Retention rate is such a misunderstood metric in any business model but especially in the subscription eCommerce business model. There are so many ways to run into issues with measuring retention accurately and in a routine cadence so that you can actually make critical decisions from the data. If you want to start leading your business from your deep-funnel retention metrics upfront this this checklist will help you avoid common pitfalls.
1. Having an Ill-defined Active Subscriber
Including prepaid, non-recurring orders and customers who are regularly skipping shipments can significantly impact your customer retention and LTV analysis. In leading eCommerce platforms like ReCharge, Bold, or Cratejoy – ‘Active’ simply means that an individual customer has a subscription and has not actively cancelled.
2. Staying in the Shallow End
Most brands only look at top-line customer retention data, but there are many factors that can impact retention and the power is in understanding how retention shifts based upon things like discount, product, or acquisition source. Once you have identified trends in retention across these variables your optimization strategy will look much more cross-functional including your marketing and acquisition team, product/curation teams, and customer service team.
3. Ignoring Charge Frequency
Renewal cycle length will impact your timeframe considerations and may skew the data when viewed in aggregrate. For example, a bi-annual subscription will not be eligible for their first renewal until six months after their sign-up, while monthly subscriptions will be available for renewals every 30 days. When analyzing cohorts from each subscription type, be sure to set the timeframe of the report to allow for new subscribers to reach renewal maturity, i.e. exclude the last 30 days or last 180 for bi-annual.
4. Blending Active & Passive Churn
Determine which customers are being lost due to credit card declines vs customer cancellations to drive customer retention strategies separately. There are different strategies to leverage for recovering revenue from active vs passive churn customers. For example, you may launch a win-back campaign for customers who actively cancelled with messaging touching on their cancellation reasons. For a passively churned customer you may A/B test different dunning strategies for charge collection. Learn more about why your customers are churning.
5. Dirty Data In, Dirty Data Out
Think about your data capture and structure in areas like Cancellation Reason so you can make actionable decisions from your metrics. If you offer a picklist make sure your “reason” values are specific enough to take action from and segment follow-up campaigns from. If your form capturing Cancellation Reason leverages any open text fields have a data normalization strategy and timeframe set for when you will make sense of that data and pull actionable insights from the customer feedback.