Key Analytics Questions When Moving To Subscription-Based Revenue Models

Everywhere you look, companies that provide content to consumers for free and instead make their money through advertising-supported revenue models are struggling.  With Google and Facebook dominating the ad market through their vast access to user data and ability to hyper-target consumers, advertisers are finding less value in purchasing ad space outside of these platforms. 

Traditional print publishers in particular are suffering from a double-whammy of reduced ad placement and declining circulations, creating an inevitable downward spiral as their audience reach shrinks and further deters advertisers from making use of the format.

Even those that have successfully made the shift to providing their content in digital format are still paying the price, as consumers are becoming more and more fed up with the constant barrage of advertising that is forced upon them.  It seems that a good proportion of us are becoming less willing to compromise our content experiences with ad interruptions simply for the sake of receiving a free service.

The alternative being embraced by many is to shift to a subscription-based model instead, relying on a (hopefully) steady and predictable recurring revenue from a loyal user base.  It’s not all sunshine and rainbows however, as converting your existing customer base to this alternative poses its own distinct set of challenges.

The key to addressing these challenges lies (perhaps unsurprisingly) in big data and analytics.  Although a huge amount of user data can be gleaned from monitoring the behaviour of free users, as subscription models by their nature require user registration, it is possible to build a far more comprehensive and detailed view of how and why people interact with your content.

Utilising this data effectively to develop an understanding of user behaviour requires asking the right questions.  Successful analytics requires direction – it’s important to define from the start what insights you want the data to provide.

Ultimately, you want to increase the profitability of the business.  To do that, you need to create a subscription service with enough value to warrant paying customers.  You need to find out at what point people demonstrate a willingness to hand over their hard-earned money.  You need to acquire those customers in the most efficient way possible and ensure that they remain not just satisfied, but regularly engaged with your content.  You need to find out where any opportunities to cross- or up-sell may lie and how to best take advantage of them (without the usual advertising).  You need to recognise the signs of a customer about to leave, learn why that is and how to prevent it.

Here are 5 of the most common and most important questions to ask when creating a subscription-based revenue model.

At what point do you start charging for access to your content (put up a paywall)?

One of the most fundamental questions to ask and one of the most important, deciding how much free content should, or needs to be available in order to encourage regular engagement and convert the user to subscription is tricky.  Put up a paywall too early and you won’t build engagement with your brand.  Put it up too late and you risk reducing the value of subscribing. 

How much should you charge for access to your content?

The subscription cost can be influenced by a huge range of factors, some with greater weight than others.  Perhaps first and foremost, there is the need to ensure your pricing is competitive in a market where consumers have a huge amount of choice and control.  It will also depend on how uniquely valuable your content is – investing in improving content, while having its own costs, can have a big impact on loyalty and acquisition.  Volume – or the size of your user base – as ever, is also key consideration.

How do you identify those users most likely to convert?

Knowing which ad-supported users are more likely to convert to subscribers enables you to target campaigns, special offers and discounts most effectively.  Analysing the behaviour of users before, during and after the subscription process can enable you to understand the pathways and triggers people take on the journey from free to paid consumption.

What can you do to keep your users engaged and ensure they renew their subscriptions?

Monitoring the performance of your content and cross-refencing that performance with individual user behaviours enables the creation of defined user groups.  These might be broad user demographics or small niche audiences depending on the depth you go to, but both can be used effectively to align specific types, formats or topics of content to the users most likely to engage with them.  Providing this subtle but powerful personalisation will add value to the user experience, enhancing their engagement and loyalty.

How do you reduce customer churn rates?

While customer acquisition is always important, customer retention is arguably more so.  The key performance metrics for subscription-based models differ substantially from those of ad-supported models, with customer acquisition cost, customer lifetime value and average revenue per account all becoming crucial.  Understanding what triggers users to drift away from your content, recognising the signs of lower engagement before it’s too late and targeting those users with personalised offers to retain their business will be critical to success.

There are of course a thousand-and-one more questions you can ask and, thanks to analytics, insights you can gain.  Using advanced analytics to reach these insights should be a cornerstone of your strategy to enable subscription models and with a little effort, will enable many companies to escape the old reliance on advertising revenue.