audience. So build lookalikes out of every single website custom audience so your email list, the people on your website, build lookalikes of all those people.

15:38 SA: Yeah, 'cause ultimately the best way to find your next set of customers is to use your existing customers to give you information about it.

15:46 SW: Exactly. So those three, number one, website custom audiences. Number two, uploading your email list of people that have already been on your website, targeting them. And number three, build lookalikes off your website custom audience list and your email list. Those are the three audiences that we always... That I always stuck with.

16:04 SA: Yeah, absolutely. Next question I know is a passion point for you. We're gonna be talking a little bit about video. So what are the best ways to use video in your Facebook ad campaigns and sales funnel?

16:15 SW: Okay, cool. So remember Facebook is evolving. It used to be just this crazy ad platform that companies would leverage to drive new user acquisition. It's still that, in a nutshell, but we... And for myself, I look at Facebook as more of a CRM system, very similar to how email marketing works. So I like to really segment all the people that I market to and I call these segments top of funnel, mid-funnel, and then bottom of the funnel. The top of the funnel is, "I've never heard of you. I've never seen you. I don't even know who you are. I don't know how you smell." [chuckle] I wanna make the best first impression on this new human being that's gonna be engaging with my ad, so I use video on the top of the funnel. That's the first thing they see when they look at my new product. So they're gonna see really cool video ad of someone unboxing a subscription box.

17:04 SW: Really cool, exciting moment, put the box on the table, and they're opening it up. And then inside that video, you have captions saying, talking about the products, talking about the discounts. You could actually use captions 'cause remember Facebook video doesn't any sound. Most 80% of the videos don't have sound on Facebook. So number one, using video top of funnel. When I say top of funnel, I mean targeting lookalike audiences that... And you're excluding all your website custom audiences and your email audiences. So number one, video top of funnel. Number two, video to video bottom of funnel. Video to actually make a pitch to purchase my product. So you've already engaged with me, you've already been to my website, you've added stuff to shopping cart, but you haven't make a purchase. So using video to induce a purchase by using some form of scarcity.

18:01 SW: Having a video saying, "We only have a 15 more boxes to go for the holidays. 48 hour sale, get 15% off a subscription." Using video as a main call to action on the bottom of the funnel. And then mid-funnel, we also use video to tell a story. Very similar, "I've engaged with your brand, I heard of you, now I'm providing you even more value of... This is how we existed, this is how we started." Maybe do a quick video bio of the founders, that really works well for mid-funnel to really get people more seasoned to make a purchase.

18:37 SA: Very cool. Here's one I know you have some strong opinions on, it's just a hotly contested topic. How can a subscription product business drive urgency, generate interest, without offering a discount or devaluing their products? What are the ways to kinda get people in?

19:02 SW: First off, I'm not a big fan of ever discounting. Discounting is usually the last thing you do, just before you... Back to the drawing board. I don't like discounting brands, I think brands that do a lot of discounting on Facebook, I always try and tell them, "Don't do that unless you really need to." With that said, I think you could do a lot before you discount. If you're a subscription box company, you could talk a lot about your products and the benefits. I think that showing a video around the products and the benefits and kind of... I think when you run a subscription box company you really wanna sell the surprise of what's coming next. So I think that if you could do a good job of selling the dream of what's coming next and what's in the box, and the experience of being on the subscription, that's gonna be really key to acquiring new users and scale. I really say that because it's so important to really sell the dream of the product. You could do that in so many different ways, without having to discount.

20:04 SA: Yeah. And this will be the last question here, and this kind of related to the last one 'cause somebody wanted to know, kind of, "If we wanna get somebody to just try the product, if we need to offer an incentive to try the product, what are the best ways to do it?" Is it, a free trial where they get a free box for the first month? Is it a discounted first month? Is it a lifetime discount, where they're getting 10% off the entire subscription? Obviously, we just talked about discounts a little bit. What do you think is the best way to offer that incentive?

20:35 SW: So people are numb to the word free.

20:37 SA: Yeah.

20:38 SW: I've learned that on Facebook, running so many ads over the years. Someone would think that the word free would increase the conversion rate? [chuckle] It really doesn't. What really increases the conversion rate is bringing value to the consumer. Anyway you could... I'm a big fan of bundles. Any way you could keep the price at its current rate, but add something to the box, is something I'm a huge fan of. So if you could keep your prices the same, but keep adding more and more value to whatever offering you're doing, I'm a big fan of that, instead of giving away a price or giving away 15% off, 'cause remember, people don't know what 15% off is. They don't even know what your price is. They don't even trust it so I feel like you really have to focus on bringing more and more value instead of discount. I'm not a big proponent of discounting. I'm a much bigger proponent of bringing more value.

21:36 SA: Yeah, I think that's a good point 'cause especially when you're advertising. If you're saying, "Hey, you're gonna get our box, you're gonna also get this other item." You get to talk more about the stuff, which is really what's gonna sell it in the end. If you're saying, "Hey, you can get 15% off or you can get 10% off every month if you sign up now." People don't even really know yet if they even want it at all.

21:56 SW: And plus you're attracting the wrong customer. I think that the companies that do a lot of discounting, you don't want the customer that's so price-conscious that they're looking at their credit card, "Oh my God, that's $20 a month. Well, I can't deal with that $20." You don't need the price-conscious customer. You want a customer who's gonna make a commitment to be a part of your subscription program because of the value that you're bringing to their life.

22:19 SA: Awesome. Well, that's been 10 questions Steve. Do you have any parting thoughts for subscription business entrepreneurs out there, who are looking to get started advertising?

22:28 SW: I would say really focus on understanding your metrics, understanding your customers. I talk to so many companies, and they're running all these advertising programs, but they're not talking to their customers. They don't really understand what their customers' needs are. And I would say that, very simply, picking up the phone and talking to three or four of your customers on the phone, will give you more insight into how to run paid acquisition campaigns, than spending thousands and thousands of dollars on ads. I think that that right there, is the hidden gem of online marketing, is the ability to talk to people who actually bought your product.

23:06 SA: Awesome. Well again, this has been a subscription business seminar, here. We wanted to thank our partner, ReCharge, for hosting us on the webinar this week. And I wanna thank Steve Weiss for sharing all of these great thoughts today. Again, this is Steve Weiss and Stewart Anderson, we are here with MuteSix on Spend $10K a Day podcast. We will see you next time.

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