Subscription and one-time orders in MER: keep them apart

Split the revenue before dividing

• Split revenue into four lines: new one-time orders, first subscription orders, subscription renewals, and repeat one-time orders.
• Usually only the first two lines come from acquisition. Renewals mostly follow from earlier acquisition, so show them as their own line, not as ad revenue.
• Write down whether a renewal counts in the period it is billed, and do not change that rule in the middle of a quarter.

Read MER both ways

• Total MER: all revenue over all marketing spend. It is fair to the business, but it flatters a store that is growing its subscriber base.
• New-customer MER: first orders only, over the same spend. It is closer to what acquisition is doing now.
• Show both with their formulas, and the revenue split beside them.

Use the right payback

• For a subscription, cash payback depends on how many renewals follow. Model payback on the first order and on expected renewals, and label which one each figure is.
• Take the renewal rate from cohorts old enough to show it. A rate from a cohort two weeks old is a guess and should be labelled as one.

What to write in the client report

• The four revenue lines and both MER figures, each with its formula and its period.
• The renewal rate and the cohort it comes from, with the age of that cohort in months.
• A note on the timing rule for renewals, and any change to it, with the date.