Investors wish they could forecast the future and decrease the uncertainty regarding how a business will grow. Subscribers’ retention on the annual plan is directly related to the product value. However, it comes with a significant lag, e.g., an annual plan is only observable a year after the customer signed up.
So, the best predictors for resubscription are the current engagement rates of your existing subscribers. Let’s see what engagement metrics gain the most significant interest from investors.
Engagement over long periods at the end of a subscription
There are many engagement metrics to look at. What matters most is how your subscribers engage with the core app functionality over longer periods, specifically closer to the end of their subscription. If they are using it actively, this signals they are getting the expected (or hopefully even beyond expected) value from the product, increasing the probability of their renewing for another year. The obvious metric to review is how often your user opens the app toward the end of the period in question.
For a more in-depth analysis, look at the usage of the core app functionality during these periods. Cohort engagement analysis comes in handy here; you can see what share of users who started using your application 12 months ago are still opening it and using the core functionality three, six, nine, and 12 months after the first use. When you see, for example, a 60% churn rate in the third month after installing it, the cohort obviously will not have a high chance of getting more than 40% of its customers to resubscribe in nine months because they are highly likely to have canceled their annual subscription in these initial three months. This situation is when the direct relation between engagement and retention comes into play.
Frequency of interactions with core app features
To make a solid argument regarding the value customers get from the product, investors want to see how many core app functionality interactions happen on average over the life of the respective subscribers’ cohort. For example, interactions beyond just opening your app mean subscribers are consciously seeking value. Each startup should define its “key engagements” and help users by guiding them toward this core activity inside the product.
