Who comes back after the first purchase

Training 1035 minutescustomer retention

You run a service with a $20 monthly subscription. Serving one paid subscription costs $5 a month. All other costs are the same in every option compared.

Training goal: Tell growth from new sales apart from better retention

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Situation

1. At the start of the month you have 100 subscriptions and 20 of them do not renew. During the month 30 new paid subscriptions are added, leaving 110 at the end; there are no other changes. Which conclusion do these data support?

Retention improved by 10%
The base grew, retention of existing ones is 80%
About 18% of existing clients left

2. Two groups paid for a subscription for the first time on the same day: 40 clients from channel A and 20 from channel B. A month later 20 from A and 14 from B renewed; price and terms are the same. Which group has the higher renewal rate?

A: 20 renewals against 14
The same: 34 of 60 renewed in total
B: 70% against 50%

3. In a new test, 100 comparable subscriptions are randomly split into two groups of 50. Without a reminder 30 renewed, with a reminder 35; the campaign costs $40, the price is $20, service is $5, and only next month is compared. What is the observed extra contribution after the campaign cost?

$35, but the result needs a repeat check
$60, so the effect is proven
$485, so scale without limits

4. For one month, two fully known scenarios are compared: without a discount 80 clients renew at $20, with a $3 discount for everyone 88 renew at $17. Service costs $5 per client; there are no later purchases, referrals or other differences in this comparison. Which gives more margin?

Discount for all: 8 extra clients matter more
No blanket discount: $144 more margin
The same: more clients offset the discount

What you will learn

A change in the base is new sales plus churn; count them separately.
Compare rates in groups of the same age and remember that small samples are noisy.
Measure a campaign's extra effect against a control group and after variable costs.

Your real-life step

For two groups of clients who joined in different months, calculate the share who paid again after the same number of days. Write down each group's size and do not conclude from total revenue alone.

Questions and answers

How do you calculate customer retention?

For a chosen starting group, divide the number still active at the set date by the size of that group. New clients are not added to the denominator.

Why can the base grow while retention is poor?

New sales can exceed churn. In the example 30 new subscriptions cover a loss of 20, yet the starting group still loses 20%.

How do you test whether reminders help?

Compare comparable groups with and without a reminder over the same period. Count extra renewals, margin, campaign cost and the uncertainty of the result.

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Numbers are illustrative. A game, not financial advice.