The ROI (Return on Investment) of an online subscription business will vary depending on certain assumptions that are made. This post will identify some of the most significant factors that determine the ROI of an online subscription business.
The first and most fundamental factor that will determine the ROI of an online subscription business is the lifetime value that can be attributed to each individual subscriber. The lifetime value of an individual is the value that can be attributed to that individual, based on the plan that they have subscribed to. For example, if you have 1,000 paying subscribers, and you charge each of them £10 a month, then the lifetime value of each of those 1,000 subscribers is £110.
The lifetime value of an individual is a key metric that can be used to measure the profitability of an online subscription business. If the lifetime value of an individual is high, then it indicates that the plan is attractive and that the subscriber has substantial equity in the product or service that they are paying for. On the other hand, a low lifetime value indicates that the plan is unlikely to be as profitable as it could be.
The lifetime value of an individual is also a function of how long they stay subscribed to your product or service. The more time that an individual spends using your product or service, the higher the lifetime value becomes. A high level of engagement with your product or service will result in a high return on investment. It is, therefore, a fundamental tenet of marketing analytics that you should continually monitor the lifetime value of your customer to ascertain the health of your business.
The demographics of your customer base will also influence the ROI that you can obtain from an online subscription business. For example, if you are selling cookery ebooks to older people then that will impact the overall profitability of the company. In general, older people are less likely to use new products and services, and they are normally more price-sensitive than other demographics. As a result, the cost of acquiring a new customer may be more expensive than the revenue that that customer is likely to generate.
The demographics of your audience will also influence how much money you can make from your business. For example, if you are selling fashion accessories, then younger people are more likely to be a source of revenue for your business than older people. In general, men spend more money on style products than women do, so if your customer base is predominantly male then the revenue that you obtain from men is likely to be more significant than the revenue that you obtain from women.
A key aspect of the ROI of an online subscription business is how you intend to grow your business. If you have established a business that is successful and profitable in the present, then you can expand that business in a number of ways. The type of product that you offer, the pricing for that product, and the promotion of that product all impact upon the growth of your business. Consider the example of a digital nomad, who, while traveling the world, decide to launch a blog to chronicle their adventures. They visit a number of countries and accumulate a large number of blog subscribers in the process. As a result of their efforts, they are able to monetize their blog and develop a successful business that earns them a living from writing and illustrating travel blogs.
The growth of an online subscription business will be determined by a combination of factors, but it is essential that you maintain an open mind about what constitutes growth and how you intend to achieve it. Growth does not always mean expanding your physical premises or adding additional employees. It can, in fact, be a function of developing new products or expanding your marketing activity to new platforms. The only way to know for sure is to experiment, test, and analyze the results of your efforts.