“Did you know that it costs five times as much to attract a new customer than to keep an existing one?”
“It is six times more expensive to attract a new customer than it is to retain an existing one.”
“It costs 7x more to obtain a new customer than to keep an existing one.”
Customer Acquisition vs Customer Retention
Okay, okay. Top ranking articles from Google can’t quite agree on the exact multiple of the cost of Customer Acquisition versus the gain of Customer Retention. That’s partly due to the fact that measuring customer retention, as well as the time and effort that goes into it, isn’t always easy. But there is a clear consensus among businesses…simply put, keeping customers is easier, faster, and cheaper than winning new ones.
If that’s the case, why is there such an imbalance of efforts? On the acquisition side, we have funnels, pipelines, very intentional processes for bringing on new clients. But all too often after the sale is made, all we do is the bare minimum to fulfill the product or service.
A lot can be done. We can become more organized in our fulfillment or onboarding. We can create systems that generate “wow” experiences along the customer journey. We can find out why customers are canceling and then do something about it. We can find out when customers are likely to cancel and proactively engage them before that time comes. But you only know those details if you track and measure them.
That’s why we decided to build out 7 NEW SUBSCRIPTION REPORTS in Graphly. Check out the new reports and how they can help you increase your customer retention.
Subscription Stick Rate
Subscription Stick Rate or Customer Retention Rate measures the retention rate of existing customers who started the date range with an active subscription. The effective statement being made with this report is, “Of the active subscriptions we started with this month, 97.2% of them remained active. Now you might be wondering if this report is the exact inverse of churn or attrition. It’s close, but not exactly. The small distinction of the customer already having an active subscription at the start of the time period is what makes this report not an exact inverse of churn or attrition. Attrition could include someone who signed up during the month and decided to cancel within the same time period. Those customers are excluded in the Subscription Stick Rate report.
Subscription Tenure
Subscription Tenure shows you the theoretical subscription length. Similar to LTV (Lifetime Value) which forecasts the value a customer will be worth based on attrition and average subscription price, but different because it displays how long they are likely to remain active (in time) as opposed to displaying an amount (potential revenue). Subscription tenure is calculated by 1/ATTRITION.
Subscription Duration
Subscription Duration shows how long subscriptions have historically remained active over a given date range. While Tenure uses attrition to provide a theoretical subscription length, there is no theory with the Subscription Duration report. It looks at your actual results. It’s important to note that with historical results, the subscription duration can only be as long as you’ve been offering a particular subscription. Let’s say you started a new program 3 months ago and did a massive launch. You get 9 new customers. 3 only last a month. 3 cancel at the end of month 2. And 3 make it to the 3-month point.That results in an average subscription duration of 2 months. As time goes on and subscribers are given a longer chance to remain active, this number can increase. It will also, of course, take into account ongoing sign-ups.
Subscription Stick Rate by Age, Subscription Tenure by Age & Subscription Duration by Age
The 3 reports above all have “twin reports” that are grouped by age or what Keap refers to as a successful billing cycle. This approach moves away from displaying results obtained during a specific date range and instead groups all subscriptions regardless of their start date by their billing cycle. My favorite use for this is to identify where customers begin to cancel. If you can see that numbers begin to dip at 17 months, you can begin efforts at 14 months to increase usage, measure customer satisfaction, offer additional or free service – anything and everything you can to make sure customers are raving fans before meeting “the dip.” After some effort and ongoing measurement, you will likely see the dip move further down the road. Maybe the new dip is at 30 months. Regardless of where it is, if you know it’s location in time (successful billing cycles) you can proactively put systems in place and take the steps you need to, to retain customers for longer periods of time than you currently are today.
Subscription Attrition by Age
Graphly has had a Subscription Attrition report for a couple of years now. The report has been a favorite of those who have recurring revenue in their business. After creating the “______ by Age” reports above, we decided to give our Subscription Attrition report the same love. Now instead of seeing the attrition during a certain time period, you can group it all together and look at the attrition at the 6-month mark, the 1-year mark, etc.
This new “by Age” approach is pretty sweet. You might be asking why we need the standard ones that use date ranges. They certainly have their place as they show moments in time and how certain events that occur in your business impact your customer retention. So while the cohort approach is great for seeing some trends regardless of time, it’s also very important to measure specific points and time so you can replicate things that increase customer retention, and avoid repeating things that decrease customer retention.
Here’s the bottom line: you are likely neglecting customer retention. At a minimum, it’s probably safe to say it doesn’t get the same attention you give to customer acquisition. If this is true, we’re letting you off of the hook for previous transgressions because you might not have been capable of measuring your customer retention. But now you can, 7 different ways. There are no excuses. Set these reports up on one of your Graphly dashboards today and start improving your customer retention. Your bottom line will thank you.
Happy Charting!