Understanding the Importance of Subscription Analytics for Your Startup
Every SaaS and subscription company should track key performance indicators (KPIs) that provide valuable insights into business health, and many startups are hesitant to invest in subscription analytics tools. In fact, despite the enormous upside, a cash-strapped startup may opt for manual analytics and forecasting processes.
On the other hand, effective subscription business analytics can assist startups in streamlining metrics tracking so that they can make data-driven decisions and scale. A subscription analytics dashboard can provide deeper insights than manual analytics efforts and ultimately save startups money.
In this article, we’ll review some of the most essential data analytics subscription metrics and explain why startups should consider implementing automated analytics and reporting software.
Understanding Subscription Analytics
While each subscription business will have different data analytics requirements, the following are the minimal requirements for viable analytics to guarantee predictable growth and a long-term subscription e-commerce model.
Annual or monthly recurring revenue (A/MRR):
By far the most important success metric for your investors and shareholders. One of the reasons so many direct-to-consumer companies have reached $100 million in less than five years is that customers subscribe to what they are comfortable with (i.e., they “set it”) and then forget it.
So long as you continue to provide a high-quality product at what your customers perceive as a fair price, automatic billing becomes habitual, and customers rarely think about the product you’re selling again.
Read about: Top 7 Advanced Analytics Solutions for Retail Industries 2023
Customer Lifetime Value (CLV):
It is the estimated revenue a customer will generate throughout their relationship with the company. This metric can be compared to the average customer acquisition cost to determine whether funds should be allocated for sales and marketing.
When a startup’s CLV exceeds its CAC, it is in a great position to grow its business rapidly.
Customer Acquisition Cost (CAC):
In traditional e-commerce sales, CAC is frequently determined by the individual product price or multiple expected repeat purchases. You can figure it out by dividing the amount spent on marketing and sales by the total number of new clients. Your CAC must be less than your CLV. Your CAC should be less than half of your CLV (and the lower, the better).
Churn Rates:
This metric measures the number of customers or revenue lost during a specific time period. A high churn rate indicates a lack of customer satisfaction and will increase your CAC in two ways.
Happy customers tend to bring in more customers, lowering your acquisition costs. Unhappy customers, on the other hand, tend to be very vocal, reducing your ability to convert potential prospects into paying subscribers.
Average Revenue Per Account (ARPA):
Also known as average revenue per user (ARPU), ARPA determines how much your average customer spends with you based on your subscription plans. Cross-selling and upselling strategically is the key to raising ARPA without alienating your customers and causing involuntary churn. ARPA is calculated by dividing the total number of customers by the sum of their MRR.
Why Should Subscription Startups Invest In Subscription Analytics Tools?
While you could calculate metrics manually or with Google Sheets, subscription analytics software can make tracking KPIs easier, faster, and more accurate. Here are some of the benefits of investing in an automated reporting tool.
Reduced Common and Human Errors
It would be best to calculate metrics accurately to track the errors over time and discover patterns. Spreadsheets and other manual methods have the disadvantage of introducing human error. Subscription analytics tools can calculate metrics consistently, avoiding errors that could limit the potential for business insights.
Saves Time And Money
As discussed in the previous section, most subscription startups should track several metrics to get a complete picture of their businesses. Manually calculating these will slow decision-making, so subscription analytics tools are essential for more efficient operations.
Enhances Data And Aid Resolve Issues
Effective subscription analytics tools can extract data from various sources, such as a payment processing solution or a customer relationship management (CRM) system. This enables startups to gain deeper insights that would not have been possible with a single data set.
In short, using automated data augmentation, startups can gain a much more comprehensive view of their business.
Facilitates Better Forecasting
Creating sales and cash flow forecasts is much easier if you have all your metrics and data in one place. The best subscription analytics software tool should compute MRR/ARR and the company growth rate, critical figures for forecasting future sales. An effective reporting tool may include adequate forecasting capabilities.
Quick problem resolution and better customer service
When you can view metrics in real-time, your company can become more agile and solve problems faster. For example, if you notice that your churn rate is rising, you can identify and address issues to improve your customer experience.
Data analytics subscription for real-time metrics from automated analytics tools helps you optimize your business operations and stay ahead of potential challenges.
Grow With Subscription Analytics
Your subscription analytics will quickly become your business’s scoreboard, allowing you to see how you’re doing. You can refine your metrics as you grow, but these KPIs will help you ensure you’re measuring the right things to be successful.
By transforming complex data into simple interactive dashboards, LatentView assists subscription businesses in evaluating past performance and making accurate predictions with customized subscription analytics tools.
