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Understanding Total Subscription Sales
You implemented your subscription program a few months ago. Now what?
Looking at your ecommerce subscription business data and dashboards from SaaS tools, such as Smartrr and Recharge, offers insight into how things are going.
Is your subscription program bringing in new customers? How much monthly recurring revenue (MRR) have you driven from new and returning subscribers to the business? Are customers leaving the subscription program after a couple of months? If so, why might that be the case?
At Tydo, the metric total subscription sales is defined as the total revenue you generate from orders with a subscription tag in Shopify.
Total subscription sales is a number that helps you make informed business decisions regarding customer experience, retention, average order values, and how to improve or optimize all of the above. It also helps with forecasting and optimizing inventory management strategies.
How to calculate Total Subscription Sales
Figuring out how much annual recurring revenue your business model is earning from subscriptions services is simple using this formula:
Total subscription sales = sum of all revenue from orders with a subscription tag in Shopify
Data source: Shopify
Example
Imagine you run an online granola brand, and you have a ‘flavor of the month’ subscription program. Customers can sign up and receive a bag of granola for a recurring price of $20.
In May, you have 500 total subscription orders. Those orders brought in $10,000 in sales. That same month, you had 700 non-subscription orders, bringing in $17,493 in sales. Your total subscription sales would be the revenue coming from subscribers only: $10,000.
Takeaway
Total subscription sales are like standing in line at the grocery store and using your rewards card to save money while the person behind you pays full price. The store sees both of you as customers, but one customer belongs to a specially offered program, and the other does not.
Why is this metric (total subscription sales) important?
You want to isolate subscribers, specifically total subscription sales, to see what subscriptions are doing for your business. Are they helping you grow and retain customers? By looking at this metric, you can gain insight into how much subscriptions are contributing to your bottom line. If they aren’t making a difference, you might want to optimize your program, offer VIP benefits, or change your product offerings.
Ready to level up your learning?
Read more about Total Subscription Sales
Total Subscription Sales vs. New Subscription Sales
The metric, total subscription sales, refer to the sales from all subscribers, whether they’re new or returning.
Isolating new subscription sales gives you an idea of how much annual recurring revenue (ARR) or monthly recurring revenue is tied to these new subscriptions. A subscription program should be about offering value to the new and existing customer base.
Look for ways to personalize the customer experience. From cross-selling to offering unique subscriber benefits, optimizing the subscription experience with functionality and flexibility in mind is critical in creating ongoing subscription revenue and increasing your conversion rate. Upsell where it makes sense based on customer preferences.
Create a post-purchase email flow highlighting the subscription program's benefits and perks to target one-off customers and invite them to sign up. This will increase your new subscription sales. Prioritizing full-paying customers and implementing strategies to encourage repeat purchases dramatically increases metrics like profitability, average over value (AOV), and customer lifetime value (LTV or CLV).
Total Subscription Sales vs. Returning Subscription Sales
Total subscription sales: the sales (or how much money you bring into the business) from all your new and returning subscribers.
Gaining new subscribers is important, but tracking the revenue from returning subscribers specifically offers insight into customer behavior, your subscription experience, and whether subscribers are sticking around.
With increasing customer acquisition costs (CAC), focusing on retention and predictable income or cash flow via returning subscribers helps business growth. Plus, it’s cheaper. To keep customers from canceling subscription services, you can try a few strategies to reduce churn:
- Create tiered subscriptions. Meet customers where they are and provide real value, such as exclusive perks, access to new products first, or additional savings during certain months. Customize subscription pricing to suit your most active customers and enhance those customer relationships.
- Give subscribers a reason to stay. Is there a certain amount of time before subscribers cancel? Is there a common reason for churning? Offering exceptional customer support, gifts, incentives, or special savings throughout the year gives customers something to look forward to and rewards them for loyalty.
- Keep subscriptions flexible. Periodicity is a significant factor in whether or not customers churn. Since monthly subscriptions don’t work for everyone, consider customizing the cadence of shipment depending on your product offerings. It is also helpful to make it simple to renew or adjust subscription accounts through QR codes.
Don’t expect customers to sign up for subscriptions after the first purchase. Nik Sharma says a path to subscription often looks like this:
First purchase > variety pack.
Second purchase > customer’s favorite flavor or variant.
Third purchase > subscription to that favorite variant.
Total Subscription Sales vs. Churned Subscription Sales
Total subscription sales: the total amount of money coming into your business (revenue) from new and returning subscribers.
Churned subscriptions sales is known as the amount of money or revenue lost due to canceled subscriptions (also known as churn). Here, you’re looking at churned customers or those who’ve canceled their subscriptions.
This number gives context into how much revenue you’re losing from churned customers and the impact on the business.
This data also helps you pinpoint which subscription retention strategies need more attention and potential causes for churn. Sometimes, the answer to customer churn is not so obvious.
First, you want to learn why they left. Talk to your churned subscribers or ask for their feedback immediately upon canceling their subscription.
Often, a high churn rate indicates a poor customer experience and offers insight into areas where improvement is needed. Limited offerings play a role in churned subscription rates, too. Depending on your product, you might want to try sequential subscription offerings.
It is important to create subscription programs that focus on customer retention and make sense for your customer and their needs.
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