Tracking subscription metrics can feel like the Wild West sometimes.
The industry has grown massively and shows no sign of slowing down. We are all constantly pioneering new ways to stay competitive and measure our efforts.
Metrics help you determine which of your processes work and which don't. You're probably already looking at monthly recurring revenue, customer acquisition cost, customer lifetime value, and other standard metrics.
Each of these (and others) can bring value to a subscription business, but trying to track everything leads to data fatigue, which won’t help you much in the end.
We chatted with Kettle & Fire's Director of eCommerce Niccolò Gloazzo about what he thinks are the 4 most critical subscription metrics eCommerce merchants should track.
Niccolò defines the opt-in rate as the number of customers who choose to go with a subscription. He calls this number the most important metric for subscription businesses to measure.
Ecommerce brands thrive when customers opt-in for subscriptions. Knowing your opt-in rate helps you determine how successful you are at making that happen. He notes that it is especially helpful for smaller companies or those selling individual items who want to get in on the subscription game.
You can measure the opt-in rate by identifying how many people chose subscriptions over a certain period and dividing that by your total transactions. So if you have 1,000 transactions in a day and 100 of them are subscribers, you have an opt-in rate of 10%.
4 Ways to Optimize Your Opt-in Rate
Simply having this information puts you at a good starting point, but the real goal is to increase your opt-in rate so you grow your subscribers.
Kettle & Fire does this by including the option to subscribe in every step of their funnel, making the whole experience obvious and easy.
Here are 4 tips he gives to make this happen:
Measuring customer churn is a staple metric for ecommerce vendors. For a subscription business, the goal is to calculate how many existing subscribers drop their subscriptions.
Niccolò sees this as a critical metric because teams that focus on reducing churn end up retaining the recurring revenue of those existing customers. All revenue from new customers builds on the foundation of those you already had in place.
You measure your subscription churn rate the same way you would with customer churn. Take your canceled subscriptions and divide that by the total number of subscriptions. Then, multiply that number by 100, and voila, you have your subscription churn rate.
Losing customers is never fun, so Niccolò offers a few ideas for how subscription ecommerce brands can prevent subscribers from canceling.
First, he suggests building a cancellation flow that leaves room for options rather than a simple all-or-nothing approach. For instance, you might create ways to encourage customers to adjust their subscription cadence or amount. Psst: We know a way you can do that!
You can also get feedback from customers as they go through this cancellation flow. Ask them why they want to cancel so you can identify patterns that need adjusting.
Niccolò notes that not all churn happens intentionally. He suggests looking at involuntary churn, which occurs with billing issues like card expirations. Having a plan to remind subscribers to update their payment info is key to preventing this type of churn.
Lastly, remind yourself that churn always happens. Of course, you want to keep your churn rate low, but looking for 0% is unrealistic. Comparing your company to industry standards (consumer goods and subscription box companies average around a 10% churn rate) could help you set more attainable goals.
If you choose to follow Niccolò's first piece of advice for reducing churn, you create an opportunity for a little bonus metric: measuring how many customers choose to delay or skip a shipment instead of canceling.
We've played with this metric for a while at ARPU and discovered that giving options to customers plays a huge role in retention. Often, a subscriber just has too much product and needs an easy way to scale back or pause to prevent pileup.
Measuring delays and skips can help you see how much this problem relates to churn.
Reactivation is like the anti-churn. It comes from someone who canceled their subscription and then joined again later.
Niccolò makes a point to differentiate this metric from saving someone from churning. While that has plenty of value, reactivation is about when an inactive subscriber becomes active again.
To measure reactivation, identify how many new subscribers over a given time already had accounts previously. Then, compare that number to the overall amount of new subscribers. 100 new subscribers with 1 reactivator would lead to 1% reactivation.
It’s helpful to know that this doesn't often happen, so the number is usually pretty low. But, subscription ecommerce does give you a chance to win back subscribers, especially if they run out of your product over time.
Any chance you have at reactivating subscribers will come through thoughtful engagement with those who have canceled.
Niccolò offers 5 ideas for winning these customers back:
Another trick that we've seen work well is adding feedback in the later emails. See if they'll provide any reasons for why they canceled so you can take that info back to your team and improve the product or subscription experience.
Niccolò calls this final metric "upgrade or downgrade." It looks at the frequency in which customers add or remove items from their subscription, leading to a change in the AOV.
Niccolò admits that there are challenges with creating a steady flow of upgrades. Still, he sees this as one of the most important metrics because it gives insight into customers' changes.
Measuring these changes requires you to first know your customers’ AOV for their subscriptions. After that, you identify how often they upgrade or downgrade over a certain period before comparing that number to those that don’t. If 10 customers out of 100 downgrade their order every month, you’ve got a 10% downgrade rate.
Though Niccolò wasn't optimizing for the upgrade/downgrade metric when we spoke with him, he still had a few ideas for how to increase your AOV.
Offer product swaps when customers want to reduce their subscription orders. This can keep things interesting for consumers when they feel bored of a product or have too much to continue ordering. You turn a desire to cancel into a chance to try something new.
Consider the time of year when promoting subscriptions. Niccolò changes his sales approach depending on the season. The holidays or the start of the year don't usually lead to subscribers with a high customer lifetime value. He suggests ecommerce companies might have better luck focusing more on single orders during these times than pushing subscriptions.
We'd also add two other suggestions we've seen work with our customers: shipping soon emails with upsells and delays.
Shipping soon emails are simple reminders that the customer's order is on the way. They also give consumers a chance to make last-minute decisions like adding or swapping products and offering the subscriber a chance to request their next shipment be delayed.
Delays help reduce downgrades because they enable customers to pause their subscription instead of canceling it. They often still want the product. They just might not need it as often as they expected.
ARPU makes it easy for Recharge merchants to send these reminders to customers, leading to better subscription experiences, higher AOVs, and less churn.
You don't have to measure everything to have a successful subscription business, but you need to stay on top of these core metrics.
We've outlined the 4 most critical metrics Niccolò gave us, but he also covered a ton of other helpful practices in our Subscription Ecommerce Live session.
If you'd like to gain more insights from industry leaders, subscribe to the free series and catch replay episodes.