Archive | September, 2012

How to Calculate the Breakeven Point for Digital Subscriptions

In subscription-based business models, maximizing customer lifetime value is understood to be a key success factor to a profitable business. But how do you know at what point a customer relationship turns profitable? While there are obvious differences between customers, it turns out you can calculate your average customer lifetime to reach the breakeven point using your existing operating metrics. So how is this done? Here are the standard operational metrics known by every online service: Customer Acquisition Ratio (CACR)  – the sales and marketing costs to sign up a new customer as a ratio to revenue acquired Customer Renewal Cost ratio (CRCR) – the sales and marketing costs of closing a renewal as a ratio to revenue renewed Research […]