Stick rate and the subscription model.
I recently took on a new client in the software/subscription space.
This is a space that I am very familiar with because I also run a software/subscription based company.
One of the big challenges with this business models is keeping customers from month to month especially when they have the option to cancel at any time (which is the norm)
Finding out what your churn rate (also known as retention) is, should be your first priority.
It’s hard to know what an average churn is because it will depend a lot on the type of business, who your customers are and the type of product you are offering.
I have seen businesses that lose over 30% of their customers monthly and others that manage to retain 90% of them.
The other way to look at it is how long on average does a customer subscribe for (Your Stick Rate).
Looking at it this way gives you an average value per customer which will also tell you how much a customer is worth to you and even how much you can afford to spend to get new ones.
If the cost of your service is £47 a month and the average stick rate is 3 months, then a customer on average is worth £141 to you.
If you could work on getting that up to 4 or 5 months, then the average value of a customer goes up to £188 or even £235.
That could make a massive difference to your bottom line and give you a lot more scope for customer acquisition.
Subscription model businesses are one of my favourites but to make them work long term you really do need to make sure you keep current customers happy so they keep subscribing as long as possible.
One way to do this is to keep your customer informed.
Don’t fall into the trap that the less you contact them the less likely they are to remember to cancel.
That rarely works as a good subscription model!