Dose #188: Why Acquisition is More Important Than Retention

Matt here with your weekly Subscription Prescription 💊

Acquisition or retention? One of my favorite questions to ask on Twitter, because most retention marketers think it’s retention, and growth marketers think its acquisition. I’m a retention marketer, and I know it’s acquisition. That’s what I prove with some simple math in this week’s dose.

This week’s dose is also a podcast episode. Take a listen (or watch) on your favorite platform:

Why Acquisition Moves Matter More Than Retention

If your goal is to boost lifetime value, improve renewal rates, or move the needle in month four and beyond, the instinct is to tighten up churn. Is retention the best way to do this?

In practice, retention strategies are valuable. But depending on your starting point and current numbers, the work you put into retention can move the needle slowly and uncertainly. Sometimes the same impact can be achieved more predictably by adjusting your acquisition strategies.

Let’s walk through a simple exercise to prove this out.

Focus on Acquisition, or Retention?

Imagine your brand is taking in 100 subscription orders from 280 total orders a month (35% opt-in rate) with a sitewide conversion rate of 5%.

With decent retention rates, keeping between 85-88% of these 100 subscribers each month, you’ll end up with 55 subscribers in Month 4.

In order to improve that, you’d have to work hard at improving onboarding, testing different billing reminder emails, cancellation offers, and more to make improvements.

Let’s say for the sake of argument, you absolutely crush retention and get your monthly renewal rates up to 92%.

That gets you 17 more subscribers by Month 4.

If you’re reading this, though, then you know how difficult it can be to get retention up to 92% per month! That’s a lot of work, a lot of different things, and it can take a long time to understand how things are playing out months later.

So, consider this option instead. Let’s say you bump up your sitewide acquisition to 5.5% - that gets you 4 more subscribers by Month 4.

Ok, what if you raised your subscription opt-in rate to 45%? That’s 14 more by Month 4.

In order to match that 17 subscriber increase from a 92% retention rate above, you could do that with a 5.25% conversion rate and 45% opt-in rate.

In my experience, it is easier (and faster) to test offers that improve conversion and opt-in rate than 2nd and 3rd month renewal rates. You can get more subscribers with that approach than worrying about retention.

Some Offers Are Better for Retention Anyways

The other part of the secret sauce here is that some offers do better for retention, and testing to find the right combinations will do more for your renewal rate and LTV than anything on the retention side.

I’m talking about bulk offers, like buy a 3-month supply at once. Buy 2 get 1 free. Buy 3 and get a free gift.

These types of offers get subscribers on a 3-month cycle, and those subscribers always renew at a higher rate than monthly subscribers do.

Even just getting someone to take an add-on or upsell at checkout can drastically improve not just LTV - but those customers typically retain at a higher rate.

Bottom line

How people come into the program has a huge impact on how they stick around. Your acquisition and retention teams need to be on the same page, because you’re all working for the same thing: more profit for the business. This can mean more subscribers, or subscribers that buy more.

You obviously should keep working on retention, and using feedback from subscribers in the program and those trying to cancel, to make improvements. Just don’t forget that acquisition will have the biggest impact on anything you do.

Until next Tuesday, that’s your Subscription Prescription. 💊

 - Matt Holman 🩺

The Subscription Doc