Perceived Value vs. True Value: Is There a Difference?

This is a great TED talk: Rory Sutherland makes an entertaining case for thinking more about psychology in the way we design and enhance things (and less about technology).

One example: one of the best improvements to the London Underground in ROI terms did nothing to change the trains or how they ran. Instead, it was to install displays on platforms to show passengers when the next trains were expected.

If you have a few minutes spare, it’s worth a watch.


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Google +1 Recommendations Rolling Out to All Users Today

According to an email I’ve just received from Google, they are today rolling out Google +1 Recommendations to all users.

When you hover over a +1 button, you may now see a popup showing other pages on the site that your friends have recommended via +1.

My account has been in the beta test for the feature for the last few weeks, but I must admit I hadn’t noticed any recommendations until today. I guess I just hadn’t been using those +1 buttons enough!

Anyway, it’ll be interesting to see if this extra functionality is useful to anyone. If users do find it a useful way to discover new content, perhaps it could encourage a few more people to actually click the +1 button as well. For now, I haven’t found the recommendations particularly interesting, so I remain a bit skeptical about the new functionality. What I think would be useful to users is if the +1 button recommended content on other sites. But that would be a tough sell to the website owners who need to choose to include the +1 button in the first place and who wouldn’t want to lose visitors to their competition.

How about you? Are you seeing any interesting recommendations?


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What’s a Typical Subscription Commerce Retention Rate?

Cocoa Subscription Box

What’s a typical retention rate for a subscription commerce business?

If you’re trying to model a potential new subscription box business, or just wondering how profitable an existing business is, retention rate is a key variable. What retention rate should you assume?

The answer, of course, is “it depends.”

But you need something to plug into your calculations. So let’s look at some potential comparables.

Retention Rate Comparables

Here’s some retention data that has been shared publicly:

(If you know of some other good public data, please let me know — this sample is a bit limited at the moment!)

Why Churn Rate Tends to Decline Over Time

If you look at the H.Bloom and Relay Foods examples, you’ll see that lots of subscribers cancel early in their subscriptions and the remaining ones tend to be more loyal. I’d expect to see this in most subscription businesses — customers that aren’t getting value from your service are likely to leave early on. Those that remain are likely to be doing so because they like the service. Consequently, as your business matures, your overall churn rate is likely to fall.

Churn Rate Varies by Acquisition Channel and Offer

You will also find that your churn rate is affected by how people sign up. At Boudoir Privé, for example, we found that, when we ran a special offer giving a discounted first box, a lot proportion of those new subscribers cancelled after they’d received that one box.

Churn Rate vs Retention Rate

I’ve been talking about churn rate and retention rate. But how are they related?

Churn rate is the percentage of subscribers who cancel in any one period. e.g. if you have 100 monthly subscribers and one month 20 of those subscribers cancel, then your churn rate for that month is 20%.

Retention rate is simply the percentage of subscribers who remain. In the example here, 80 subscribers remain and your retention rate is 80%.

retention rate = 1 – churn rate

Modelling Retention Rate for Your Business Plan

In my opinion, simple is good where possible. And I think that applies to modelling retention rates and churn rates for subscription commerce businesses.

Here are a few models you may want to use:

1. Average subscription length: Probably the simplest model (and my favourite for back-of-the-envelope calculations) is to assume an average subscription length and not worry about the details beyond that. This is good for estimating whether or not a business is likely to be profitable.

2. Fixed churn rate: To model cashflow, you’ll need to look at retention over time. One simple way is to assume that a fixed percentage of your overall current subscribers will cancel each month.

3. Declining churn rate: A slightly more complex model is to assume a slightly high overall churn rate to start with, dropping gradually over time.

Any of these approximations is probably fair for a pre-launch business where there are large amounts of uncertainty about other key factors of your model anyway.

More advanced businesses with a better idea of their numbers (or early stage ones run by ex-investment bankers) may want to look at a cohort analysis to better predict and model how the churn rate for a particular group of customers is likely to change over time.

Your assumptions about future retention rates significantly affect how profitable a business looks in the long term, so whatever approach you take, it’s worth understanding this component of your model and any simplifying assumptions you’re making.

How about you? Are you trying to model retention rates for a new business idea? What approach are you taking?

Update: you may also like to read this more recent article: What is the Average Churn Rate for a Subscription Box Business?

For more information about starting or growing a subscription commerce business, have a look at Subscription Commerce Insider.

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How to do Video SEO

The latest Grovo ‘Expert Series’ video is an interesting one. Tom Critchlow is an SEO expert and talks through what you need to know about video SEO. (And he’s a Brit, too, which makes a nice change!)

Here’s the video series.

There are 13 snippets to go through, so it takes a while to watch. If you don’t have time, here are my notes:


  • Video is becoming increasingly important.
  • Now’s a good time to get into it.

Choosing Subject Matter

  • Think about who your audience is and what they’ll be interested in. Talk about something you know a lot about.
  • On YouTube, people are typically searching for information – researching and asking questions rather than looking to buy something.
  • Look on Quora or Yahoo Answers for an idea of what things people might be searching for and what terminology they’re using.

How to Create Your Videos

  • Just dive in. Don’t worry about optimisation to start with.
  • Include a call to action; tell people what you want them to do.
  • For B2B marketing, you may want to put the video behind an email opt-in.

YouTube or Self-Hosting

  • If just dabbling, host on YouTube. If looking to invest seriously, use something like Wistia, Vimeo or Vzaar (more features and better analytics).

YouTube Basics

  • Have a good title and description. Use YouTube Keyword Tool to find out what people are searching for.
  • Make it public.
  • Allow comments.
  • Make sure you have an umbrella account that the videos are posted under.
  • Try to build up a group of followers. Ask people you know to Like and comment on your videos.
  • Make sure the description encourages people to watch the video.
  • If you want to drive people back to your site, include your full URL in the description.

Advanced YouTube Tips

  • Upload captions (use CaptionTube) — helps video indexing and discovery.
  • Use your target keywords in the filename you upload.
  • Make sure you get people to watch the video all the way through.
  • Engage in the YouTube community.
  • Use YouTube annotations for call to actions, but don’t make it too spammy / intrusive — try to provide value for the user.

Self-Hosting Basics

  • Tom recommends Wistia.
  • If self-hosting, you should create a video sitemap.
  • Wistia does this for you automatically (their killer feature).
  • There are no great tools for doing this, apart from Yoast’s video SEO tool (WordPress-only).

Advanced Self-Hosting

  • Use schema to mark up your video (VideoObject).
  • If you’re getting really serious about video, consider doing transcriptions of your videos. Post transcription along with each video.

Getting Distribution

  • 100,000 views is achievable.
  • It’s often easier to get a blog to embed a video than to link to it elsewhere.
  • TubeMogul can be useful for getting maximum views.
  • Google is getting smart at spotting duplicate videos.
  • If you want SEO value of ranking for a particular phrase, self-host and don’t use TubeMogul.
  • If you’re pushing a viral video, paying for initial views can work well.
  • StumbleUpon advertising can be effective for viral/funny content (especially if video autoplays).

Video Linkbuilding

  • Have embed codes that link back to your site (you can tweak the YouTube embed codes).
  • Can work well to include the video in a press release (either embedded or linked-to).
  • People will often link to YouTube rather than your site. To counter this, have some related resource on your site and encourage people to link to it (even if they’re also linking to YouTube for the video). If people don’t link to your resource, follow up with them and ask them to do so. News organisations generally won’t update articles, but bloggers will.

Link Outreach

  • Carefully craft your content with a particular audience in mind.
  • Contact people in a friendly way to see if they’d be interested in your content.

Video Analytics

  • YouTube Analytics show you lots of good information, e.g. when people tended to stop watching.
  • SEOMoz’s Open Site Explorer is good for seeing your backlinks. You need to register for a free account to use it.
  • AuthorityLabs tool has icons that let you see if videos are ranking highly for a given keyword phrase. If they are, then the phrase may be a good one for you to target with a video (Google thinks videos are a good thing to show for that search phrase).

Case Studies

  • SEOMoz Whiteboard Friday
  • Zappos are pushing the envelope for video SEO in e-commerce by having 50,000 product videos like this one. Note that the videos are on the relevant product pages, so it’s perfect if someone clicks through to the page from a search result.


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Comparing Payment Gateways and Merchant Accounts

PaymentBrain logo

Working out how to accept payments online is a pain. What do you need, exactly? Which payment gateway should you choose? How much will it cost?

I’ve set up a few online businesses now, so I think I have a pretty good idea of it all, but I remember how confusing all this payments stuff was to begin with.

What’s so Hard about Payment Processing?

When it comes to payment processing, there’s lots of terminology to get your head around (PCI, chargebacks, 3-D Secure, IMA) and dozens of factors to consider (security, shopping cart compatibility, support, retention periods).

Even when you understand it all, it takes ages to dig out relevant information about the different providers. And if you’re getting a merchant account you really need to shop around and play different providers off against each other to get good rates.

Does it Need to be so Hard?

Taking payments really shouldn’t be this hard. But no-one seems to be doing much to help UK merchants figure all this stuff out. The best resources I’ve come across are some excellent blog posts by David Mytton and Daniel Tenner.

So I’ve decided to have a go.

Introducing PaymentBrain

I’ve set up a site called PaymentBrain as a home for resources to help UK merchants choose online payment solutions.

So far, it’s hosting my first stab at a comparison engine to compare payment gateways. I hope to be adding and improving upon it as time goes by.

If you have a friend who’s planning to apply for a UK merchant account in the next few weeks, please put me in touch. I’d love to chat with him or her about it and to share what I know.



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How to Build a Successful Startup – an Interview with David Tisch of TechStars

It’s 11.38pm as I’m starting to write this, so I’ll keep it brief.

The latest startup interview from Grovo came out today. It’s with David Tisch who runs the TechStars incubator in New York.

David sees lots of startups from an early stage, so has an interesting vantage point on things.

Here’s a quick rundown of the more actionable highlights from what he had to say…

Founder/product or founder/market fit

This is one of the things David looks for when selecting startups for TechStars. You need at least one of the following:

  1. Direct experience of a pain point in the space
  2. A thesis on the space (how the status quo is broken and how things will look in the future)
  3. A network within the space that gives you an unfair advantage over other people

The actionable takeaway is this: when choosing a business to start, find one where you have at least one (preferably two or three) of the advantages above.

Personally, I agree with 1 & 3, but I’m not sure about the existence of a thesis on the space as a useful indicator of ‘fit’. For example, I have a thesis about the future shape of the National Health Service (NHS) in the UK but as I’ve never worked in that sector, it’s very likely my thesis is wrong in important ways.


David argues that storytelling is the number one skill you need to learn as an entrepreneur. You need to be able to express your story in an exciting and engaging way. e.g. why are you doing this, what hiccups and successes have you encountered along the way. This isn’t just important when speaking to investors (like David) but to everyone: journalists, customers, potential hires, etc.


As a startup, David recommends experimenting wildly and widely with your marketing (at least, I think he’s talking about marketing when he mentions this). Test as many things as you can and see what sticks.

I’d agree broadly with that. Though in reality, limited time and money generally mean you have to be selective and prioritise testing the handful of marketing techniques you think are likely to work best. This is one area where I think experience can be very valuable.

The rest of the interview is more focused on TechStars and New York. You can see it all here.

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How to Publish and Sell by Email – an Interview with Ben Lerer of Thrillist

I told you about an interesting interview with the Bonobos founder last week on a site called Grovo. Well, Grovo’s next interview with a founder of a successful Internet company is now available and it’s another good one.

This week’s interview is with Ben Lerer, the co-founder and CEO of Thrillist, a daily email city guide with over three million subscribers. Thrillist also owns JackThreads, a members-only online retailer, and Thrillist Rewards, a ‘localised commerce business’.

It’s interesting to hear Ben’s perspective on his large, email-centric businesses.

A few key points for me were:

  • For Thrillist, the daily emails are the full content; for JackThreads they’re about merchandising – showing people a curated set of products that they will hopefully go and buy on the site.
  • Currently, everyone gets the same emails. Over the next year, they’re planning to start personalising the JackThreads emails so the stuff you’re shown will tend to be more of the things you’ve indicated an interest in (I’m assuming this’ll be based on actions like clicks and purchases.)
  • Ben sees fast iteration as key. Over time they’ve become better at the try / monitor effectiveness / make changes cycle.
  • Building a brand online is about: knowing who your audience is, being consistent, and being authentic. They use an honest, slightly irreverent tone.
  • Over time, they’ve moved away from building ‘what Ben wants’ to letting the data drive things.
  • Having this kind of data-driven approach is important.
  • With the e-commerce business, the numbers are very specific (sales, profits, etc.); with the publishing business, they’re fuzzier.

The interview is here.

I’ve enjoyed this interview series so far, so I’ll be continue to follow it. If there’s an interview I think is particularly good, I’ll share my thoughts about it with you here.



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Google AdWords Fooled by Scammers

Google AdWords has revenues of $30 billion or so a year. With that sort of money involved, you might think the AdWords ad review system would be pretty good.

It seems it could still do with a bit of work.

One group of scammers has been fooling Google for at least 6 weeks now.

I first noticed their ads on new year’s eve. They were tricking Google into running ads that looked to be for the Daily Mail. When clicked, the ads took you to a page that tried to trick you into buying an overpriced subscription. I later discovered (here) that the scam ads had been running at least since 12th December 2011.

Incredibly, the scammers are still getting away with it. The latest ad I’ve spotted appears if you search for “anti-ageing cream”. Now the ad claims to be for iVillage:

Rather than take you to iVillage, though, the ad takes you to the same scammy landing page as with the previous ‘Daily Mail’ ads (though on a different domain now).

This kind of thing makes my blood boil.

These scammers are, sadly, conning a lot of people out of money.

I’ve reported the ads to the Google AdWords team, so hopefully they’ll stop them soon.

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How to Build a Fashion Brand Online (According to Bonobos)

I came across an online education website called Grovo this evening. Perhaps you’ve heard of it already?

Grovo has lined up a series of what promise to be interesting interviews with successful figures in the world of online business. Their first interview (and only one for now) is with Andy Dunn, one of the co-founders of Bonobos which is a very successful men’s fashion brand in the US that was launched via the web.

In the interview, Andy offers some fascinating advice about doing the kind of vertically-integrated retail that has worked for Bonobos. He sees personalisation and curation being extremely important trends that will improve the online shopping experience.

In case you don’t have time to watch it, here are my notes:

Building a Brand Online

Four keys:

  1. Aggregate customer service to one point and staff that well (the “Zappos model”).
  2. Have a high-quality product.
  3. Vertically integrate so that you look after sourcing, design and merchandising.
  4. Get great at brand story-telling.

Customer Acquisition

Early phase: use word-of-mouth, editorial/PR and direct-selling; get up to a run-rate of $1 million to $2 million (!)

Growth phase: multi-channel (test everything and use what works best). Requires:

  1. Culture of analytics and experimentation
  2. Money to run the tests
  3. Understanding of your customer lifetime value (LTV)


  • Bonobos have differentiated through their vertical integration into design (starting with better-fitting men’s trousers, now expanding into other garments).
  • They focus on serving a specific demographic really well: 25-50 year-old active, urban, professional males.

Leveraging Social Media

  • Have a conversation (don’t just talk at people)
  • Use social media as a channel for real-time customer feedback
  • Be hugely responsive on social media
  • Use social media to let customers and your team connect on a human level (e.g. Bonobos ran a poll to ask customers to vote on which Bonobos team member had the best Halloween costume)

Evolution of Commerce

  • Think of the online experience as a bundle of product and service.
  • Be a great storyteller.

I love what Bonobos have managed to do and I think there’s lots to learn from their success.

Grovo have done a great job with this interview, so I’m looking forward to checking back with them soon.

I’ll keep you posted here with any interesting notes.


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How Google Will Suspend an AdWords Account Forever (With No Warning)

Stay Classy Mr. Top Hat

I want to like Google.

They have all those free services: search, Gmail, Analytics… what’s not to like with those?

And I’ve been a customer of Google’s for a long time, too – spending money on their AdWords ads since February 2007.

Google does a lot of good things and I’m sure most people who work at Google are good people.

But the way Google’s UK & Ireland AdWords team has treated me in the last four weeks has underlined to me how much power they have over small businesses and how little care they exercise when wielding that power.

Google Permanently Suspend My Account With No Warning

Four weeks ago, I’d created two AdWords ads. They’d been shown a grand total of zero times.

Then I read something that suggested my ads might be in violation of Google’s ad policy. Not wanting to violate that policy and preferring to play it safe, I cancelled one of the campaigns. And I tried to cancel the other one.

To be clear: I had no intention of breaking Google’s rules. And when I suspected I might be breaking a rule, I tried to correct it as soon as I could.

At this point, I assume Google looked at my ads and decided they did indeed violate their policy.

[I have subsequently reviewed Google’s ad policy and can’t see any way the ads were in violation. From what I gather, Google AdWords penalise anything that looks like affiliate marketing, though don’t make this at all clear in any AdWords policy documentation I’ve managed to find.]

Instead of alerting me to the fact that my ads were against their policy and not running them, Google decided the appropriate course of action was to permanently suspend me from using Adwords. Forever.

This came as a bit of a surprise!

“Not to worry,” I thought. “Those folk at Google are smart and reasonable. When they hear what’s happened, they’ll realise a permanent ban was a bit heavy-handed and re-enable my account.”

I Try to Contact Google

So I politely tried to reach out to Google’s UK & Ireland AdWords team.

I called them.

I wrote to them.

I wrote again.

And again.

In return, when they did reply, all they did was to send me template emails that didn’t seem to address any of the points I’d tried to raise.

At one point I did manage to speak to an AdWords customer support person on the phone. They were friendly enough, but their only authority seemed to be to pass a message on to someone else. Nevertheless, I hoped this might do some good. A few days passed. Then I received it … yet another template email. Grr.

I filled out their online complaint form, asking for a more human interaction. Again, nothing but a template reply.

Despite several weeks of me trying to contact someone relevant, Google refused to engage with me in any meaningful way.


Barred from Accessing 91% of UK Search Traffic

So Google have barred me from accessing what amounts to around 91% of the UK’s search traffic with paid search. And they don’t even bother to properly respond to my queries about it. Great.

Google’s UK and Ireland AdWords has refused to discuss why they’ve taken this action. I suppose this is always a risk when a company has the kind of dangerously monopolistic market share that Google currently enjoys.

I know there are good people at Google; people who want to do the right thing. Sadly, Google’s policies no longer seem to be letting them do that. Now when I call customer support, the people I speak with tell me that there is nothing they can do: the policy people have spoken and they must be right. It seems policies are now in charge rather than people.

Google’s Different Rules for Different Sizes of Customers

What’s especially upsetting about this is that I know full well that Google do not treat everyone the same way.

Google treat larger customers with more respect.

I used to work for a company that was (and still is) an extremely large AdWords buyer. When they screw up and violate a Google advertising policy, it’s a different story. A quick word with their account manager and Google turn a blind eye. Their account isn’t suspended. They don’t have to wait days for a response. And they don’t have to put up with condescending template emails.

It’s the small business that gets the raw deal. It’s the small business that gets automatically penalised for a mistake, then ignored by Google.


If you work for Google: we both know your organisation can be better than this. If you’d like to sort it out, you can contact me here.

If you don’t work for Google, please recognise how little Google’s policymakers seem to care about treating their millions of small business customers fairly.

If you can figure out a way to depend on Google a little less, then you might just want to do so.

Further Reading

photo credit: airinnajera

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