The 5 must-dos to master subscription customer acquisition
Subscriber acquisition impacts your business and revenue growth, and it’s one of the most important and challenging strategies in subscriptions. Acquisition requires a deep understanding of your product, subscriber preferences and behavior, and consumer loyalty.
This article will teach you the ideal subscriber acquisition strategy and how to optimize yours for acquisition success.
What is subscriber acquisition?
Subscriber acquisition is the process of getting potential consumers to buy your products–or in this case, subscribe to them. Attracting and converting new customers keeps your subscription business healthy and growing.
How to measure subscriber acquisition
Measuring acquisition success requires analyzing the right metrics–each one playing an important role in your strategy and attempts to maximize revenue. Alongside your marketing campaign KPIs, these are the key metrics you should monitor closely to track acquisition:
Customer acquisition cost (CAC)
This essential metric calculates all the costs associated with acquiring a new subscriber, including marketing, sales, and related headcounts.
Your CAC will tell you the effectiveness of your sales and marketing efforts and how long before you can expect to start profiting from your subscribers.
Lifetime value (LTV)
This is a forecast of the total revenue your business can expect from a single subscriber over the period they remain with you.
Subscriber LTV is an essential metric to keep an eye on. It helps identify your most and least profitable subscribers and how much money you should spend on acquisition to maintain profitability.
LTV: CAC ratio
Another way to measure subscription customer acquisition is to analyze the ratio and impact of lifetime value (LTV) to customer acquisition cost (CAC).When combined with CAC, subscriber LTV will tell you if you’re spending too much to acquire consumers in relation to what they’re worth.
LTV that exceeds CAC helps identify your most profitable acquisition campaigns. Aim for a 3:1 ratio as your standard. A 5:1 ratio, for example, means you could be growing faster and should invest more in your marketing efforts.
Watch on-demand: How to track, apply, and optimize acquisition for LTV
Monthly recurring revenue (MRR)
This is the sum of all recurring revenue–gains and losses–standardized into a monthly amount. While this metric isn’t specific to acquisition, MRR measures how much revenue your business can expect every month based on the total of all recurring revenue.
MRR helps understand your growth trajectory or the way subscriber acquisition impacts revenue.
Annual recurring revenue (ARR)
ARR is the annualized version of MRR. It shows how much recurring revenue your business can expect in a year.
ARR offers better insights for the long term–perfect for financial planning. Analyzing ARR from upgrades and new subscribers helps you identify the factors that impact your revenue the most.
Trial conversion rate
This formula will help you track trial conversion rates and understand their effectiveness in converting users to paying subscribers.
You can also learn why people aren’t converting and spot improvement opportunities by looking at the retention rate and LTV of subscribers who started with a free trial versus those who did not.
Subscriber acquisition benchmarks
Knowing how your business performs versus others in the industry is key to determining if your customer acquisition efforts are working.
The best acquisition tactics for your business will depend on your audience, resources, and overall strategy. With acquisition benchmarks, you’ll want to look at several components, like free trials, coupons and promotions, and gifting, to revamp your strategy.
The ideal subscription customer acquisition strategy
A strong customer acquisition strategy attracts qualified subscribers and predictable recurring revenue, ensuring:
A return on investment on acquisition costs
Revenue growth after breaking even on acquisition costs
It’s important to know the difference between acquisition and retention and avoid its confusion with reducing churn. Acquisition means gaining a new subscriber; retention is keeping that customer as long as possible to maximize LTV–which prevents churn.
Your customer acquisition strategy consists of pricing, packaging, and promotion. How you tailor these, however, relies on three essential elements: segmentation, payments, and experimentation.
Segmentation involves identifying your ideal consumer to amplify acquisition and LTV through higher-value subscriptions. Dividing your subscribers into different groups is an insightful method to analyze and compare performance between audiences.
The possibilities are endless for segmentation–plans, acquisition channels, location, demographic, interests, behaviors, churn likelihood, and more. However, cohort analysis is most often segmented by user acquisition or start date and is used to gather insights on MRR, marketing campaign effectiveness, LTV, churn, and retention rates.
Pro tip: Identify your ideal subscriber profile or ICP, and build personas based on your key buyers and their values. Then, provide timely, appropriate content along the member journey for long-term growth.
Want to catalyze growth? Focus on payments. Don’t think about payments as another infrastructure component. The more seamless you can make payments, the quicker you’ll grow.
Think of Twitch, for example. Their rapid international expansion played a significant role in subscription success. But that growth didn’t come without localization–enabling geographic expansion and unlocking new payment options.
92% of consumers globally prefer to make purchases in their local currency, while a third of consumers are likely to abandon a purchase if pricing is only available in U.S. dollars.
Pro tip: Think global, act local. Integrate with the right gateways and enable as many currencies and languages as necessary. Recurly makes this simple with 22 gateways, over 140 currencies, and 18 different languages to make cross-border transactions easy.
Testing, learning, repeating
The only way to discover your most successful acquisition strategies is through experimentation. You can test dozens of things within your acquisition journey, and some quick wins include playing with pricing, plans, and trials.
Every test you run should have a great end goal–delivering greater value or being more competitive.Create performance reports by cohort to track the test performance and identify high-profitable subscribers and trends.
Pro tip: When testing your acquisition hypotheses, consider business seasonality and how it impacts your testing audience and results.
One of the many benefits of the subscription business model is its data–use it to hone your strategy, create efficiencies, and anticipate challenges to keep your recurring revenue growing.
Five ways to master subscriber acquisition
Every subscription business is different. So are their consumers. Nowadays, brands can leverage an omnichannel approach to promote their products and draw the attention of leads–including organic search, social media, and email.
The best acquisition channels for your business will depend on your audience, resources, and overall strategy. Here are five ideas you can start testing today:
1. Allow free subscription trials
Trial periods let cautious customers test before they buy, experiencing your product’s value first-hand. For this, you’ll have to decide whether or not to require a credit card to start the trial.
Asking for payment information creates a seamless experience where the prospect becomes a subscriber automatically without entering any additional information. This is useful when a trial requires a few steps to set up the account and configure preferences.
However, by not requiring a credit card, prospects may be more inclined to sign up as they perceive the trial as risk-free. Although conversion rates may be lower at the end of the trial period, only committed prospects will stay.
Pro tip: Test different trial lengths and card information requirements. Stick to the strategy that works best for your subscribers.
As you can see, 42% of subscribers convert after a 33-day free trial that requires billing information. However, these numbers vary according to industry, customer type, and product.
2. Offer promotions & discounts
Everyone loves discounted pricing. Used mainly, but not exclusively, in the direct-to-consumer (DTC) realm, discounts are a great way to increase awareness and adoption.
You can target specific subscriber groups with a special offer to upgrade to a higher-value plan or encourage them to complete their checkout if they’ve abandoned their carts.
Experiment with different promotions and terms. As you can see, most subscribers find 20% and $10 discounts appealing–something to keep in mind when designing your strategy.
Pro tip: Make sure you add an urgency element to the purchase or set a minimum purchase amount to increase their spending.
Get the guide: 10 tips to grow your subscription business using discounts
3. Give attractive coupons
It may seem counterintuitive to give discounts. However, U.S. subscribers redeemed 18.8 million coupons in 2021 alone. Coupons are a great way to drive revenue, awareness, and adoption–generating buzz around a new product or enhancing your referral programs.
When designing your coupon campaign, ensure the discount you're offering and the subscriber conversions you expect to generate from it will result in profits, not just revenue.
Pro tip: A/B test your messaging, discount amounts, or terms to understand your audience better and optimize your strategy.
4. Encourage upsells & cross-sells
Suggestive selling works. Upsells and cross-sells are proof of that. Let prospects and subscribers know about other plan options they might be interested in or add-ons they hadn’t thought of trying.
An effective way to do this is at the end of a trial period or checkout. Subscribers may have tried your basic plan but would benefit from a higher tier or a complementary service. Suggest this option at their time of conversion.
5. Gift subscriptions plans & cards
Let raving fans spread the love with gift subscriptions–another valuable subscriber acquisition tool. There are two types of gift subscriptions: gift cards and gift plans.
Both types are popular, especially during the holidays, for those who don’t want to shop for a physical gift. People like gifting subscriptions because they are:
Easy to purchase
Easy to deliver
Additionally, they expose your company to potential subscribers. Nearly 70% of U.S. consumers want to give and receive subscriptions. If you’re not offering gift cards and subscriptions, you’re missing out on the opportunity to boost revenue and signups.
Supercharge your subscribers
Understanding the power of promotions is key for acquisition–ask MarketMuse. They keep their recurring revenue growing through experimentation and optimization.
Revamp your customer acquisition strategy with the subscription and billing platform built to support a variety of acquisition methods, provide insights into performance, increase retention, and minimize churn.