A ContentBiz reader just wrote in asking for quick basics on what a subscription retention rate is and how should you track it. Here is a brief overview:
Your retention is the % of paid subscribers to your service who after a particular term of service continue to pay for it.
1. If you are month-to-month, you will track retention each month based on % of the original buyers haven't cancelled their accounts. You'll probably find after dropping sharply over a few months, that number stabilizes a bit. However, most month-to- month publishers tell me that they find very few subscribers make it to a full year. In addition to the % of the current actives each month who then pay again for the next, you'll also need to track average account lifetime by original source.
2. If you are selling for a longer term (generally a year) you will track retention based on what percent of paid annual subscribers go on to pay for another term. You do the math based on how many paid subscribers in the group you are tracking renewed this particular time, not how many out of the total overall original group. You should always track by original source code so you know which of your subscriber acquisition investments pay off the best over the lifetime of the customers from them. You'll find surprising differences.
3. You will also want to track long-term/annual subscribers separately as groups depending on how many terms they have already been paid subscribers with you. You'll find first-time renewers (which some publishers confusingly call "conversions") will always renew at a much lower rate than second-time renewers, and these in turn will be at a slightly lower rate than people who are renewing for their 3rd time. From that 3rd time on it usually steadies out and remains about the same percent every year.
4. Never look at just the expiration-to-renewers number in one single month and declare "this is our renewal rate." These things vary from month to month too much for one single month to be used for reliable forecasts. Instead look at a period of 3-6 months that are already "finished" renewing (i.e. the orders that are going to come in, are in, sometimes you do have stragglers).
5. Always also track by effort. This is the marketing campaign or any type of notification that appears to subscribers that tells them they need to renew or they need to contact you if they don't want to be auto-renewed. You may find one particular effort is much more effective than others, and juggle their order of presentation or your creative to get better results. Again, never judge by just one month's effort results, you need a few months worth to get statistically relevant data.
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