Chapter 1 Subscription Economics: How Recurring Revenue Changes Everything A decade from now, economists will look back and say that stocking shelves and hoping customers buy was a 20th century business model. We will live in a future where companies measure success not by counting how many products they sell, but rather, how many high- value, monthly subscribers they have. Implications for Entrepreneurs In order to succeed in today’s subscription economy you have to be able to sell, market, and deliver based on a clear understanding of customer behavior by doing the following: • Pulling the right levers. Instead of SKUs and purchase orders, you’re going to have to think about growth efficiency, churn, and recurring profit margins. And you’re going to have to be maniacally focussed on growing your ARR. • Relentlessly learning. Netflix looks at millions of plays per day, including when you pause, rewind, and fast-forward, as well as user ratings, searches, geolocation data, viewing times, device information, and social media feedback. What are your user plays? How are you learning? • Creating an amazing subscription experience. Overnight, Tesla magically gave its cars autonomous driving capabilities. Overnight, Apple magically gave its phones voice recognition. What’s your magic? How do you happily delight your customers on a regular basis? I hope I’ve mapped out the fundamentals of subscription economics, but all of this, of course, is just the tip of the iceberg. In the next chapters you’re going to learn the basics of SaaS sales and marketing: segmentation and hub strategies, sales and marketing alignment, growth funnels, content marketing engines, and much more. All of this information is vitally important, but never lose sight of your north star — ARR.