Leveraging Data Analytics for Subscription Business Growth

Subscription businesses can be rewarding when operated properly. They allow you to drive recurring revenue while building a book of clients that can be ever-growing. But subscription-based business models may be more challenging to develop and operate than many think. There’s much more to building a subscription business than simply coming up with a product, monthly or annual pricing, and showing that product to the world. The most effective subscription-based businesses have created compelling products, determined the right price point for each subscription tier, and learned how to market their offerings to the right audience.

Doing these things would be next to impossible without leveraging data analytics. The strongest companies in the subscription business space use analytic data to understand what drives sales, improves client retention, and leads to better customer experiences — and you can too.

Types of Subscription Models

There are several different types of subscription-based business models out there. Some of the most popular include:

• Subscription Services: Subscription services are just as they sound. The customer makes monthly, quarterly, or annual payments and the company provides a service regularly in exchange.  
• eCommerce Subscription Model: eCommerce subscriptions are subscriptions for online-based products and services.
• Business-to-Business Subscriptions: These are subscription models that cater specifically to businesses. For example, a company may fill office water dispensers regularly in exchange for a monthly fee.  
• Data Subscription Businesses: Data subscription businesses provide exclusive access to data in exchange for a periodic recurring payment.
• Subscription boxes: Subscription boxes are sent at regular intervals to subscription customers in exchange for a recurring payment, such as a coffee subscription box that provides customers with new coffee blends monthly.  

Key Metrics for Subscription Businesses

There are several metrics that subscription businesses should keep track of. Here are some of the most important:

• Purchase data: It’s important for subscription businesses to keep driving sales. Customers will inevitably cancel their subscriptions from time to time, and your revenue could shrink if you’re not bringing new customers through the door.
• Customer retention rates: Customer retention rates relate to your ability to keep a customer for a predetermined period. For example, if you have an 83% annual customer retention rate, that means 83% of your customers stick around for one year or longer.
• Customer churn rates: Customer churn rates measure the customers who cancel your subscriptions. A 20% annual customer churn rate means that you lose about 20% of your customers on an annual basis.
• Customer lifetimes: Customer lifetimes relate to the amount of time your customers stick with their subscriptions. The longer the customer’s lifetime, the more money you’ll generate from each customer on the books.  
• Monthly Recurring Revenue (MRR): The total predictable revenue that a company expects to earn every month from active subscriptions. MRR is crucial for understanding your business's revenue health and growth trends.

Data Analytics for Subscription Business Growth: Why It Matters

Subscription business model analytics are integral to the successful operation of a subscription business. If you’re not paying attention to your analytics, you may have no idea how much revenue you can expect to drive each month, what your customer retention and churn rates are, or how long your customer lifetimes are.

Without tracking this data, it can be impossible to determine moves you can make to optimize your subscription business. Keeping an eye on this data can bring:

• Opportunities to optimize your sales process based on sales data
• Opportunities to optimize your service offering based on sales and customer retention/churn data
• A better understanding of cash flows within your business, which makes ordering from vendors more effective
• An improved understanding of customer lifetimes and the ability to spot problems by tracking changes in customer lifetimes

How Data Analytics Drives Growth

Subscription business analytics aren’t just numbers and statistics that you can look at from time to time. If you pay close attention to them, they can help you improve your offerings, marketing, and several other areas of your business, ultimately leading to growth in revenues and your business as a whole. Here are some of the ways you can use subscription data analytics to drive growth in your subscription-based business.

Personalizes Customer Experiences

Subscription-based businesses that build a loyal customer base will likely succeed and grow over time. But if a company has customer retention issues, it will fail if nothing is done to correct those problems. It often comes down to whether you use or don't use subscription data analytics.

Your analytics can tell you at what point your customers cancel their subscriptions, giving you an idea of where your business and offerings need the most work. And analytics can tell you about the audience that sticks around, allowing you to personalize customer experiences and resulting in better customer retention rates.

Optimizes Pricing Strategies

Competitive pricing is one of the keys to the success of any subscription-based business. If a customer has to pay 20% more for a membership with your company than they would for memberships with other companies, there’s a high probability that they’ll look to your competitors to meet their needs.

But when you use subscription data analytics, you can determine what price points are the most attractive for your audience. That allows you to optimize your pricing strategies, which can drive stronger sales and significantly improve your customer lifetimes.

Improves Product Development

Your subscription offering should be unique to your company, and you should ensure you’re consistently developing your products. But there’s a difference between simply developing products and using data to drive your development process. The latter will likely be far more effective.

When you use data analytics, you’ll be able to pinpoint the aspects of your current products that keep your subscribers coming back for more. You’ll also be able to identify holes in your current products that may leave something to be desired among your subscriber base. By using this data, you can create more compelling products that lead to more loyal subscribers.

Enhances Marketing Effectiveness

Before data analytics were available, one of the most popular forms of marketing was sending mailers. The idea was that if you blindly sent enough mail to enough people, some of those people would be interested in your product. Marketing consisted of playing the law of averages and taking advantage of known statistics.

Today, marketing is a much different process. You now have data at your fingertips that tells you exactly the types of audiences that would be interested in your products and, in many cases, where those audiences are. As such, using data analytics to inform your marketing strategies can drive your customer acquisition costs down.

Reduces Churn Rates

The longer your average customer lifetime is, the more money you stand to make from each customer that subscribes to your services. So customer loyalty is critical to the success of any subscription-based business. But if you’re not using data analytics, you may find that your customer churn rates are high and you have no idea how to reduce them.

When you employ data analytics in your subscription business, you may be able to determine what’s causing your customers to cancel their subscriptions.

Say you own a coffee subscription box business. Your data shows that most of your customers stick around for the first four months, and then you have an influx of cancellations in the fifth month. You need to find out what's happening in month five that’s driving customers away. Are the products in that box a lower quality than in previous months? Do you skip a month of shipments? Whatever the issue might be, data analytics will help you improve upon it.

Drives Strategic Decision-Making

As a business owner or executive, your decision-making skills are integral to the success of the business you operate. Make the wrong decisions in terms of sales, marketing, spending, or other areas of your business, and you could face hefty losses.

Data analytics can help you make wise decisions in all areas of your business. With up-to-date data, you can determine what types of products your customers like, what types of marketing drive customers to your business, and what price points are most effective at leading to sales.

Streamlines Operations

Data analytics also produces opportunities to streamline your business operations. When you operate your company based on the data it produces rather than knee-jerk reactions and hunches, you can rest assured that your company will run more smoothly.

Grow Your Subscription Business With Revolv3

If you want a payment partner that offers you a transparent look into your data analytics, look no further than the Revolv3 platform. Revolv3 is a subscription management and payment solution that’s specifically designed to help subscription-based businesses thrive. You’ll have access to easy to understand analytics, as well as a team of payments experts who are there every step of the way.

Revolv3 isn’t interested in charging your company excessive fees. The platform doesn’t even charge for failed transactions — which happen less often, thanks to Revolv3’s dynamic routing. And the platform is built to scale with your business. Schedule your free demo today to find out how Revolv3 can help your business thrive.