Running a successful subscription business can be a daunting task. You need to consistently deliver high-quality products or services to retain your customers and keep them satisfied. However, to achieve this, you need to track your performance regularly, and that’s where Key Performance Indicators (KPIs) come in handy.
KPIs are specific metrics that help you measure the performance of your business. They give you a clear picture of how well your business is doing and what areas need improvement. If you’ve been running your subscription business for a while, you know there are tools and subscription apps on Shopify and other platforms that help you track KPIs, but which ones should you be tracking?
This blog will discuss some of the most important KPIs for a subscription business and how they can help you run a successful operation.
1. Monthly Recurring Revenue (MRR)
One of the most important KPIs for a subscription business is Monthly Recurring Revenue (MRR). MRR measures the predictable revenue generated by your business every month. It is calculated by multiplying the number of subscribers by the subscription price. This KPI is critical because it shows how much revenue you can expect to generate each month, which allows you to plan your budget and investments accordingly.
2. Churn Rate
Another important KPI for a subscription business is the Churn Rate. The churn rate measures the percentage of customers who cancel their subscriptions each month and is a common KPI to measure through tools and subscription apps. A high churn rate can be a red flag, indicating that your customers are unsatisfied with your product or service.
A low churn rate, on the other hand, shows that your customers are happy with your offering and are likely to remain loyal to your business. Your ideal churn rate should be between 2-8%, but for subscription businesses, it’s typically around 6-8%. By tracking the churn rate, you can identify areas for improvement and take steps to reduce customer churn.
3. Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) is a KPI that shows how much revenue a customer will likely generate over their lifetime. It considers factors such as the customer’s subscription length and the amount they spend each month. This KPI is essential because it helps you determine the long-term value of your customer base.
By understanding your CLV, you can identify which customers are the most valuable to your business and focus your marketing efforts on retaining and upselling them. Moreover, businesses that have invested in making it a core and measured metric have seen 2X growth in less than one year.
4. Average Revenue per User (ARPU)
Average Revenue per User (ARPU) is a KPI that measures the average revenue generated by each customer. This KPI is important because it shows how much each customer contributes to your business. By tracking ARPU, you can identify which subscription plans are the most profitable and make adjustments to maximize revenue.
5. Cost per Acquisition (CPA)
Cost per Acquisition (CPA) is a KPI that measures the money you spend to acquire a new customer. It includes all the customer acquisition costs, such as marketing and advertising expenses. This KPI is essential because it shows the efficiency of your marketing and advertising campaigns.
By tracking CPA, you can identify which acquisition channels are the most effective and adjust your marketing budget accordingly. This can easily be done through merchant tools like subscription apps on Shopify and other platforms.
6. Retention Rate
The Retention Rate measures the percentage of customers who continue their subscriptions after the initial purchase. It is a critical KPI because it shows how well your business retains customers. A high retention rate indicates that your customers are satisfied with your product or service and will likely remain loyal to your business.
On the other hand, a low retention rate shows that you need to improve your offering or customer service. The best subscription businesses have a 65% retention rate after one year; even 50% is considered in the top quartile. By tracking the retention rates, you can identify areas for improvement and take steps to increase customer loyalty.
7. Monthly Active Users (MAU)
Monthly Active Users (MAU) is a KPI that measures the monthly active users on your platform. It is a critical KPI because it shows your users’ engagement with your product or service. Subscription businesses should aim for higher than 20% MAU.
By tracking MAU, you can identify the most popular features and make adjustments to improve user engagement. Additionally, tracking MAU can help you identify potential issues with your product or service that may be causing users to disengage.
8. Customer Satisfaction (CSAT)
Customer Satisfaction (CSAT) is a KPI that measures how satisfied your customers are with your product or service. It is usually measured through customer surveys or feedback. This KPI is important because it shows how well your business is meeting the needs and expectations of your customers. By tracking CSAT, you can identify areas for improvement and take steps to improve customer satisfaction.
9. Net Promoter Score (NPS)
Net Promoter Score (NPS) is a KPI that measures how likely your customers are to recommend your product or service to others. It is usually measured through customer surveys that ask customers to rate their likelihood of recommending your business on a scale of 0 to 10.
This KPI is important because it shows how well your business is meeting the needs and expectations of your customers. A high NPS indicates that your customers are happy with your offering and will likely refer others to your business.
Looking For Apps To Improve Your Subscription Business? Try Appstle!
Tracking KPIs is essential to a subscription business’s success, but why not make it easy for yourself with a subscription app that’ll track all of them for you? Appstle is a platform providing membership and subscription apps for Shopify with comprehensive merchant tools that enable them to track business progress and provide a personalized experience to their customers.
The Appstle℠ Subscriptions and Loyalty app is the top subscription app on the Shopify platform and is used by Shopify and Shopify Plus merchants. The Shopify Subscription app can help personalize payment methods, subscription boxes, and more. The app is available for download from the Shopify store, or you can check out Appstle’s website to discover their full range of solutions.
