Subscription / Recurring Billing
A sales model based on automatic monthly/annual billing. Common for coffee, cosmetics, supplements, and SaaS. Raises LTV and enables predictable revenue.
In practice
Subscription is the single biggest change a store can make to LTV. A customer who buys once a month equals 12 purchases a year from that one customer. Without a subscription, you'd need to re-acquire them 12 times.
Common misconception
'Subscriptions only work for software.' Not at all. Dollar Shave Club (razors), Birchbox (cosmetics), HelloFresh (food) all proved subscriptions work in any category with a recurring need. Ask: does the product run out or wear out? If so, a subscription is possible.
How to fix it
High subscription churn? (1) Check failed payments — an expired card is cause #1. Add dunning emails (card-update reminders), (2) check for a pause option — a customer who can pause temporarily doesn't cancel entirely, (3) offer an anniversary discount for renewal.
Example
An Israeli coffee store added a 'monthly coffee' subscription. 280 subscribers in the first month, 8%/month churn. Adding a pause option and flavor personalization cut churn to 3.2%, with LTV 2.8x that of a regular customer.
Priority
Offer a subscription option (not mandatory) at least on your top sellers. Tools: ReCharge (Shopify), Subbly, Bold Subscriptions. ROI becomes clear after 90 days.
Related terms
Keep learning. Metrics that touch the same area:
- Churn RateFinanceThe percentage of customers/subscribers who stopped buying or paying in a given period. High churn means every new customer just replaces an old one. Per Harvard research: cutting churn by 5% increases profit by 25-95%.
- TokenizationPaymentsReplacing a credit card number with a unique string (a token) for storage and reuse. Enables repeat charges without storing card details — reduces breach risk and supports PCI DSS compliance.
- Payment GatewayPaymentsA service for accepting payments. Stripe, PayPal, Tranzila, Cardcom. Fee: 1.4-3.5% plus a fixed amount.
- ChargebackPaymentsA customer disputing a charge through their bank. Costs the merchant: a $7-15 fee plus the lost amount. Above 1% puts the account at risk.
- PCI DSSPaymentsSecurity requirements for any business handling credit card data. Non-compliance means fines and account termination.
- BNPL – Buy Now Pay LaterPaymentsKlarna, PayPlus, Afterpay — interest-free installment payments. Raises AOV by 20-30% but carries a 2-6% fee.
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