The subscription model is engaging more consumers than ever. In the past few years, it’s been observed that consumers prefer the subscription payment model and remain loyal to the brands for longer durations. The growth that comes along with the subscription model is pretty positive, but there are many other vital considerations that you should consider. These include customer lifetime value, MRR, subscribers churn, acquisition cost and much more.
With changing consumer behaviour and needs, brands must carefully observe what they must add to their business to please their consumers. Subscription billing has a significant contribution to the growth and development. But there is more to it, and every company should monitor the subscription model and its related acquisitions to understand the process briefly. In this article, you’ll find an overview of different metrics contributing to your solid and consistent customer growth.
Metrics of Subscription Billing Model
CAC (Customer Acquisition Cost)
When a business acquires a new customer, it calculates the customer acquisition cost. It included different costs that are associated with acquiring one customer. CAC is calculated by combining the marketing, sales, and headcount costs. To find the actual customer acquisition cost, you divide the total cost spent on acquiring the new customers by the total number of customers acquired in the particular duration. It is essential for your business to know your CAC to see the ROI generated from the subscribers.
Compare the Lifetime Value with Customer Acquisition Cost
The LTC: CAC ratio helps businesses to analyse the return on investment on the customer acquired. It primarily tells you the overall profits you will probably generate from your customers by spending each dollar on the marketing, sales and promotion to reach the customer. If the LTC: CAC ratio is 1:1, you are at a loss. But if the ratio is 3:1 or 4:1, you are likely to generate good profits in the future.
Trial Conversion Rate
When a customer first enquires about a service or a product, they insist on getting a free trial. However, it would be best to observe how quickly a customer turns from a free trial to a subscribed and paying customer. You need to realise how long the trial period extends and the cost you incur to entertain your potential customers. Usually, the trial period lasts for a month before the customer gets a reminder to start paying the subscription bill. If the trial conversion rate is rapid, it indicates that your free trial period had a significant impact on your customers.
Monthly Recurring Revenue
The monthly recurring revenue is a prediction of how much profit you will make in a month. Only taxes, variable fees and one-time charges are excluded from it. All the monthly credits, refunds, and debts you incur are included in the MRR.
Various other things are considered in the subscription payment model. But most importantly, you need to find a good merchant that can provide you with subscription billing services.
As more and more people are interested in the subscription payment service, you can see new merchants emerging with potential offers. It would be best if you took your time to research good recurring payment services and compare their features, prices and benefits to pick the best one. You will truly see how subscription payments increase your conversion rate and promote customer loyalty.