January 21, 2022 | Authored by: Roy Barak
Five key metrics to monitor your subscription business success
If you can’t measure it, it’s difficult to manage it.
There’s no truer statement in business today.
Data is the driver, but only if it can be effectively measured and analyzed in a way that supports decisions and drives action. At Vindicia, we’ve been gathering, monitoring, and analyzing subscription data for longer than anyone else in the industry, 18 years. But more than that, we know how to measure subscription business performance against the metrics that really matter. It’s called subscription intelligence, and it’s how we provide our customers with true value that leads them towards success.
What are the metrics you should be monitoring to ensure the success of your subscription business? Here’s our recommendations:
Payment capture rate
Recurring payments are the golden goose for subscription businesses, supporting long-term consumer relationships as well as ensuring a continuous revenue stream. But when payment errors occur, the consequences are huge. Industry-wide, we see around 20% failure rates. Measuring the payment capture rate is critical for understanding the efficacy of your payment systems and the level of passive churn at any given time. At Vindicia, we work hard to reduce subscription churn and boost payment capture rate, directly saving our customers tens of millions of dollars each and every month.
The business world is in the midst of the “Great Resignation,” with a detectable rise in the number of “Boomerang Employees.” Employee turnover has a widespread impact on an organization, in terms of business continuity, morale, and competitive fitness. Creating a workplace that is supportive, balanced, and resilient is fundamental to employee satisfaction and battling attrition. The goal? Constant employee engagement. How? By tracking employee retention rates so you know when you can do better and what you need to do to improve the workplace environment.
What makes a “good” subscription? One that is satisfying for the customer. This much is obvious. However, measuring customer satisfaction is tricky because it is such a complex, subjective notion, covering so many areas of the brand-customer relationship: product performance, service and support, brand values…the list goes on. For e-commerce companies who manage relationships with customers directly and can more easily track all their interactions, we recommend Net Promoter Score (NPS) as the most reliable and accurate metric for customer satisfaction.
Customer lifetime value (CLTV)
A subscription is not a one-off purchase. When a customer subscribes, it is the beginning of a long-term relationship with the brand, made up of a complex series of touchpoints and experiences. That’s why it is essential to track the lifetime value of customers – how much revenue the average customer represents over the entire lifetime of their relationship with the company. This metric gives subscription businesses the information needed to improve their marketing strategy at different points in the customer lifecycle and maximize potential revenue at every moment of the customer journey.
Customer acquisition cost
While retention is critical, you’ve got to acquire customers before you can retain them. That’s what the customer acquisition cost (CAC) metric is all about. What is the average total cost of acquiring a new subscriber? This metric is key to optimizing your acquisition strategy and making decisions about where and how to invest acquisition resources. For e-commerce and subscription companies, gain even more insights by calculating the CLTV/CAC ratio – this compares the cost of acquiring a new customer with how much revenue they will bring to the company throughout their lifetime as a customer. While the ideal CLTV/CAC ratio can vary across industries and offerings, it’s generally preferred to keep this ratio between 3 and 6, and adjust your sales and marketing spend accordingly.
What are your favorite metrics?
Subscription data opens a window into the performance of your business, but it’s the metrics used to analyze the data that will really help you build better e-commerce connections and smarter subscription journeys. No two subscription businesses are alike, and every business needs its own customized retention strategy and KPIs. Make sure to focus on the subscription metrics that can serve you best in paving the way to success.
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