Don’t Make People Work To Know If You’re Worth It

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Seems like every  business is chasing continuity income (CI) these days.

On the surface, CI is a great model. It smooths out cash flow and gives you consistency. When you’ve got 1000 people paying you $100/month on autopilot, you tend to sleep a little better. What’s not so apparent is that it can end up smoothing cash flow, but also generating less total revenue and fueling complacency that, in the long run, can kill your business. I’ve already covered that topic, though.

This post is about another potential CI trap, one that’s more hidden. It’s easy to fix if you know about it before you begin. But much harder to wrangle if you discover your mistake along the way. I know this through personal experience.

So, let’s break it down…

First, what exactly is CI?

CI is where someone signs up one time, then pays on a recurring basis moving forward. Sometimes payment starts after a free or reduced-price trial, other times it starts right away. Often the payments are charged monthly, they happen automatically and continue either for a fixed window or until they’re cancelled.

Offline examples include health club memberships, health insurance, wine or book of the month clubs and even rent. Examples from the online world include all varieties of membership sites, educational programs, gaming and music services.

CI can work well as a business model, helping you sleep better at night knowing a reliable income is coming your way every month.

But when it’s based on content or education, it can also become a bit of an unplanned content beast (which is the most common reason for membership sites shutting down). And here’s where is gets really tricky, it can also cause serious grumbling when the value delivery cycle doesn’t match the billing cycle.

What does that mean?

Let’s break it down…

The value delivery cycle is about how and when you deliver the value that people are paying for. The billing cycle is about how often people are paying. And here’s where things get dicey.

When the value delivery cycle matches the billing cycle, clients can easily make a price/value comparison and figure out whether they’re “getting what they paid for.” When they don’t line up well, though, people have to work way harder to figure out if they’re getting what they’re paying for. And memories tend to be short, billing cycle short, which can lead to some real issues.

So, let’s say you sign up for a wine of the month club and every month your credit card is billed $15 and you get a bottle of wine. You can easily line up the value of that bottle with the $15 you just paid. If you feel like each bottle is worth at least $15 and you like getting surprised with new bottles of wine every month, you’ll likely keep paying. It’s an easy comparison, you don’t have to work to know it’s worth the cost.

When the value cycle does not match the billing cycle, though, that’s when the opportunity for things to fall apart arises.

So, let’s say you pay health insurance. Every month, money goes out, but you don’t get sick or injured for 4 months. Then you sprain your ankle and get charged $175 for a doctor visit that’s not even covered because you haven’t hit your deductible.

You get annoyed at the fact that you’re paying $350 a month for something you don’t even use most months, and when you do, it doesn’t even cover what you’ve paid out. You also conveniently forget that time two years ago when you needed to be rushed to the emergency room for surgery and your insurance covered what would have been a $45,000 bill. All you really focus on is “what has my insurance company done for me LATELY?” And by lately, what you really mean is “in the last billing cycle. The last month or maybe two.

Let’s take it into the world of online products and trainings…

If you signed up for an online training program, paid monthly and the content was delivered in equal installments on a regular monthly basis, you’d have an easier time matching the value cycle with the billing cycle and, in doing so, be able to easily determine if the value was worth the spend.

But what if the exact same level and quality of content and interaction was delivered on a more sporadic basis?

What if you got a ton of it one month, then very little or nothing for two months? What if the content was delivered in short intense bursts every 3 months, with lull months in between but you were paying equal amounts every month?

The value would be the same, BUT because the value delivery cycle didn’t match the billing cycle, when you ask “what has this solution provider done for me lately?” you tend to focus on the last billing cycle or month. And, if that was a “lull” month, you’re far more likely to come up with a “false negative value.” You forget the fuller value that’s been delivered over a longer window of time. It’s impact fades, that’s just how our brains work.

And you end up bailing on the experience, not because of a genuine lack of value, but because you had to work too hard to match the value you were getting over time with your recent investment. We are notoriously bad at recalling the real impact of past value, often underestimating or flat out forgetting. Especially if we’re looking for a reason to walk away (and spend the money on something else). We are incredible rationalizing beasts!

And, by the way, we also happen to be horrible at affective forecasting or forecasting the anticipated value of a future experience.

So, what’s the solution?

When you’re thinking about your next venture or product launch, if you’re considering a continuity pricing model or even a financing/pay-over-time model, make sure to also deliver the value in increments that are spread fairly evenly across the billing cycle.

That’ll make it far easier for clients, customers and members to say “this month I paid $10 and I got at least $10 worth of service or stuff in return.” Rather than, “this month I paid $10 and got $6 of service and stuff, but two months ago, when I paid my $10, I got $50 worth of service and stuff, so it’s all good and then some.”

Eliminate the value lulls. People, including smart people like you and me, have trouble doing the math.

Which brings up one of the biggest mistakes entrepreneurs make in the online world—launching a product or venture, then creating the content/experience on the fly (raising my hand here, lol). You create a sales process as a way to test an idea, but you don’t create the product or solution because you don’t want to do the work until you know there’ll be enough demand to make it worth the effort.

Then, the launch goes gangbusters and you are gifted with the opportunity to deliver on your promises.

The good news is – you didn’t have to spend a ton of time, energy and money on something before knowing whether it was time or money well spent. But, now that you’ve got people lined up to pay you, you need to deliver on your promise and create the content, the experience, the level of engagement and benefits…all in in real time.

It’s possible, BUT it also increases the likelihood that all sorts of short term challenges will screw with your best intentions to create and deliver the content and experience on a schedule that makes it easy to match value with the money being paid. And, even though, on the whole, you believe you’re more than delivering what was promised, the disconnect between the value cycle and billing cycle wreaks havoc on “perceived” value/price associations.

So, even though it means doing more work before a launch, whenever possible, try to create a solid chunk of the solution, product or experience BEFORE you launch. Enough to give you the buffer needed to deliver the value on a schedule that matches the billing cycle and makes everyone feel happy and satisfied that they’re getting what they’re paying for each and every month.

This’ll also let you sleep better at night, knowing you’re always ahead of the value delivery curve.

So, do have a CI based business, product or service? What’s YOUR experience been with it?

Share away in the comments…

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12 responses

12 responses to “Don’t Make People Work To Know If You’re Worth It”

  1. Sean Vosler says:

    excellent information Jonathan! going to integrate this with my system right away- I think one other tip might be if you are providing training in a continuity system try and find, license, or develop a bit of software that you host on your system that they can access with their membership… can be something as simple as a Google spreadsheet that calculates things for them, just needs to be a tool on top of the training.

    I do this with my course I have a calculator that they can access as a member, and I also have hosting- if they cancel their training they loose the calculator and the hosting… and that has a lot more value then just the training in their eyes.

    Totally agree with the thoughts on making sure you deliver content at the right time- it’s also good to integrate your folks with a community of sorts, something as simple as a Facebook Group, this can really add value that they won’t to loose by canceling their membership.

  2. Laura says:

    It’s all about PLANNING! I’m always amazing by how little planning most business owners do. If you’re launching something monthly, you need to have at LEAST the next 6 months plotting out with a plan to how you’ll get it all done.

    But I think planning is really a symptom of a deeper issue that strongly comes up in CS – sustainability. Can you idea still stand 3 years down the road? Are you going to be struggling to come up with something new every month because that’s what your model relies on, even though you’ve already squeezed all the relevant, useful content to death? Most sites just churn churn churn – create something new every month or week then never leverage it again. I don’t think it’s a model that scales. And I just switched my business over to be all continuity, so this is definitely an interesting topic for me!

  3. Stu McLaren says:

    Great post Jonathan.

    As someone who works with a lot of membership site owners I can definitely confirm what you’re saying in regards to the value of the content being there some months and others not.

    With that said, one of the big mistakes I see is not reminding members of the value they DID receive each month.

    Many times we assume that our members are going back to the membership and seeing/consuming/downloading all the new content that’s been posted.

    The reality is, they don’t – we need to remind them.

    So communication with members is also vital to retention.

    Do you mind sharing a couple top retention strategies you used with your yoga studios?

    I’m a bit of a retention nut so I love hearing about what worked for others.

    Cheers!

    Stu

  4. Tom says:

    Great article. Very good point about expecation management. I think a great model for a CI business is something like Spotify, or anything that offers a product and service together. Software + subscription is the way to go it seems (I haven’t tried it yet, but I will). Again, great post!

  5. Sean Davis says:

    I’m in the process of building a membership site right now and I had these exact thoughts just a few days ago.

    Considering what it is I will be teaching and the learning curve attached to it, I know for a fact that continuously adding value passed 3 or 4 months is going to be extremely difficult and is not a time investment I am wanting to make.

    Likewise, I do not think it’s right to take money from someone month by month simply because they are not checking their bank statements and stopping payment once they get to the point where they are paying more and getting less in return.

    So, I’ve decided to cut my membership program short and put a time cap on it. That way I can better control the price/value relationship. However, about 75% through the program, I want to offer the ability to stay in if the person needs it. That way those who stay are doing so with intent and there’s no question about the value they’re receiving.

    As much as we would all like to have everything on autopilot, I do believe certain things must be considered. This article definitely addresses one of them.

    Great read.

  6. Jo says:

    Hey Jonathan – great and timely thought-provoking article, thanks.
    I’m exploring CI too, as a creative director and brand person interested in working with heart-centred peeps.

    My take on it is that yes, I would feel incredibly pressured to deliver content month-by-month on a rolling cycle, and, because it doesn’t fit with my personality, I’m vetoing that idea!

    What I am considering, though, is a closed community with a small one-time koha or donation to enter, and then a small number of time-limited premium groups. For instance, if I wanted to gather four clients together for a one-month brand intensive, then that seems manageable to me and deserving of the premium price. (Ning allows you to charge for access to groups or pages.) A balance of both worlds, perhaps…

  7. John says:

    The build as you go and start with vapor model that Brian Clark teaches has always bothered me for this reason exactly.

  8. Hi Jonathan,

    I was very interested to read this and thank you for not recommending the “sell it and then scramble around to create the product if people buy it” model. Many seem to recommend that as a great way to get paid before you do any work but I hate the idea of it. I think it’s much better to be confident that you have a great product to sell and keep working to improve it rather than sell nothing.

    The other thing that interests me is that I know I should have some type of CI income. Having been self-employed for 15 years I’m used to having a variable income but some steady income would be great and I know many small business owners who are successful with this model.

    Unfortunately it doesn’t suit me at all as I’m afraid of commitment! My working style is to work, work, work for a month (or six) then goof off for a month (or six) so of course being beholden to members scares me senseless. I already have three children, a business and two blogs clamouring for my time. I love helping clients but it’s important for me to be able to tell them that I’m not available next month as I’m travelling or my kids are on school holidays.

    So here’s your challenge – can you come up with a CI for people like me?!

    I can’t but I haven’t given up hope:)

  9. This is exactly why I actually discourage a lot of people from building a membership site. They don’t think about the long-term commitment required on BOTH sides of the transaction to make it work – and I’ve worked with some pretty prolific authors and thinkers to help them build their platform!

    If you’re looking at continuity as an easy money arrangement, forget it. There IS effort involved. Sure you can hire a VA to handle a lot of the moving parts, but remember that customer service issues are directly proportional to the number of folks you’re servicing in a group like that. You’ve got to be ready.

    In regard to the “sell before you create” conundrum… I had one client that brought me in during the third month of a massive launch (like 800 new members in a single month!) – and nothing was ready for the membership when the “beta” period was over. Folks dropped like a hot rock and then he scratched his head wondering why everyone was leaving!

    Then, as we recovered from the horrible early attrition, we continued to have issues on deliverables because HE was the bottleneck. He simply wasn’t completing his content for timely delivery. Customers were pi$$ed! His response was to keep tweaking the colors on the interface so that things “looked” right. Finally, I told him that things could look good all day long, but without members, no one would see the content.

    Eventually, we were able to get the project on track – after pulling much of the content out of his hands. But he lost out on over 500 members that quit because content wasn’t delivered on time. And at $500 a month, well, I think that’s a significant attrition for anyone’s pocketbook.

    To be sure, Membership programs can be lucrative, but you need to have a plan. Don’t just slap together a sales page and think you’ll start “raking in the dough” every month.

  10. This was great to read and oddly serendipitous as it just called out to me when I saw the tweet today — I’m just now opening my first real community-based membership program and excited about it, but my first concern is in creating a life changing experience for everyone participating.

    I’ve often experienced a sort of sense of letdown when joining a continuity program and then just dropping off randomly because I’m no longer getting the value I once did. I think the program I’ve created solves this problem by going in three-month cycles with a core defined purpose that everyone is working towards, so they have the opportunity to have a complete experience and then choose whether they want to continue on for the next cycle or not. We shall see!

  11. Nick B. says:

    Hey thanks for sharing your thoughts on CI business models. Being a new entrepreneur, your perspective is really appreciated! I’ll definitely keep this post in my back pocket.

  12. Hi Jonathan,

    Really good points you make here. I do not yet have a CI program, but as I was reading this I immediately thought of one program that I left because the monthly payment did not seem to relate to the value delivered.

    The material was delivered at a different time than the payment hit my account, and I started to see the value of the content decline as well. So that when the charge hit my account, I thought, “Wow, I’m still paying for this but not getting nearly the value I did in the beginning.”

    I now think it’s a key reason why I left. Thanks so much for this persepctive! I’m going to remember it because I am sure a CI program is in my future.