Improving customer acquisition rates and retention in subscription-based business models; the importance of Net Promoter Score
It is of little surprise that business models have become more subscription based. Companies benefit from a recurring revenue stream and greater revenue predictability. Consumers pay for time-bound access to goods and services, avoiding large capital expenditure when compared with buying the same access outright. However, as subscriptions become the dominant model, high customer loyalty and net promoter scores are needed to ensure consistent business growth. Given that customers are paying for access rather than ownership, it is easier to switch to competitive products at the end of contract terms. Crucially, this could be before customer lifetime value (LTV) has balanced customer acquisition costs, therefore yielding a negative gross customer margin.