A Crash Course on the Subscription Metrics that Matter with Freshly’s CPO

Understanding and Driving LTV:CAC

The Most Important Metric for Subscription: the LTV:CAC Ratio

LTV:CAC is the lifeblood of any subscription business. The metric measures the lifetime value of a customer versus the cost of acquiring that customer. Yet, there are very few leaders who have successfully optimized LTV:CAC at meaningful consumer scale. Jeremiah joined us for crash course in how to think about LTV:CAC and how to optimize it.

  1. Increasing Lifetime Value (LTV)
  2. Decreasing Customer Acquisition Cost (CAC)

Decreasing Customer Acquisition Cost

There are two major ways to reduce customer acquisition cost and drive conversion:

  1. Remove friction
  2. Drive intent

Increasing Lifetime Value

The main lever, outside of pricing, to increase the lifetime value of your customers is to bolster retention. There are two dynamics to think about when thinking about how to improve retention:

  1. Early user retention: The first few weeks of your user’s experience is the window where you most have the opportunity to make your product sticky. Improving early retention is all about education and encouraging users to form an attachment to the product. For Freshly, this means teaching users how to order, how to unpack their boxes, how to choose meals, etc.
  2. Long-term user retention: Long-term user retention is about maintaining loyal customers. They’ve been educated about the product, but for some reason the product doesn’t work for them anymore. For Freshly, perhaps a user has gotten tired of the meals they’re being sent and wants more variety.

Utilizing Qualitative Feedback

Along with quantitative data, qualitative feedback unlock value in two major ways:

  1. Consumer insights: Qualitative feedback is a great way to discover insights about your customers that you wouldn’t have otherwise known. For example, when Jeremiah was at Bark, a majority of the employees’ dogs were adopted. However, through qualitative feedback, he and the team learned that a huge segment of their customers had purebred dogs. This affected the way they imagined dogs, thought about their dogs’ priorities, etc. The team then discovered that asking customers their dog’s breed was a key insight into assessing what kinds of toys and treats their dog liked.
  2. Explaining Quantitative Data: Qualitative feedback also allows the opportunity to explain the narrative behind the data. For example, through a complex test, Freshly discovered that users who experienced delivery errors often ended up becoming more frequent users. This data point was extremely confusing until the Product team had conversations with users and discovered that they often made more orders after having delivery errors because they were offered partial coupons after the error.

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