The LTV CAC Ratio

On the podcast I talk with Sylvain about the top subscription app insights you should be thinking about, how important cohorting is when looking at growth metrics, and why good advice can turn bad if you apply it at the wrong stage.

Top Takeaways
💎 In an early stage, engagement is more important than growth
💎 When looking at retention for your subscription apps, segment your users based on their subscription status
💎 Launching only a monthly plan first can help you improve the product
💎 Gifting is a great way to increase the spend ceiling
💎 You need to ask for the annual upgrade beyond sign up

About Sylvain Gauchet
👨‍💻 Director of Revenue Strategy at Babbel and founder of Growth Gems
💡 “Whether your onboarding is going to be short — because you get people to experience the background removal — or it's long because you need to sell them on the idea, it's still about convincing them. It’s for you to figure out what’s the best way to convince them.”
👋  LinkedIn | Twitter

Links & Resources
‣ Learn a language at Babbel
‣ Sign up for the Growth Gems newsletter
‣ Gabor-Granger Pricing Model Explanation and Survey Template
‣ Check out Gabor-Granger on YouTube
‣ How To Price Your Product: A Guide To The Van Westendorp Pricing Model
‣ Check out Van Westendorp on YouTube

Follow us on Twitter
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‣ Jacob Eiting
‣ RevenueCat
‣ Sub Club

Episode Highlights

[2:11] The curator: On top of working a full-time job, content consumer extraordinaire Sylvain “mines” the best growth insights to share in a biweekly newsletter.
[3:13] Top Gems: Strategy
[3:17] Get out and explore: Andy Carvell, co-founder at Phiture, preaches big swings for big results in place of sophisticated measuring and A/B testing. The stage you’re in shapes the tactics you use.
[7:05] Clash of priorities: On top of revenue, the CAC/LTV ratio considers health and growth instead of one or the other, says Michael Berliner, former principal product manager at MasterClass.
[13:02] Engage all systems: Without engagement, growth is meaningless, according to bestselling author Nir Eyal. Don’t scale until you’ve nailed engagement and know that people are willing to pay.
[15:29] Avoiding extremes: Eric Seufert, analyst and strategy consultant at Heracles Media, says that if you’re blowing up, you should spend on paid acquisition much earlier than you think — even before onboarding and perfecting the product. Just don’t focus too much on a specific channel — extremes aren’t good.
[20:22] Engineering success: Testing velocity is critical. Canva head of revenue and product growth David Burson knows you have to get comfortable with just enough engineering and moving fast. Growth and product engineering aren’t the same — you’re going to fail sometimes.
[23:32] Ease the tension: Monetization, engagement, and virality need balance, says independent mobile growth consultant Thomas Petit. Doubling the price for double the short-term revenue sometimes works, but at what cost for long-term retention?
[26:35] Top Gems: Retention
[26:40] Segment, re-engage: You can’t look at everything in aggregate, Sylvain says — if you do, you won’t understand the story behind user behavior. But as Thomas Petit also highlights, segmenting on a subscription basis helps you to target appropriately through re-engagement.
[29:27] Month by month: For cash flow, annual plans reign supreme. But monthly plans offer incremental improvement opportunities, says PhotoRoom co-founder and CEO Matthieu Rouif.
[33:30] Winning by proxy: It’s very difficult to impact the tail end of retention. Finding earlier patterns and indicators helps you to optimize for the proxy — and provides the only way to do so, says RBI head of digital marketing Anja Obermüller.
[36:41] Talking tactics: Strategy matters, but the technicalities of involuntary churn could be the key to increasing retention. Patrick Campbell, CEO of ProfitWell, advises looking at the Tactical Retention Zone as well as the Strategic Retention ends of the value spectrum.
[39:35] Top Gems: Onboarding & Activation
[39:40] Seeing is believing: Thomas recommends not A/B testing in the early stages — make the change directly instead. If it matters, you’ll know when you’ve made the desired impact. You don’t have to mimic mature, late-stage companies like DuoLingo that religiously A/B test everything.
[42:59] Onboarding is separate: Darius Mora, formerly the CMO of Reflectly, knows how important onboarding optimization is — to the point that you should view onboarding as a separate product.
[45:06] The art of persuasion: Don’t bother with a how-to tutorial, says Leon Sasson, co-founder and CTO of Rise Science. Instead, educate and convince: Demonstrate how the product affects users’ lives and why they should care.
[50:14] Collateral damage: Leon also emphasizes a classic mistake with funnel optimization: Making moves in one direction hurting elsewhere — say, increasing trials negatively affecting long-term retention. Use counter-metrics to avoid these pitfalls, which don’t have to be that sophisticated.
[52:06] Countdown to experimentation: Growth trainer and coach Ethan Garr is keen to stress that you don’t jump into tactics — you experiment instead. Just because something works for someone doesn’t mean it’ll work for you, so avoid copying tests.
[54:32] Realignment: What happens before is as important as what comes after, Sylvain says. Phitur senior designer Marissa Hsu clarifies the importance of setting the right expectations during onboarding for ensuring user acquisition continuity.
[59:26] Top Gems: Monetization
[59:31] Surveying the landscape: Giancarlo Musetti, growth product manager at Burner, strongly recommends surveying to understand the best ways to deploy paywalls. Especially if you’re in the early stages, talk to users.
[1:03:16] It’s all about the percentages: You can’t ignore the percentage of users who see the paywall. Monitor it, because many apps make it difficult for people to actually pay for them. Of the peopl...