In a recent interview with Diane, she spoke frankly about some of the ways that she thinks about data-informed decision making, reporting, and vanity metrics.

Customer-derived data

Whether you’re considering an on-site quiz or simply evaluating what fields to include/exclude from sign-up forms, it’s important to have a strong understanding of what you’re asking for, why, and how it will be used. Smol uses a quiz to capture usage and behavior data from their customers that is then used to determine product recommendations and to inform future marketing efforts. A quiz, in and of itself, is not enough though. You need to have a clear plan for how the data will be used and why you are asking your customer for specific information. As a general rule of thumb, you should review each question through the lens of:

Is there…

1. A different way to capture or infer this information?
2. A compelling use case for this data?
3. A clear value to our customers in the response to this question or will it be considered intrusive or self-serving?

Customer lifetime value (LTV)

Is there any KPI or data point that has received more attention, scrutiny, or consternation than the lifetime value of a subscriber? At a surface level, it may seem as though the definition and corresponding calculation for this metric is fairly straight-forward. As Diane points out though, “you need to calculate the LTV according to your business model.”

With subscription businesses, this is all the more true. A simple analysis of LTV based on lapsed subscribers ignores the highest value customers that, by definition, have an as-of-yet unknown LTV because they are still actively purchasing and their net value will increase over time until an unknown point in the future when they churn. In this situation, some subscription businesses attempt to predict future orders for current subscribers which is “going to look better for the investors, but realistically, that’s not what your LTV actually is.”

The other major error that operators make is ignoring gross margin. This becomes especially problematic when you attempt to benchmark your subscription business against others. Depending on the rigor and logic used to calculate LTV, “you’re either going to be very happy about yourself or very depressed if you’re comparing the wrong kind of metrics and [Diane has] made the mistake in the past as well.”

The three most important things to consider when analyzing LTV, average customer value, or any other similar metric is to:

1. Create a definition that is consistent with your business, product and customer.
2. Stay consistent in your definition – the goal is to keep the goal the goal.
3. Always factor in customer acquisition costs (CAC) and optimize against the LTV:CAC ratio, not the LTV alone.

Vanity metrics

Vanity metrics abound in virtually every business. Marketing teams in particular often fall prey to tracking all of the wrong things. As Diane points out, subscription businesses need to be particularly careful about focusing on vanity metrics such as visits to your site that can be artificially inflated as your customer base grows because you will “get a lot of visits of people who come and amend their subscription.” It can be easy to fall into the trap of comparing your site traffic numbers to more traditional ecommerce stores and think that your business is much stronger when in fact your are tracking a metric that is significantly impacted by the nature of your business model (subscriptions in this case) and therefore not a great indicator of growth or strength.

The other vanity metric that Diane often sees with subscription businesses in particular is the size of your customer base. It is tempting to track the sum total of customers, but within the context of a subscription business this is a misleading metric at best and a disingenuous one at worst. If tracking the gross number of customers over time, you will need to segment it into active vs lapsed subscribers to give a real sense of the overall health of your subscription business. To Diane’s point, “if 75% of your subscriptions are off, I don’t really care if you have thousands and thousands of them.”

Your most valuable acquisition channel

Every subscription, and ecommerce business in general, spends a lot of time, resources, and money on customer acquisition. As you begin to grow and scale your subscription business, you will naturally experience churn. At scale, these churned customers can counter-intuitively become your most valuable “acquisition” channel and merchants should devote a significant portion of their efforts on re-engaging these lapsed customers.

Not only are these lapsed customers much more likely to purchase from you in the future than a net-new customer, but with the right tactics you can activate them “at a CAC of zero, which is quite an upside.” 

With this in mind, you should make sure that you are capturing relevant data when customers churn and then building reactivation programs over time that can predictably bring subscribers back while considering net-new customer acquisition costs (CAC) compared to any material or immaterial costs you might incur to win those customers back.

Final recommendation

Our favorite takeaway from this interview, and one that can and should be applied broadly in your approach to analytics, is to “ think about delta and…movement rather than the actual number itself.” Too often we fall into the trap of focusing on absolute numbers when those numbers or the logic behind them are likely incomplete. By focusing on the delta, or change, over time of a specific metric you ensure that you are focused on positive movement rather than absolute numbers that may be gamed.

To take this back to the example of LTV calculations, you should set an agreed-upon definition of LTV for your business, measure that consistently, and then focus on the delta of that metric over time. If you do that, you can free yourself from the endless cycle of re-examining assumptions and direct business decisions towards activities that drive positive and measurable movement.

Check out the full-length interview with Diane and other industry experts at our Hit Subscribe Podcast.

The post Lifetime Value (LTV), KPIs, and the importance of data in subscription businesses appeared first on Recharge.

The key to this success was staying focused, even with the allure of significant attention and distribution via a platform such as Netflix, on the purpose of the content. John fully recognizes that Battlbox is first and foremost a business and not a group of actors or individuals interested in celebrity for the sake of celebrity. He has even gone so far as to say, “We’re 100% a business first. So the whole concept [of content marketing]… was purely lead generation.”

Content marketing can easily be abstracted away from business drivers so how, with this kind of an opportunity, does the Battlbox team ensure that the content was driving results?

John’s tips for effective content marketing:

1. Ensure there is a strong connection between the content, your customers, and the value that you provide – “This showcases what we do, our process for deciding what goes in the box. And the whole show is about that.”
2. Plan and measure appropriately – “This traffic does not behave the same way. This traffic doesn’t flow through our conversion path like a normal visitor. They don’t convert even close to the same rate that normal visitors do. But we expected that.”

At a high level, the results have been impressive. Prior to the show, Battlbox was averaging around 150,000 sessions per month. Following the release of the show, that number soared past 1,000,000. 

Be opinionated about your approach to acquisition and authentic to your brand

With that kind of an increase in traffic, it’s important to make sure you have a business plan in place to capture customers and create  value. Battlbox has never been very heavy-handed in their acquisition flow on the website. They’ve purposefully found a balance between acquisition and “just fun and exciting content.” They have stayed true to this approach which creates an authentic feel for new prospects that discover the brand on Netflix and then visit their website.

Swim downstream by leveraging influencers

The real origin of this story begins long before any conversations with Netflix. Through a simple pre-checkout questionnaire, Battlbox realized that there was a Youtube channel that drove a lot of awareness and customers for them. Not only did they realize the importance of leveraging this influencer (Currin1776), but they went so far as to bring him onto the team. Once a part of the company, they let him continue to produce the type of content that had attracted such a relevant audience. Then then were able to leverage data from their customers to identify a new marketing channel that they had not been leveraging and they supercharged it by bringing the content creator onto the team and providing him with the resources needed to continue to build a presence.

Consider all points in the customer journey

While a Netflix series is likely great for the purposes of driving “discovery,” it’s not likely pushing customers immediately into a “purchase” phase. Some viewers will go directly from the series to the website and purchase a subscription, but most will not. It’s important to build as many touchpoints and linkage between the massive amount of awareness being generated and the point of customer acquisition. Are you able to provide content for your customers at every phase of their journey with you?

One example of this from Battlbox is their “Currin Pick of the Week” that runs on Facebook live every Wednesday. During this live video, Currin highlights a specific product. Then Battlbox engages with the audience during the show. This enables them to answer questions, collect insights, and engage with an audience that may not have been interested in going to their website. Since much of the audience are fans of the Netflix series, this becomes a repeated touchpoint that goes beyond the experience of the series to build greater brand affinity and interest in the products they sell.

Don’t neglect the basics

When all is said and done, you can’t put all your eggs in one basket (even if it is as big as Netflix). Battlbox still produces content in many different forms and for many different purposes. John remarks that they still “have regular posts… that are more social proof reviews and actual testimonials.” In addition, they are constantly focused on testing. John says that they “ A/B and multivariate test everything… You can almost jump on our Facebook and go through the timeline and see all these things we test.”

If there was one overarching piece of advice that John would give to other subscription brands that are looking to drive meaningful results with content marketing, he says

“You’ve just got to be extremely unique… there’s no golden ticket. It’s got to be just unique content.”

(Also, having a great personality that attracts producers that can get you on Netflix helps.)

Listen to John’s full podcast episode here, where he dives into more detail about their success with content marketing.

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