How it's calculated
- First order: charge = list price × (1 − first-order discount); its costs include the welcome gift and its pick
- Renewal: charge = list price × (1 − renewal discount); only the lines that recur ship again
- Subscribers still active at order k = retention^(k − 1)
- Expected profit per subscriber after n orders = first-order margin + Σ renewal margin × retention^(k − 1), for k = 2 … n
Every figure on this page comes from Offer Suite's own margin engine, the same code the product uses to forecast each offer's and option's profit and to compute realized margin on orders. Money is computed in whole cents.
Worked example
A $40.00 bag of coffee on subscription: 20% off the first order ($32.00) with a mug in the box, then 10% off every renewal ($36.00). The first order keeps $3.79 after the bag, the mug, the extra pick, shipping and fees. Each renewal keeps $11.68. A one-time buyer at full price keeps $15.36.
If 85% of subscribers take each next order, a subscriber receives 5.72 orders on average over the first 12, and earns $58.90 in that time. They pass the one-time buyer at order 3. The welcome discount and the mug are paid back by the renewals; if retention is lower, it takes longer, which is why the table follows every order.
Assumptions
- Retention is the same at every renewal. Real subscriptions lose more subscribers after the first and second orders; a lower retention is the cautious reading.
- The one-time buyer pays the list price with no gift and never orders again. If one-time buyers come back, compare against their repeat rate instead.
- Profit is counted when each order ships, with no discounting for time.
- Pick and pack $1.18 per order and $0.20 for each extra item are the defaults of the engine's DTC-US profile, a typical third-party warehouse contract. Use your own contract.
- The shipping label ($7.50) is an assumption for a domestic ground parcel of about a pound. Your carrier account or shipping app has your rate.
- Card processing of 2.9% + $0.30 is Shopify Payments' online rate for a standard card on the Basic plan in the United States. The Shopify Payments fees pages list every plan and country; enter yours.
- The refund reserve (5%) is a share of revenue set aside for refunds. Cost is not reduced by a refund, because the goods were already picked and shipped.
Questions
Why is the first subscription order less profitable than a renewal?
It usually carries a bigger discount and one-time costs: a welcome gift, an insert, a sample. A renewal is priced at the ongoing subscribe-and-save discount and ships only the products that recur.
How many renewals does a subscriber need to beat a one-time buyer?
Add up the first-order margin and each renewal's margin weighted by the share of subscribers still active, and see when that total passes the one-time margin. The calculator reports the order where it does, if it does within the orders you follow.
What retention should I use?
Your own, from your subscription app: of subscribers who received an order, how many received the next. If you only know churn per month on a monthly plan, retention is one minus that churn.
Does this include customer acquisition cost?
No. It is the margin the orders themselves earn. The subscription payback calculator puts your cost to acquire a subscriber against it, with churn.