Subscriptions are becoming increasingly popular as a form of revenue for businesses. With so many different options available to customers, it can be difficult for businesses to know which key performance indicators (KPIs) are the most important to focus on. In this article, we will discuss the six most important KPIs for subscription businesses that can help ensure success.
1. Active Subscribers:
measures the total number of customers actively using the subscription service and is a key indicator of a subscription model’s success.
Active Subscribers = Total Subscribers – Cancelled Subscribers + New Subscribers.
2. Retention Rate:
measures the percentage of subscribers that stay with the subscription service over time.
It indicates customer satisfaction and loyalty.
Retention Rate = (Number of Customers at the End of a Period – Number of New Customers Acquired During that Period) / Number of Customers at the Beginning of the Period.
3. Churn Rate:
measures the percentage of customers that cancel their subscriptions over time.
It indicates customer dissatisfaction or lack of value from the subscription service.
Churn Rate = (Number of Customers Who Cancelled in a Period / Total Number of Customers at the Start of the Period) * 100
4. Average Revenue Per User (ARPU):
measures the average revenue generated from each user over time.
It indicates each customer’s value and willingness to pay for the subscription service.
ARPU = Total Revenue / Total Number of Subscribers
5. Average Order Value (AOV):
measures the average amount spent on each order.
It indicates the customer’s willingness to make additional purchases or upgrade the subscription service.
AOV = Total Revenue ÷ Total Subscriptions
6. Lifetime Value (LTV):
This KPI measures the total revenue generated from each customer over their subscription.
It indicates customer loyalty and the potential value of future customer investments.
LTV = Average Revenue Per User (ARPU) x Average Customer Lifespan.
