1. It tells you if your subscription business has a financial future (or not)
If your subscriber retention rate is low, you will spend a huge amount of money acquiring subscribers who fail to stay with you. This means you are unlikely to ever recoup the marketing money you have invested to acquire subscribers in the first place leading to painful and expensive failure. A recent survey by the UK's Royal Mail revealed that an astonishing 59 per cent of subscription box companies kept their subscribers for less than three months which helps explain the number of business failures in this sector.
2. It links acquisition costs to lifetime value creation
As a rough guide, any subscription business should aim to create three times plus more revenue from a subscriber over their lifetime than the marketing cost of acquiring that subscriber. A high retention rate generates high lifetime value which in turn enables you to spend more marketing money acquiring subscribers and still hit the target 3 to 1 lifetime value to subscriber acquisition cost ratio.
3. It tells you if your acquisition marketing is any good
Breaking down your subscriber retention rate so you can split out the retention rate for subscribers renewing for the first time, allows you to see if your acquisition marketing is successfully attracting subscribers who are likely to get ongoing value from your subscription product or service. If this first-time retention rate is low, your acquisition marketers are mis-selling your product proposition or your product proposition is not strong enough to deliver ongoing subscriber value - or both!