Subscription services have proven to have staying power. Subscription brands have the business model that offers customers the option to pay a recurring price for a curated experience of their products, as opposed to purchasing them as-needed.
Subscription services have been around for a while now, but in recent years they’ve really gained traction and at this point are sweeping around the globe at record speeds, ultimately growing the industry by more than 435% in the last 9 years. And the rapid growth doesn’t stop there, with industry experts projecting that the market will be worth over $240 billion globally by 2022 — making it one of the most lucrative eCommerce trends to emerge in recent years and one that all brands would be wise to keep an eye on, whether they plan to launch their own subscription service or not.
For brands looking to expand their eCommerce presence with a subscription service model, there are a few things you should know before diving headfirst into the industry. For example, while there are many eCommerce KPIs that you can track when you utilize a subscription business model, there are also many different KPIs specific to eCommerce subscription brands to have on your radar. After all, if you’re looking at the wrong KPIs you could lose focus on your overall subscription campaign.
Data-Driven eCommerce Subscription Marketing Strategies
Data-driven marketing strategies are a typical facet of running a data-driven business. When applying this method to optimizing your subscription service, make sure that the data you’re looking at has the most relevant insights. You’ll still be looking at customer data during this process, just specifically the data that is produced based on the behavior of your subscribers, instead of the entirety of your consumer base.
One way of using a data-driven approach to your subscription model is to monitor your churn rates (more on those in a bit!) to determine when they are peaking, then you can implement a new marketing strategy to help eradicate that increase in churn.
Using a data-driven mindset is particularly helpful in the early stages of launching your subscription when you are testing the waters to see the best ways to attract a new audience, when you are perfecting your email marketing efforts, and finalizing the messaging surrounding your subscription. For example, with a data-first approach you can experiment with things like messaging frequency in order to analyze its impact on customer retention and total subscribers.
This isn’t to say that the data can be tossed out the window as soon as your subscription is in full swing. On the contrary, continuing putting data at the forefront of your eCommerce subscription marketing strategy is what will allow you to tweak it as you go, making informed changes and adjustments based on user behavior. Ultimately, without a data-driven approach to your subscription model you’ll make it increasingly difficult for yourself to accurately monitor the success of your subscription service.
Top Metrics for Subscription eCommerce Brands
1. Churn rate
Arguably the most important metric to track for subscription eCommerce brands, churn is the moment when a subscription ends without being renewed. Since renewal = retention and customer retention is the name of the subscription game, think of churn in terms of golf rules— the higher the rate, the worse your churn is.
The best part is, it is very easy to calculate your churn rate. Just take the percentage of your customers who leave your service over a given period of time and divide it by the total remaining customers you have. Your churn rate is the amount of people you’ve lost over a specific period of time, which means you can easily find out the churn of your entire subscription service or compare the churn of each month to monitor ongoing success.
2. Lifetime value
Also known as your LTV, lifetime value is the amount of money a specific customer is expected to spend on your brand over the total course of their relationship with your company. Since subscription services are dependent on the fact that customers will keep coming back for more month after month, keeping a close eye on the lifetime value of your customers is a necessary component of maintaining customer retention.
On a base level, the lifetime value of your customers will allow you to do a temperature check of your subscription in order to determine if your customers are happy or unhappy with your service. It is also one of the first indicators that something with your subscription service has gone wrong. If you see that your LTV is quickly declining, it means you need to begin implementing changes right away.
Additionally, the lifetime value of your customers will determine many factors about your subscription service such as how much you are able to pay to acquire new users, the monetary effects of losing users, and how the changes you make to your products affect the total revenue you are able to bring in from subscribers.
3. Email performance
Emails and subscription services go hand in hand. However, with so many subscription metrics to track, it’s easy to overlook all that it takes to properly analyze your email performance. To ensure no relevant email metrics are overlooked, here are the ones to track for your subscription service:
- Open rate
- Click-through rate
- Conversion rate
- Bounce rate
- List growth rate (which should coincide with your subscription growth rate)
- Forwarding rate
- Engagement over time
4. Shipping metrics
Similar to tracking email performance, when analyzing the efficiency of your shipping process there are a variety of metrics that can be tracked to optimize performance. One way of doing this is by generating a detailed and conclusive shipping report that breaks down your shipments in progress, notifies you the moment a shipment has been updated or delayed, and tracks the progress of individual packages as well.
To get started diving into your shipping messages in a weekly report, try Wonderment’s order tracking app and start tracking your shipping performance today.
5. MRR
While it’s important to have a clear understanding of how your subscription is performing currently, it’s also a good idea to make projections about the future to set accurate expectations for your service. Calculating your MRR (monthly recurring revenue) allows you to do just that by measuring the total amount of predicted revenue on a monthly basis. Additionally, understanding your MRR allows you to more easily track the success of your service month-to-month and gives you a greater insight into when to plan your momentum.
To calculate MRR:
- Take the average revenue per subscriber
- An multiply it by the total number of accounts you have that month
- Boom! You’ve got your MRR.
6. ARR
Just like how the MRR paints the monthly picture of your subscription service, the ARR (annual recurring revenue) paints the yearly picture. By tracking both you will be more prepared to plan for accurate short and long term goals for your service. But wait, unfortunately calculating ARR isn’t as easy as simply taking your MRR and multiplying by 12. There are just a few extra steps you need to take in order to gain the most clear picture possible of your annual recurring revenue.
To calculate ARR:
- Take the MRR at the beginning of the month
- Add that to the MRR gained from obtaining new customers that month
- Add the MRR change gained from converting new subscribers that month
- Once you have that total, subtract the change lost from churn for the month
- Then, multiply that by 12
- Boom! You’ve got your ARR.
7. ARPU
Now that you’ve got a firm grasp on the overview of your subscription service, let’s take it into the individual level and calculate the ARPU (average revenue per user) aka the “vanity metric” of subscription services. However, when calculated accurately and regularly, your ARPU can offer you invaluable insights into the success of your subscription especially when you put it next to your customer acquisition cost (more on that in a moment!). Additionally, your ARPU is a great way to monitor the scale of your subscription, as well as help you in strategizing short and long term goals in addition to those metrics mentioned earlier.
To calculate ARPU:
- Take the sum of all your active customer MRR
- Divide that by the total number of customers you have in that same month
- Boom! You’re looking at your ARPU.
8. CAC
Now for the flipside of your ARPU, it’s your customer acquisition cost (CAC). This metric shows you exactly how much you are spending to successfully acquire a new customer, and is therefore one of the most valuable metrics to track in order to determine the overall success of your subscription. Like I mentioned a moment ago, when you place your ARPU and CAC next to each other and your CAC is the bigger number, you’ve got some serious strategizing to do because that means that it is costing you more money to obtain customers than those customers are going on to spend on your service. In order to efficiently scale, you want that CAC to be as low as possible.
To calculate CAC:
- Reach out to your sales and marketing teams, you’ll need their data for this one.
- Take the total cost of your sales and marketing efforts
- Divide it by the total number of customers you’ve acquired
- Boom! There’s your CAC.
9. Retention rate
Last, but certainly not least, is calculating that sweet, sweet retention rate. Because retention is built into the ethos of a subscription model, some strategists make the mistake of overlooking this metric for some of the flashier data points I talked about above. However, assuming the success of your subscription automatically translated to a high retention rate is one of the first mistakes brands can make. Your retention rate is the percentage of customers who continue their subscription for the duration of any determined length of time. Meaning, that this metric is every-changing and therefore requires consistent attention to look for any sudden peaks for valleys in retention.
To calculate your retention rate:
- Think of it as the opposite of your churn rate
- Take the number of active users who chose to continue their subscription
- Divide that by the total number of active users
- Boom! There’s your retention rate.
To set your subscription service up for success, it’s important that you keep a close eye on these metrics and use them to implement changes to your service in order to increase revenue and keep that coveted retention rate as high as possible. To ensure your subscription boxes and packages are sent out and arrive on time, you’ll need a shipment app that is up for the task. The Where’s My Order? app by Wonderment is ready to be the secret to your subscription service success (say that five times fast). To get started, book a demo today.
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