If your business strategy hinges on a subscription model, subscriber churn will always be a big concern. You need the right retention strategy—and you can get there, but not without really understanding and analyzing your churn data.
But there are several important metrics that go beyond subscriber churn that you should also calculate for. These key metrics can compliment customer feedback, inform you of product issues, and even impact your marketing strategy.
4 essential subscriber churn metrics in ecommerce
Let’s look at some of the most important subscriber churn metrics you’ll need.
1. Churn by cohort
If you’re only measuring churn by calendar month — 15% in July, 14.5% in August, and so on — you’re missing another valuable set of data points:
– The length of time your customer base sticks around
– Which orders they’re most likely to cancel
– Churn rate by number of shipments
– How many customers cancel after the first order but before the first recurring shipment
The bottom line is that you need to identify the key drop-off points. Every brand will have unique drop-off points, but after working with hundreds of them, we’ve noticed some recurring behavior patterns that can be helpful to understand.
Brands will typically have two distinct points in the subscriber lifecycle that are especially important as you optimize your program:
- The churn plateau
- The churn cliff
Churn cliff & churn plateau definitions
The churn cliff is your steepest drop-off point. Nearly across the board, we see that the churn cliff happens early in the subscription lifecycle, typically between the initial order and the first recurring shipment.
The churn plateau is the point in the subscriber lifecycle when churn—you guessed it—plateaus. After that milestone, the odds of churn decrease significantly because customers have built a habit of using the products.
So, essentially, we can think of the subscription lifecycle as a funnel that pushes subscribers from the first order through an obstacle course to the churn plateau, and beyond.
2. Churn rate by product/SKU
You’ll also want to slice and dice your churn data by product.
Let’s say you run the subscription program for a wellness brand, and your overall churn rate is 15% within a specific period. What that doesn’t tell you? Subscribers to Product A might be churning at a rate of 7%, while Product B’s churn rate is much higher.
This is important to know because, for one thing, it can identify issues with product quality, shipping, manufacturing, or a whole host of other things.
But this data can also surface patterns in preference.
To build on the previous example, imagine your drink mix powder comes in two different flavors: mango and chocolate.
| Product | Churn Rate |
| Chocolate Drink Mix Powder (A) | 7% |
| Mango Drink Mix Powder (B) | 23% |
| Overall Churn Rate | 15% |
If you see a much higher churn rate on the mango flavor, you might want to try to get the chocolate alternative in front of more people, sooner.
3. Churn by cancellation reason
It’s not enough to know “how many.” You need to know why subscribers churn.
This is how you’ll know if too many of your customers are leaving because of price or if there are specific products in your catalog that typically see more churn. With this bit of data, you can tailor the customer experience accordingly.
Keeping an eye on specific cancellation reasons is also another way to help you identify product issues. For example, you might discover a production issue if you see a huge spike in churned customers on a particular product at a particular time.
4. Customer Lifetime Value (LTV)
You pay so much to acquire your customers. You have to understand how valuable they really are.
Your customer lifetime value needs to be high enough for you to make a significant return on your investment. If not, you may need to restructure your subscription program or tweak some other pieces of your strategy.
Defining subscription churn in ecommerce
Subscription churn, simply put, is the rate at which customers cancel their subscriptions within a given period. Churn can provide insights into customer satisfaction, product quality, and overall business health. You can then make informed decisions to improve customer retention by monitoring your subscription business churn.
It’s a critical metric for any subscription-based business because it directly affects revenue and growth potential.
How to calculate churn for ecommerce subscriptions
Calculating subscriber churn might seem straightforward, but it requires attention to detail to ensure accuracy.
Use the following formula to calculate the churn rate:
Churn rate = (Number of customers lost / Total number of customers at the beginning of the period) x 100
- Choose a time period to evaluate, with a set number of subscribers at the beginning of the period, and a set number of subscribers at the end of the period. Depending on your business model and subscription cycle, this could be monthly, quarterly, or annually.
- Subtract the total number of subscribers at the end of the same period from the number of subscribers at the beginning of the period
- Divide this new value by the number of subscribers at the beginning of the period
- Multiply this new value by 100
For example, if you wanted to evaluate the number of churned subscribers in a given month, and you began the month with 1,000 subscribers and 50 of them canceled, subtract 950 from the original 1,000 to get 50. Divide this value by the original 1,000 to get 0.05, then multiply by 100 to identify your churn rate of 5%.
This percentage represents the proportion of subscribers who have left during the specified period, giving you a clear view of your churn rate in a subscription business.
Why analyze subscriber churn metrics?
Understanding and measuring subscriber churn is vital for several reasons.
- Revenue Stability
High churn rates can lead to significant revenue loss. By monitoring churn, you can implement strategies to retain customers and ensure steady revenue streams.
- Customer Insights
Analyzing churn helps you understand why you’re losing customers (and total revenue along with it). Knowing the reasons behind churn, whether due to product dissatisfaction, pricing issues, or competitive offers, allows you to address them effectively.
- Cost Efficiency
Acquiring new customers is often more expensive than retaining current customers. Reducing churn can lower customer acquisition costs and allocate resources more efficiently.
- Business Health
A low churn rate typically indicates healthy business performance with satisfied customers. It’s a sign that your product or service meets customer needs and expectations.
Take action on your churn metrics to keep subscribers longer
Leverage your churn data to identify patterns, understand the underlying reasons for customer behavior, and personalize the customer experience accordingly, so you’re not just responding to churn — you’re addressing it proactively.
