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1-Page Summary of The Automatic Customer

Overview

This book details strategies for growing a small business and preparing it for future sale. The author tells the story of Alex Stapleton, who owns a marketing agency, and his friend Ted Gordon, who is successful in entrepreneurship.

Sometimes trends aren’t just trendy, but they actually work. Sometimes those trends are so effective that they start to spread across all industries.

Subscriptions have been around for a long time and are the new business model. They used to be standard practice for newspapers and magazines, but diminished when the internet came out. Now they’re back in style because of websites like Netflix, Hulu, and Spotify that give you access to thousands of movies and music tracks for a low monthly fee.

The messaging app WhatsApp built its business by giving away free service for the first year, and then charging $1 a year after that. This strategy was so successful because it encouraged people to tell their friends about the product, which resulted in millions of new customers.

The author explains how you can learn from other companies that have used subscription models. You’ll discover why Dollar Shave Club names its razors, what painful lesson gamers taught World of Warcraft, and how Amazon used subscriptions to go after Walmart and Target.

Big Idea #1:

Today, a lot of businesses are moving to subscription-based services.

A lot of companies are offering subscription services. Why is that?

There are three reasons why the subscription model is becoming popular again. First, there’s a generation that prefers to access things rather than own them. Second, people aren’t afraid of making financial transactions online anymore because they trust big companies with their credit card information more now.

Finally, data is a key asset in today’s economy and subscription-based businesses rely on data collection more than most other companies. Apple started Joint Venture to help companies transition to using Mac products in exchange for a yearly subscription. Microsoft did something similar by offering their Office software through subscriptions rather than distributing it in stores.

The subscription economy allows businesses to offer specialized services that aren’t found in the marketplace. Amazon Prime, for example, offers free two-day shipping on most purchases and access to a streaming library of movies and TV shows. Because customers love it so much, they often buy products from Amazon instead of going elsewhere.

Amazon is also expanding into other areas. Recently, they’ve started a grocery delivery service called AmazonFresh where customers can have groceries delivered to their home for no shipping charge if the total order exceeds $35. They’re also moving into subscription services that allow them to compete with big businesses like Walmart and Target as well as small businesses.

Big Idea #2: It’s better to run a company that has subscribers than one that doesn’t.

The money isn’t the only reason to use subscriptions. They actually make your life as an entrepreneur much easier. First, they significantly increase your company’s financial value. For potential investors, subscriptions are a predictable stream of cash flow.

In the long run, it’s better to get a subscription of $10 per month than a one-time sale of $100. For example, if you own an alarm company and do a one-time installation for someone’s home, investors won’t be that excited about how much money you made from that single job. They’d rather see recurring revenue from monthly charges for monitoring the property.

Subscriptions make it easier to run a business. You know exactly how many customers you have and what they want from your company, which means you don’t have to estimate demand for your products or services.