Guest post by Bethany Wright, Community Manager at Subkit.
The word ‘metrics’ can fill even the most experienced entrepreneur with dread. Which numbers to track? Where? How? It doesn’t help that landscape is bogged down with confusing acronyms and various “vanity” metrics, which might tell you how many eyes you’re getting on something—but not how they feel about it, or whether they stick around. To get your metrics right, any budding entrepreneur needs to think holistically, but also know where and how to prioritize. Here, we use Sarah, CEO and Founder of Nutribloom, to show you how to identify and then assess 5 key metrics for your subscription-based business.
Metric 1: Lead audience growth
A “lead” is anybody you can be reasonably sure will be interested in the service you have to offer, either because of where they live or their age, or their engagement with similar interests and hobbies. Growing your lead audience means building an audience of those potential customers in a dedicated place, like an email list (or on Subkit), through dedicated marketing initiatives.
You should begin by tracking how many leads you attract on weekly and on a monthly basis. Note which types of marketing initiatives tend to bring in more leads, and which don’t. Learn how to easily grow your lead audience here.
TOP TIP: If you’re paying for advertising, make sure that how much you’re paying doesn’t add up to more than you’re gaining for how many customers you’re converting.
Metric 2: Audience engagement
There are lots of different metrics you can use to track audience engagement: page views, time on page, pages per session, new visitors and returning visitors. Together, these numbers will tell you a lot about how much traffic you’re getting (and how engaged those visitors are). However, we know that it’s a lot to track at once. At Subkit, we recommend keeping it simple. To begin, focus on who is engaging and what they’re engaging with. Let’s break this down:
- Step 1: You already know your leads are relatively interested in the service you offer. So, you can begin by creating and sending content to them that is built around your business. What stories can you tell? What incentives can you offer?
- Step 2: Analyze the engagement your content receives. You’ll want to focus on two, specific areas: which leads are interacting with your content the most regularly, overall, and which pieces of content are getting the most engagement, generally.
- Step 3: Double down on what works. The type of content that gets the most interaction from your leads is the content you’ll want to start creating more of. Find ways to specially target and reward your most engaged leads.c
These examples are very simplified but once you have a view on who is interested in your content and what content they are interested in, you can then move onto creating a subscription plan based on this highly valued content and target it to those that are most engaged with that content.
So, back to Sarah. Having identified who in her audience is the most engaged and what content they find most interesting, Sarah is ready to create her subscription and start marketing it to her leads in order to drive conversion (Metric 3). Sarah decides to create a monthly subscription bundle for £15 which includes a bi-weekly 30-minute yoga session and a bi-weekly newsletter and recipe. Using this new subscription, Sarah now starts to contact her most engaged leads to test their interest.
TOP TIP: not sure what to price your subscription? Why not create a test price and ask your leads? That way you can validate your subscription offering and price before you share it with more of your potential customers.
Metric 3: Conversion rate
What percentage of your lead audience are you regularly turning into paying customers? The average conversion rate from landing page to a customer is between 2-5%. This is what you should be aiming for as a starting point.
Sarah now has a pool of leads that have converted to customers and are paying for her subscriptions. Sarah, therefore, has monthly recurring revenue (MRR - Metric 4). Sarah’s aim should now be to either maintain this revenue or to grow her revenue depending on both her business expenditure and her business goals.
Let’s break this down further:
The aim of any profitable and sustainable business is to consistently make more money (profit), be it monthly or annually, than it is losing (expenditure). So, if Sarah is earning less from her paying subscribers per month than she is spending, then Sarah will need to grow the number of subscribers in order to cover her costs. If, however, Sarah is making more money per month from her subscribers than she is spending, then Sarah is in profit and can therefore choose whether to maintain this amount of profit or look to grow the profit by increasing the number of subscribers.
TOP TIP: falling under this conversion rate? Why not reach out to your leads and ask why they decided not to pay for your subscription service. They may unveil reasoning that will help you to better market, price or bundle your subscription offering. Customers always know best!
Metric 4: Monthly recurring revenue (MRR)
You should create an easy way to track and monitor your monthly revenue. MRR is a great tool for supporting setting goals and monitoring growth.
Sarah now has an active pool of customers which she wants to retain (Metric 5). If her customers start to lose interest in Sarah’s offering or no longer see value in the subscription they may decide to leave (churn). Sarah therefore must focus some of her efforts on retention activities in order to ensure she has low churn rates.
Metric 5: Retention rates
Retention can be a tricky thing to track. The most obvious metric might be tracking how many of your customers stick around month-to-month. Easy, right? Not so fast. The key to truly understanding your retention rate is to figure out why your customers continue to subscribe. How might you find that out? Even easier. Ask them!
There are numerous ways to contact your customers and talk to them about what they like (and what they might not!) about your service. You can contact them with direct emails, or you can set up simple marketing surveys. Ask customers what they like about what you do, what they want to see more of, what they don’t like and if they’d recommend you to their friend etc. Then take the time to really analyse and utilise this feedback. It will help you keep your customers happy and can be your guide to iterating your existing subscription or inspiration for new subscriptions. Yet again, your customers always know best!
Metric 6: Churn rate
It’s sad but it’s true. You will lose some of your customers and you should be actively tracking the impact this has on your MRR. But, once again, it is essential to understand why your customers have decided to leave. Once again, the trick to figuring this out is simple: just ask.
Having used Sarah as our case study example you now have 6 metrics that you could start using today for your subscription-based business. But, here at Subkit, we understand that no one size fits all. You need to think about your business concept, your customers and your goals.
Want to discuss your business concept idea or potential metrics with a Subkit business expert? Contact firstname.lastname@example.org now and we’ll help you on your entrepreneurship journey.