In plain words
Subscriber lifetime is the number of renewals you can expect from one subscriber, on average, before they cancel. It follows directly from the renewal rates: each renewal is taken by a smaller share than the last, and the shares add up to a finite total.
That total is a ceiling. However long you wait, a subscriber will not take more renewals on average than the renewal rates allow. If the loss on the first order is larger than that many renewals can earn, the subscription never pays back, at any horizon.
Formula
- Expected lifetime renewals = Σ over every renewal of the share of subscribers still active when it ships
- At a constant rate r: r ÷ (1 − r)
Worked example
On a renewal curve that starts at 70.0% and settles at 90.0%, the engine expects 4.24 renewals in a subscriber's first twelve months and 5.81 over a whole lifetime.
Each renewal keeps $11.68, so the first order may lose no more than that many renewals can earn. Here it loses $26.21 against the acquisition cost, which the lifetime covers.
The example order
A $40.00 bag of coffee, shipped free, every cost counted
2 declared kinds cost nothing on this option
| Step | Grain | Amount |
|---|---|---|
| Revenue | – | $40.00 |
| Cost of goods | per unit | −$12.00 |
| Pick and pack | per order | −$1.18 |
| Packaging | per parcel | −$0.50 |
| Shipping label | per parcel | −$7.50 |
| Card fee per order | per order | −$0.30 |
| Refunds | percent | −$2.00 |
| Card processing | percent | −$1.16 |
| Contribution margin | – | $15.36 |
| 2 kinds costing nothing | – | $0.00 |
Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.
Average lifetime is not how long the typical subscriber stays
The average is pulled up by a loyal minority who stay for years. Most subscribers leave well before it. With a first renewal rate of 70%, three in ten are gone after one order, while the average still comes out near six renewals.
Using it
Compare the lifetime with your payback point. If a subscriber pays back at the fifth renewal and the expected lifetime is under six, the plan has almost no room for error. Lifting the first renewal's rate usually does more for lifetime than anything later, because every later renewal depends on it.
In Offer Suite
Offer Suite's payback calculation reports the expected renewals over a lifetime, with the curve's last rate carried on, and says outright when churn caps a subscriber's lifetime below the loss the first order leaves.
Source: Offer Suite's margin engine.