Episode 130: Customer-Centricity in Subscriptions with Zarina Bahadur at 123 Baby Box
If you think scaling a startup is child’s play, Zarina Bahadur, the CEO and Founder of 123 Baby Box, would agree — except she's not playing. Zarina Bahadur recently joined Nick Fredrick on his podcast, “Subscriptions: Scaled,” to discuss how her company made it to a whopping $3 million in annual recurring revenue in just under a year.
Understanding your customer is the key to product development
Zarina emphasizes that the first step to rapid growth is understanding your customer. She explains that 123 Baby Box started off with a diverse customer base but soon realized that their true target market was second-time moms aged 28 to 38 who appreciate convenience and quality. By honing in on this demographic, they were able to tailor their product offerings and marketing strategies to better meet the needs of this specific group.
“We initially had everyone as our customer base, and then we narrowed it down.”
Unpacking the fundraising journey
The fundraising journey is often laden with hurdles. Zarina’s company managed to secure seed funding, but not without challenges. She says that being aware of what investors look for is essential. For 123 Baby Box, their most significant investor, a venture capitalist, was intrigued by the strong unit economics and scalability of the business.
“We were able to secure $1.5 million for our seed funding round.”
Mastering pricing strategies for profitability
Pricing can make or break a business. Zarina explains how her company experimented with various pricing models before settling on one that offered both monthly and annual subscriptions. The flexibility allowed them to appeal to a broader range of customers, from those seeking short-term commitments to those ready to make a long-term investment.
Monthly subscriptions: For customers who want flexibility and are not ready for a long-term commitment.
Annual subscriptions: For customers who are ready to commit and want to benefit from discounted rates.
Scaling customer support without losing the personal touch
123 Baby Box places a strong emphasis on customer service. Even as they scaled, Zarina says they focused on maintaining a customer service team that not only responds to queries but also provides solutions. The team is trained to resolve issues proactively, creating an enjoyable customer experience that leads to high retention and customer lifetime value.
“We’re always watching the failed payments and reaching out to those customers to try and see if it’s a failed payment because they just forgot to update their card, or is it a failed payment because they no longer want their subscription?”
Tackling churn: a multi-pronged approach
Churn is the ghost that haunts every subscription-based business. Zarina lays out how 123 Baby Box actively combats both voluntary and involuntary churn. In the case of failed payments, her team takes the initiative to reach out and understand the root cause. If a customer wishes to cancel, the company deploys “save tactics,” offering customized boxes or a discounted plan to retain the customer.
Lower the plan: For customers who cite pricing as an issue.
Customize boxes: For those who have issues with the product itself.
Pause subscriptions: Allowing customers to pause gives them room to come back later.
Flexibility as a retention strategy
Zarina believes that flexibility is key to long-term customer retention. The company allows for paused subscriptions, especially since the pandemic, and this feature has seen high uptake. Zarina’s philosophy is that by giving customers the freedom to pause, the likelihood of them returning or referring others increases.
“We’ve gotten a lot of win-backs just doing that. It’s really important, I think, to be flexible."
The impact of transparency and flexibility on customer referrals
Zarina Bahadur stresses the importance of treating customers the way you’d want to be treated, emphasizing transparency and flexibility as pillars of their customer service philosophy. She has seen that customers are more likely to return or refer others when they feel they’re being treated fairly.
“We’re not going to hold them against their subscription because then you run into chargebacks and nobody wins there.”
How to connect with 123 Baby Box
For those interested in connecting with 123 Baby Box, Zarina directs them to the company website and Instagram page. The company is keen to reach out and provide the best to their customer base, offering potential for future collaborations or partnerships.
Conclusion: The golden rule that drives success
The success of 123 Baby Box can be attributed to a meticulous focus on data, effective customer support, a multi-pronged approach to tackling churn, and a strong commitment to flexibility and transparency. Zarina concludes the interview by reiterating that customer service is the backbone of their business model, advocating for a “golden rule” approach — treat customers how you’d like to be treated yourself.
For tech CEOs looking to scale without compromising on customer service or facing the churn nightmare, 123 Baby Box provides a compelling case study. Zarina’s insights offer actionable steps for any business in the subscription-based model to consider, such as:
- Proactive customer service for high CLV
- Targeted strategies for tackling churn
- The power of flexibility and transparency in retention
Zarina Bahadur’s emphasis on data-driven strategies and customer service isn’t just a business model — it’s a philosophy that resonates deeply with consumers, and that should be a guiding principle for any CEO aiming for sustainable growth in today’s competitive landscape.
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