Benchmarking Subscription Commerce’s KPIs

Like patients who avoid going to the doctor because they don’t want any bad news, online sellers who aren’t rigorously and continuously analyzing their customer data are also ignoring potential problems that could prove fatal.

According to Chad Buckendahl, vice president and general manager at San Francisco-based eCommerce subscription platform operator sticky.io, if you’re not studying how your best and worst customers are performing — from acquisition to retention to lifetime value — you’re missing a huge opportunity.

“It’s very refreshing to talk to merchants that appreciate analytics,” Buckendahl told PYMNTS in a recent interview about the firm’s annual Top 20 list of measures to evaluate eCommerce and subscriptions.

And sticky.io produces the list of benchmarks covering all historical averages within its platform, sharing it with the world given that so many of its clients face the same kind of problems and ask the same type of questions.

“It’s pretty popular because it allows you to gauge yourself against other people who are doing the same kind of business,” Buckendahl said.

Doing A Deep Dive Into Subscription KPIs

“The successful merchants that are really on top of the issue of cancellation are those folks that really focus on low customer engagement,” Buckendahl said. “If you’ve got low customer engagement, you’re likely to have higher churn.”

Typically, that means looking into things like email open rates and repeat visitor rates and searching for clues within customer reviews or conducting surveys.

If that seems like a lot of time and effort, Buckendahl cited research showing that “highly satisfied” clients with a positive emotional engagement with a brand are 52 percent more valuable than those who are merely “satisfied” with a product.

Churn Analysis

Buckendahl also said companies need to analyze their churn ratios and the frequency of things like declined card activity as part of a process to increase customer lifetime value (or “CLTV”).

For example, say a churn analysis model shows a company loses lots of customers after four purchases. Buckendahl said that would mean it’s important to take steps to clear that “big hurdle” and develop ways to get clients to make the fifth purchase.

He added that sticky.io’s analytics seek to accurately identify a merchant’s top customers, and the only way to do that is to look at CLTV. But Buckendahl added that as important as it is to know which customers have spent the most on your products, it’s also telling to assess the spending habits of those that have below-average CLTVs.

However, he warns that since CLTV is a lagging indicator, eCommerce companies need to use other near-term metrics to identify future best customers.

The Key Metrics To Monitor

Buckendahl said he’s noticed over the years that when it comes to customer retention, the most skilled companies all gravitate toward improving three key metrics — churn, average order value and margin.

And while metrics like return on ad spend, average order value and conversion ratio “roll off the tongue” for most eCommerce marketers and business owners, there are many more metrics that get overlooked.

“One that’s maybe not so familiar to people in the space is days to ship,” he said. “How many days does it take me on average to ship a product to my consumer?”

That’s critical because the longer it takes to get a product to a home, the higher the refund ratio you’re going to see, Buckendahl said.

Likewise, he said that managing and monitoring the billing approval ratio could dramatically reduce churn and increase retained customers by addressing one “silly” and common mistake on recurring subscription orders.

“It’s pretty frustrating when you see a percentage of your subscription base churn involuntarily month over month just because of silly things like credit cards expiring,” Buckendahl said. “The consumer still wants the product to be shipped, but you’re not able to ship it because their credit card expired.”

Another underutilized metric that merchants often overlook is the quick cancellation rate. “Subscription programs need to identify those customers that come in, sign up for a subscription, and then cancel right away,” Buckendahl said.

That’s just one more scenario where online businesses need to “dig in and figure out” what their data is telling them,” he said.

“It’s all driven by analytics,” Buckendahl said. “That’s what we’re focused on.”