The document discusses the importance of customer retention over acquisition in subscription businesses, emphasizing that companies need to focus on monetization and retention-based growth for better financial outcomes. It highlights statistics showing that the majority of budgets go to acquisition, yet only a small percentage of companies have a retention strategy. Additionally, it offers insights on optimizing retention strategies, such as understanding customer needs and improving recovery from payment failures.

1. Brought to you by
Retention (in 20 minutes)
JUNE 2019

2. Brought to you by
Whomever gets closest to the customer wins.
We need to get to value quicker and more deeply or we will fail.
HOW RETENTION IS CHANGING

3. Brought to you by
First, some background.

4. Brought to you by
PROFITWELL
Free financial metrics for
subscription businesses.

5. Churn
tribution
Financial
Unit
Price
Survey
Willingness to
In-App Usage
Drastically reduce churnRETAINTM
Audit proof revenue recognition
RECOGNIZED
Proprietary pricing software for
monetization
PRICE INTELLIGENTLY

6. We’ve studied more real SaaS data
than anyone else out there.
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7. Brought to you by
Whomever gets closest to the customer wins.
We need to get to value quicker and more deeply or we will fail.
HOW RETENTION IS CHANGING

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Why now?

9. It’s all about the benjamins…

10. …we just don’t like to keep the benjamins…

11. What percentage of a company’s
budget goes to acquisition?

12. ~63%

13. What percentage of teams have
an actual retention strategy?

14. 2 out of 10
(~22%)

15. Acquisition is now table stakes.

16. WE FOCUS ON THE WRONG FUNDAMENTALS
Impact of Improving Each Pillar of Your Business
Monetization and retention based growth far outpaces acquisition based growth. This impact is getting
greater over time.
%IMPACTONREVENUE
SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS
0%
5%
10%
15%
20%
ACQUISITION MONETIZATION RETENTION
2.663%
4.85%
2012 - 2014 2015 - 2018
N
1.6k
N = Data from 1.6k subscription commerce companies
PILLAR OF THE BUSINESS
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17. WE FOCUS ON THE WRONG FUNDAMENTALS
Impact of Improving Each Pillar of Your Business
Monetization and retention based growth far outpaces acquisition based growth. This impact is getting
greater over time.
%IMPACTONREVENUE
SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS
0%
5%
10%
15%
20%
ACQUISITION MONETIZATION RETENTION
14.588%
16.884%
2.663%
8.83%
10.74%
4.85%
2012 - 2014 2015 - 2018
N
1.6k
PILLAR OF THE BUSINESS
Brought to you by
N = Data from 1.6k subscription commerce companies

18. WE FOCUS ON THE WRONG FUNDAMENTALS
Impact of Improving Each Pillar of Your Business
Monetization and retention based growth far outpaces acquisition based growth. This impact is getting
greater over time.
%IMPACTONREVENUE
SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS
0%
5%
10%
15%
20%
ACQUISITION MONETIZATION RETENTION
14.588%
16.884%
2.663%
8.83%
10.74%
4.85%
2012 - 2014 2015 - 2018
N
1.4k
PILLAR OF THE BUSINESS
Brought to you by
N = Data from 1.6k subscription commerce companies

19. There are clear winners and losers
in this environment.

20. CLEAR WINNERS AND LOSERS
Comparing Growth Strategies of Companies
Acquisition based growth companies grow at a smaller rate than those with a balanced growth
approach (growth from all three pillars of growth).
YOYGROWTHRATE
SOURCE: 2016 STUDY ON GROWTH
0%
25%
50%
75%
100%
2012 2013 2014 2015
50.81%49.81%47.91%48.91%
25.71%27.1%
31.09%
34.67%
Primarily Acquisition Growth
Balanced Growth
N
512
N = Minimum of 512 companies per segment pulled from the middle 2/3 of companies in terms of
growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate.

21. TL:DR?

22. Acquiring customers is just one piece of the
puzzle, but that’s where we put all of our
focus and it’s not going to turn out well.

23. Brought to you by
Let’s get a baseline of retention
understanding.

24. Retention is a math formula.

25. Retention Consists of Three Main Parts
Active Cancellations
A subscriber actively choosing
to end their subscription due to
some sort of dissatisfaction or
lack of use.
Payment Cancellations
A credit card failing due to
expiration, limits, or technical
issues with gateway or
processing company (130+
reasons this happens).
Expansion
A subscriber expanding the
amount of revenue they’re
providing you through upsell/
cross-sell or more usage.
Gross Churn

26. Active Cancellations + Expansion Revenue + Payment Failures

27. Where should you be?

28. Company Age correlates with lower churn

29. Brought to you by
Optimizing Retention

30. Time to value.

31. You need to understand your customer.

32. Because you definitely don’t…

33. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
WE’RE BUILDING THE WRONG PRODUCT
Calculating the expected impact of product on growth
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Differentiable Features
High Value/High WTP
Add-Ons
Low Value/High WTP
Core Features
High Value/Low WTP
Trash Land
Low Value/Low WTP
Brought to you by your friends at

36. For companies who do customer research,
how much lower do you think their churn is?

37. -47%

38. You need to understand your customer.

39. Brought to you by
Switch up to a value metric.

41. Value metrics reduce churn considerably

44. Brought to you by
More tactically experiment with annuals

45. Longer term contracts greatly reduce cancellations.

46. Time to Value

47. Longer term = lower cancellations

50. Brought to you by
Credit Card Failures

51. 20-40% of your churn

52. Lower. Always lower.

53. We’re only recovering 3 out of 10 of these folks

54. You need to treat these folks as a marketing channel.

55. It’s a game of inches.

56. RETAIN
Reduce churn through targeted campaigns
POINTOFFAILURE
NO SIGN-IN NEEDED FORMSSMART RETRIESINTELLIGENT AT RISK
MONITORING
+5%
EXPIRATION TRACKING
+5%
+10%
EMAIL AND IN-APP NOTIFICATIONS
+40%
+15%
Retain scans card & transaction metadata and
delivers pre-dunning notifications at just the
right time to at-risk users.
Utilizing historical and usage data, Retain
monitors when the best time is to ask for an
updated credit card from an expiring user.
Message copy greatly influences recovery.
Retain is constantly adjusting timing and
content of notifications to optimize recovery.
Retain retries a customer's credit card when
there's the highest chance of recovery.
Retain reduces friction immensely by not
requiring a user to login to update their payment
information
Towards the end and beyond the point of
failure, Retain will lock out a delinquent user,
allowing for a long tail of recovery.
LOCKOUT (OPTIONAL)
+8%

57. DO NOT do pre-dunning emails

58. +11-18% in active churn

59. DO NOT use stylized emails

62. Don’t require a sign-in form

64. Make sure you’re locking out folks.

66. RETAIN
Reduce churn through targeted campaigns
POINTOFFAILURE
NO SIGN-IN NEEDED FORMSSMART RETRIESINTELLIGENT AT RISK
MONITORING
+5%
EXPIRATION TRACKING
+5%
+10%
EMAIL AND IN-APP NOTIFICATIONS
+40%
+15%
Retain scans card & transaction metadata and
delivers pre-dunning notifications at just the
right time to at-risk users.
Utilizing historical and usage data, Retain
monitors when the best time is to ask for an
updated credit card from an expiring user.
Message copy greatly influences recovery.
Retain is constantly adjusting timing and
content of notifications to optimize recovery.
Retain retries a customer's credit card when
there's the highest chance of recovery.
Retain reduces friction immensely by not
requiring a user to login to update their payment
information
Towards the end and beyond the point of
failure, Retain will lock out a delinquent user,
allowing for a long tail of recovery.
LOCKOUT (OPTIONAL)
+8%

67. Payment failures = highest impact lever for you now.

68. Brought to you by
Enough? Everyone get some value?

69. Brought to you by
Whomever gets closest to the customer wins.
We need to get to value quicker and more deeply or we will fail.
HOW RETENTION IS CHANGING

70. Most of you aren’t going to do anything…

71. How many of you implemented the advice/tactic
from the last great piece of content you consumed?
(N = 53.4k folks who work in tech)
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72. 1 out of 10
(11.1%)
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73. Brought to you by
You just have to put in the work.

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profitwell.com/#retention-audit
Free Retention Audit

75. Next Steps
patrick@profitwell.com
profitwell.com/#retention-audit
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