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 the margin engine in Offer Suite's own code (packages/engine), the function that prices offers in the product. Money is computed in whole cents and rounded once per line.
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 a common online card rate. Shopify's rate depends on your plan and the card, and your admin shows 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. Put your cost to acquire a subscriber against the expected profit per subscriber to see payback.