đź’ˇ TIP: Here's how to optimize your subscription offer with unit economics, and more acquisition tactics to supercharge your enrollment growth.
Key Takeaways
- Subscription enrollment is the first step towards the 2.5x recorded increase in CLTV that recurring revenue can drive.
- Enrollment rate can pertain to subscription enrollment or subscriber enrollment, and tells you how much of your eCommerce business is enrolling in your subscription program.
- The total pool of checkouts we consider can be filtered to only subscription eligible products, or all products in your catalog. Both can tell you important things about improvements to your program, like setting more products to subscription eligible.
Why is enrollment rate important?
Making it easier and more valuable to shop subscriptions is the key to unlocking higher subscription enrollment rates. You might be thinking, well of course! But why does that matter?
Sources like McKinsey confirm that subscriptions can and have been proven to drive up to a 2.5x increase (yes, you read that right. +250%!!) in your average Customer Lifetime Value (CLTV).
A higher enrollment rate in particular can directly drive down your Customer Acquisition Cost (CAC) and generally mean a larger onboarded cohort of customers for that timeframe, driving larger recurring revenues and larger recurring gross profits in present time and down the line.
All that to say, subscriptions are a win for your business and your customers. And enrollment is the first step to unlocking supercharged recurring revenue growth.
In Ordergroove Subscription Academy’s Enrollment courses, we’ll guide you through best-in-class practices that our A/B tests have proven to drive up to a 577% increase in enrollment rate, resulting in immediate value and long term health for your business. We’ll also talk about preventing accidental sign-ups and customer friction in the enrollment process.
But first, let’s talk about what subscription enrollment is, and how to start thinking about what healthy enrollment looks like for your business’s subscription program.
How should I measure subscription enrollment health?
You can look at enrollment rate in terms of either new subscriptions or new subscribers to your program. And taking a step back from that, enrollment rate is a good standalone measurement of acquisition, but the actual enrollment numbers (# of new subscriptions, # of new subscribers) themselves are a necessary input value for other important business metrics.
Subscriber enrollment is an important consideration when calculating CAC for your business. A higher subscriber enrollment drives down CAC. And in a market where CAC has risen nearly 60% in the past 5 years alone, brands have also been very cognizant of increasing their CLTV:CAC ratio, or the value per customer they’re making; as it’s become increasingly expensive to acquire each one.
One of the many benefits of subscriptions is that subscribers tend to spend more through their lifetime with your business by receiving more average returning orders from you. So not only are more subscribers good for your business, but the subscribers you already have boost this CLTV:CAC ratio by repeating their business with your brand.
When it comes to enrollment rate specifically, it’s a little easier and more comprehensive to look at subscription level enrollment rate to understand how much of your eCommerce business is subscription vs. one-time. It’s likely that the average subscriber will have more than one active subscription with your business in their lifetime, so subscription enrollment rate goes deeper than the customer level and looks at all customers’ purchasing behavior.
Subscription Enrollment Rate simply measures what percentage of your eCommerce transactions are new subscriptions vs. one-time checkouts.
To accurately calculate enrollment rate as a health metric, we consider the total pool of checkouts to only include those belonging to subscription eligible products. We do this because gauging the “success” of your current enrollment rate requires considering your subscription eligibility rate, which is the percentage of SKUs in your catalog that are currently eligible for subscriptions.
For example: If your enrollment rate is 95% but only 50% of your SKUs are eligible for subscriptions, there remains an untapped 50% of your catalog that currently has a subscription enrollment rate of 0%.
In a separate exercise, you could also choose to consider your total pool of checkouts to include non subscription eligible products for further insights. While this would make your enrollment rate appear much lower, it may reveal opportunities for growth such as setting more products to subscription eligible.
For the purposes of this course and gauging your enrollment health, we’ll continue to consider only subscription eligible products.
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To illustrate this, Ordergroove merchant Death Wish Coffee offers non-subscribable merchandise such as this Fortune Teller Tankard mug in addition to subscribable products like their Medium Roast Coffee and Dark Roast Coffee.
Let’s say that in one day…
- The Tankard is purchased 5 times (via one-time purchase as it’s not subscription eligible)
- The 2 lb Medium Roast Coffee is purchased a total of 10 times (5 via one-time purchase and 5 via new subscriptions created)
- The 2 lb Dark Roast Coffee is purchased a total of 5 times (2 via one-time and 3 via new subscriptions).
When calculating our enrollment rate, we will factor in all checkouts - both one-time and subscription - but only for our subscription eligible products. So in this case, we will only consider the Medium Roast Coffee and Dark Roast Coffee.
So we’ll total up all new subscriptions created (5 Medium Roast + 3 Dark Roast) and divide that by the total number of checkouts, both one-time and subscription, for these subscription eligible products (10 Medium Roast + 5 Dark Roast) for an enrollment rate of 53%.
Including the tankard in the total one time and subscription checkouts count would be an unfair factor to calculate enrollment rate, as this tankard wouldn’t be an ideal subscription product - so it shouldn’t count against your enrollment rate. (But it would be an awesome subscription add-on! Read our Upsell Module here for more tips on boosting your subscription AOV through upsells.)
What's next?
Enrollment Rate on its own is a helpful tool to understand how your subscription business is doing relative to your total eCommerce business performance. It can reveal areas of opportunity, like making more of your product catalog subscription eligible, or leaning further into acquisition tactics like subscription program marketing.
So now that you’re a subscription enrollment expert, let’s talk about boosting your enrollment for top tier subscription performance. Here's more on unlocking an up to 5x increase in enrollment rate, and here's how to retain that growth.