WordPressTwo kinds of revenue
A first order and a renewal are different. The first order usually carries the acquisition cost. A renewal carries little or no new acquisition cost, but it depends on the customer staying.
What to measure
- MER on first orders only, against the acquisition spend that produced them.
- Renewal revenue on its own, so one blended number cannot hide a weak subscriber base.
- Repeat rate by cohort, at the renewal ages that matter, such as the second and third payment.
Payback, not one day
- Estimate the payback period: how many renewals it takes for a customer's contribution to cover the cost to acquire them.
- Compare that with how long customers stay, using the cohort table.
Made-up scenario: the cost to acquire a customer is 45, and the contribution per box is 15. The first box covers a third of the cost, so the customer needs three boxes to pay back. If only 40 percent of customers reach a third box, most of the group will not pay back at this cost.
Reporting rules
- Show first-order MER and blended MER side by side, and say which spend each one includes.
- Write 'not measured' for renewal revenue if the store's orders cannot be split into first and repeat.
- Report payback as a range when the cohorts are small.
