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20Growth: The 7 Core Levers to Win at Consumer Subscription: Growth Loops, CAC + LTV Benchmarks, Pricing, Packaging, Notifications, Discounts, Paywalls | The Breakdown with Phil Carter
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
Understanding CAC and Retention in Consumer Subscriptions
Customer Acquisition Cost (CAC) plays a crucial role in the payback period, with high CAC leading to longer payback times, particularly in consumer subscription models compared to B2B. For consumer apps, a payback period of six months is acceptable, while one month is considered great and achieving payback in the first session is exceptional. The short attention spans in consumer behavior necessitate quick conversion from trials, as over 75% of trial starts occur within the first 24 hours post-installation, underscoring the urgency to recover CAC swiftly due to high churn rates. Retention benchmarks vary significantly between monthly and annual subscribers. Retaining over 50% of monthly subscribers after six months is indicative of strong performance, whereas the focus for annual subscribers should be on retention over the first two years, which signals the potential for long-term loyalty. Effective retention strategies are essential, with a focus on monitoring trends to understand whether retention rates stabilize or improve over time. Reactivation of dormant users can contribute positively, highlighting the importance of dynamic retention strategies. In the context of consumer subscriptions, achieving high retention is vital due to the elevated churn rates, making it a foundational concern for sustaining business growth.
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