Prof Daniel McCarthy | Door Dash and Food Delivery - The Case For Building a Subscription Model

Jan 28, 2025

Daniel McCarthy, a Professor of Marketing at the University of Maryland and co-founder of Theta Equity Partners, dives into the evolving landscape of food delivery subscription models. He explains how marketers can leverage these models to enhance customer lifetime value and navigate competitive dynamics. McCarthy distinguishes between 'promiscuous' and 'heavy' buyers, discussing the impact on loyalty and profitability. He also highlights the role of AI in shaping customer acquisition costs and why embracing a subscription approach could be pivotal for future success.

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INSIGHT

CLTV Explained

CLTV (Customer Lifetime Value) represents a customer's net value to a business.
It considers acquisition cost and the total profit from future purchases.

INSIGHT

Ideal Data Source

Restaurant delivery data is ideal for studying subscription impact due to clear transaction tracking.
Credit/debit card usage allows for better tracking compared to grocery shopping.

INSIGHT

Subscription Impact

Subscriptions increase order frequency but create significant competitive effects.
Increased purchasing can come from category growth or stealing share from competitors.

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A CMO Confidential Interview with Dr. Dan McCarthy, Professor of Marketing at Maryland. Dan returns for the third time to share research on the food delivery business and how marketers can "bend the growth curve" by implementing a subscription model. He discusses the engineering behind various subscription models and why most marketers should "at least" consider these programs. Key topics include: the difference between "promiscuous" and "heavy" buyers; balancing the "give versus the get," and how AI may drive the implementation of more models. Tune in to hear why charging for membership is a good idea.

Are subscription models the future of business growth? 📦 In this episode of CMO Confidential, former CMO Mike Linton sits down with Dr. Dan McCarthy, a renowned marketing expert, tenured professor at the University of Maryland, and co-founder of Theta Equity Partners, to uncover "The Truth About Subscription Models." Tune in to hear how subscription programs like DoorDash’s DashPass and Postmates are reshaping customer behavior, boosting customer lifetime value (CLTV), and driving competitive advantages in today’s market.

Key topics include:

- The fundamentals of customer lifetime value (CLTV) and its role in subscription success.

- Insights from Dr. McCarthy's groundbreaking research on the impact of subscription models on market share and consumer loyalty.

- How high-frequency customers, competitive dynamics, and strategic design affect subscription profitability.

- The surprising effects of subscription models on competitors and adjacent industries like grocery and dining.

- Practical advice for businesses considering implementing a subscription model.

Whether you're a marketer, advertiser, or business leader, this episode offers actionable insights into how subscription models can bend the curve of customer retention and profitability. Learn how AI and evolving consumer behavior are shaping marketing strategies in this dynamic space.

Subscribe to CMO Confidential for more expert insights, and stay tuned for future episodes featuring in-depth discussions on marketing strategies, leadership, and industry trends. Don’t forget to like, comment, and share to keep the conversation going!

#growthhacking #digitalmarketing #conversionrateoptimization #marketinganalytics #customerretention

CHAPTERS:

00:00 - Intro

01:14 - Dan McCarthy Insights

02:38 - Customer Lifetime Value (CLTV)

05:59 - Food Delivery Trends

09:28 - Dan’s Key Findings

13:16 - Postmates Subscription Model Analysis

17:40 - Subscription Model Winners and Losers

20:09 - Late Entry to Subscription Models

23:52 - Industries at Risk with Subscriptions

26:26 - Emerging Industry Sleepers

27:20 - AI Impact on Subscription Models

31:33 - Practical Advice for Subscriptions

35:36 - Acknowledgments and Props

35:40 - Like & Subscribe

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