Subscription Metrics 101
Dear Growth Designers,
I'm Jen Byyny, and I lead growth-focused product design teams for data and wellness companies such as Looker Data Sciences, Teladoc Health, and Strava. There are a few must-know metrics about subscription businesses that I'll share with you just like I would any new designer joining my team. I'll then give you a B2B and B2C example from my career about which metric each business emphasized and why.
Subscribing to your growth,
Jen Byyny, Growth Design Leader
Most Important Subscription Metrics
No matter where I'm working, I strongly encourage each member of my team to know the company's core four subscription metrics and how to access them:
1️⃣ Monthly Recurring Revenue (MRR)
Measures the total revenue generated by monthly subscriptions within a given month. It provides insights into the revenue stream and helps track changes in subscription growth over time.
2️⃣ Annual Recurring Revenue (ARR)
Represents the total revenue generated by yearly subscriptions within a year. It indicates the long-term revenue potential and stability of the business.
3️⃣ Churn Rate
Measures the percentage of customers who cancel or do not renew their subscriptions within a specific period. Tracking churn rate helps identify customer retention issues and assess the overall health of the subscription base.
4️⃣ Customer Lifetime Value (CLTV)
Estimates the total revenue a business can expect from a single customer throughout their lifetime as a subscriber. It considers factors such as subscription duration, monthly or yearly payment amount, and the likelihood of churn.
Companies use different tools to track these metrics, but designers on my team do not just proactively monitor them; they also draw a line back to their design solutions.
So, how are these subscription metrics used in practice by B2B and B2C companies?
B2B Example
The transparency was exceptional at Looker, a beloved product among data analysts and a broad business audience. Our internal home page as employees was a Looker dashboard that allowed us to see how the company was performing. We knew the MRR or ARR at any given time and when there was a newly acquired business (referred to as new "logos"). The tool and transparency fostered a culture of strategy and innovation, which helped drive growth and engaged us in attracting new business.
B2C Example
Strava, a fast-growing product highly endorsed by cyclists and runners, has expanded to over 100 million users and caters to active individuals participating in now over 50 different types of activities. MAU is the most talked-about metric. MAU serves as a signal for business health, revenue prediction, and overall growth. With subscriptions, a steady win for the business lies in acquiring monthly or annual paid subscribers, benefitting both the company and users.
In Conclusion
If they're not readily available, you must request access to metrics like MRR, ARR, Churn Rate, and CLTV. It's necessary and expected that designers accountable for growth understand the current metrics, goals, and changes in numbers over time. By understanding and monitoring these metrics, growth designers can explain the ROI of our work in the language of the business.
About the Author
Jen Byyny is an experienced product design leader focused on driving innovation for business success. She has over twenty years of experience leading high-performing teams in designing and building exceptional product experiences. She’s based in Denver, CO and moonlights in the mountains as a ski instructor.
