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Subscription Value Loop

The Subscription Value Loop

  • Key elements of Kenny’s Newsletter on the subject

A comprehensive blueprint for growing your consumer subscription business

Building a businesses on a core value promise that provides enduring value

→ Harnessing the value promise to drive a compounding Subscription Value Loop that increases LTV/CAC and accelerates Payback Period:

  1. Value Creation: Quickly connecting new users to the app’s core value promise and offering enduring value that keeps them coming back

  2. Value Delivery: Cost-efficiently distributing the app to users organically through word of mouth and SEO, as well as through sustainable paid acquisition

  3. Value Capture: Converting free users into subscribers, which generates revenue that can be reinvested into the business to strengthen the rest of the loop

As a company bolsters its Subscription Value Loop, LTV/CAC goes up and Payback Period comes down, driving faster and more efficient growth.

The 5 elements to remember:

There are five steps to using this tool:

  1. Identify metrics that drive Value Creation, Value Delivery, and Value Capture for your app.
  2. Calculate your company’s recent performance against each metric.
  3. Compare your performance on each metric vs. category-specific benchmarks.
  4. Discover opportunities based on metrics where you underperform vs. these benchmarks.
  5. Prioritize initiatives to improve the metrics with the greatest upside potential.

Calculator link

1. Build a great product with a unique and enduring core value promise

  • Step: Value Creation

Specific tactics

Building a great product is more art than science, but there are tools that early-stage companies (and larger companies launching additional products) can use to measure and improve their product-market fit (PMF).

  • Measure your PMF Score: There is a tool called the 40% Test created by Sean Ellis that offers companies a way to measure their PMF Score by running a PMF Survey that asks users, “How would you feel if you could no longer use [product]?”: very disappointed, somewhat disappointed, or not disappointed. If over 40% of respondents say they’d be “very disappointed,” then you can be confident you have at least the initial signs of PMF.

  • Identify your High-Expectation Customers (HXCs): Next, you can group respondents based on their answers and identify those who Julie Supan refers to as HXCs, the ones she says “will acknowledge and enjoy your product or service for its greatest benefit.”

  • Synthesize feedback from HXCs and “on the fence” users: After finding your HXCs, as well as “on the fence” users who said they would be “somewhat disappointed,” review their qualitative feedback to understand what improvements they are most interested in.

  • Prioritize your roadmap to serve these users: Finally, prioritize new product features and improvements to the existing product experience that directly address the demands of your HXCs and on-the-fence users. This offers a fast track to boosting your PMF Score.

2. Optimize subscription pricing and packaging

  • Step: Value Capture

  • Target metrics: Subscription Prices, Trial Start Rate, Trial Conversion Rate, Install to Paid Conversion Rate, Subscriber Retention Rates

3. Deliver immediate value through new user onboarding

  • Step: Value Creation / Value Capture

  • Target metrics: Signup Rate, Trial Start Rate, Trial Conversion Rate, Install to Paid Conversion Rate

Recent reports have found that more than 75% of trial starts occur on the same day a user installs an app (often in the first few minutes). This means onboarding flows should be optimized for speed to value so new users quickly understand why they need your product.

Specific tactics

  • Emphasize your value promise
  • Conduct a Psych audit
  • Leverage single sign-on (SSO)
  • Provide a personalized experience

4. Boost paid marketing efficiency by investing in web conversion flows

  • Step: Value Delivery

  • Target metrics: Cost per Install (CPI), Cost per Trial (CPT), Paid CAC per Subscriber, Gross Margin, Subscriber Retention Rates

5. Optimize paywall visibility and conversion

  • Step: Value Capture

  • Target metrics: Trial Start Rate, Trial Conversion Rate, Install to Paid Conversion Rate, Subscription Plan Mix

6. Distinguish and emphasize your premium value promise

  • Step: Value Creation / Value Capture
  • Target metrics: Trial Start Rate, Trial Conversion Rate, Install to Paid Conversion Rate

7. Improve subscriber retention by minimizing involuntary churn

  • Step: Value Capture
  • Target metrics: Install to Paid Conversion Rate, Subscriber Retention Rates

8. Leverage motivation tactics (e.g. streaks, badges, leaderboards, and notifications)

  • Step: Value Creation
  • Target metrics: Subscriber Retention Rates

9. Promote word of mouth to drive more organic user acquisition

  • Step: Value Delivery
  • Target metrics: Cost per Install (CPI), Cost per Trial (CPT), Blended CAC per Subscriber

10. Leverage strategic discounts and promotions

  • Step: Value Capture
  • Target metrics: Trial Start Rate, Trial Conversion Rate, Install to Paid Conversion Rate

Further study

Other great resources for consumer subscription businesses

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