Every subscription business aims to build a strong subscriber base and turn their customers into brand ambassadors. Valuable subscribers aren’t necessarily the customers who spend the most. Profitable customers advocate on your behalf, share valuable feedback, and actively interact with your brand. 

When identifying your most profitable subscribers, apply the 80–20 rule. This means that 80% of your profits come from 20% of your customer base. This article will dive deeper into the acquisition elements and metrics that can help you identify top-performing subscribers.

Why is it important to identify high-profitable customers?

At the highest level, three major hallmarks of a strong subscription model are

  • predictable revenue

  • customer loyalty, and

  • the ability to harness valuable subscriber insights

Predictable revenue and customer loyalty are key. Unlike traditional transactional billing models, subscription businesses frequently incur greater expense upfront to acquire subscribers. The payback on acquisition costs happens over the subscriber’s lifetime. 

img-2022-10-acquisition-campaign-subscriber-loyalty-and-recurring-revenue-970x685

Acquisition efforts provide more new sign-ups, attract loyal subscribers, and guarantee predictable revenue to ensure payback and growth. Benchmark data is critical to designing a strategy that works for your business specifically. 

Learn the latest acquisition trends and how they impact the subscription industry.

Identify your most profitable subscribers

The best way to identify high-performing subscribers is through data and insights. Use a mix of marketing, customer, and billing data to evaluate which acquisition methods produce high-value customers.

By harnessing key data points, you can leverage the most profitable campaigns and channels for meeting payback quickly. Let’s review the key elements and metrics that indicate customer profitability.

Subscriber acquisition key elements

Where do most profitable customers come from? There are two elements to consider:

Acquisition channel

An acquisition channel is a method by which you promote your product or service. Tracking acquisition channels helps you identify where valuable subscribers are coming from and where to invest your marketing dollars.

Acquisition campaign

An acquisition campaign, whether inbound or outbound, has a specific theme, focus, or offer with a defined start and end date. An effective acquisition campaign ensures: 

  • A return on investment on acquisition costs.

  • Revenue growth after you break even on acquisition costs.

Acquisition-data

Recurly customers, for example, can easily track each account's acquisition costs, channels, and campaigns. Then use this data to craft effective retention and growth strategies. 

Subscriber acquisition key metrics

What channels or campaigns are more effective? There are five metrics to track:

New sign-ups by marketing campaign
  • Definition: The total number of new subscribers acquired due to a defined marketing campaign.

  • Value: Assessing a marketing campaign’s immediate impact on customer acquisition. New sign-ups can bring in more potentially valuable subscribers.

New sign-ups by channel
  • Definition: The total number of new subscribers acquired through a specific channel.

  • Value: Understanding your best-performing channels–within a specific campaign or over time. The marketing campaign indicates the effective acquisition methods; the channel hones in on where you successfully reach your customers.

Customer acquisition cost (CAC)
cac formula
  • Definition: The total cost of acquiring a customer.

  • Value: Calculating the average CAC across all customers. Evaluating CAC against lifetime value (LTV) gives businesses a sense of their payback ratio. Evaluating the CAC of a campaign or channel tells you which is the most or least expensive relative to the payback.

Discover the most effective acquisition strategies and how global subscription brands drive growth. 

Retention by marketing campaign or channel
  • Definition: The average customer lifetime (number of months from signup to churn) of customers acquired by a specific marketing campaign and/or channel.

  • Value: Retention evaluates customer loyalty. Suppose you gain new subscribers during a specific marketing campaign, but they stay for one month. In that case, you’re less likely to recoup the dollars spent on acquiring those customers.

LTV by marketing campaign or channel
customer-lifetime-value-ltv-formula
  • Definition: The average lifetime value of subscribers acquired by a specific marketing campaign and/or channel. To calculate it, track your average revenue per subscriber and average churn rate.

  • Value: To understand where acquisition spending is effective in producing profitable subscribers. The total revenue from subscribers over their lifetime must surpass the total costs to acquire those subscribers.

Get the worksheet: How-to: Cohorts & line graphs to predict LTV

Increasing revenue using subscriber data

Your acquisition strategy must provide an influx of newly activated subscriptions, attract loyal subscribers, and generate predictable recurring revenue. Relying on a single source of truth for measuring your strategy performance is key to achieving this.

Maximize your revenue with the subscription management and billing platform that supports a variety of acquisition methods, provides performance insights, increases retention, and minimizes churn.