Offering Subscription

Definition (short). Customers pay a recurring fee (monthly/annual) for continuous access to a product, service, or perks. Value comes from retention, expansion, and efficient acquisition—far more about relationships than one-off deals.

Recent examples. Netflix closed 2024 with ~301.6 million paying members and keeps raising ARPU via pricing tiers and an ad-supported plan. Spotify ended Q4 2024 at 263 million premium subscribers and posted its first full profitable year. B2B SaaS leaders (Salesforce, ServiceNow) live and die by ARR growth and net retention.

Historical example. Newspaper and magazine subscriptions date to the 18th century; The Times (1785) and Reader’s Digest (1922) built massive recurring bases long before software did.

1. Net Recurring Profit Growth % (NRG) EN: Year-over-year growth in profit generated by recurring revenue (ARR × Gross Margin − OpEx tied to subs). Pseudo:

   ((ARR_t*GM_t - OpEx_t) - (ARR_{t-1}*GM_{t-1} - OpEx_{t-1})) / (ARR_{t-1}*GM_{t-1} - OpEx_{t-1}) * 100  

   Why: Bundles what a CEO ultimately wants from a subscription engine: bigger recurring top line and healthy margins. Benchmark: Private SaaS medians target ~20% ARR growth with ~75–85% gross margin (OpenView).

2. ARR / MRR Growth % EN: % change in annual or monthly recurring revenue. Pseudo: (ARR_t - ARR_{t-1}) / ARR_{t-1} * 100 Why: Clean topline indicator, independent of one-off services. Benchmark: 2024 SaaS ARR growth medians ~19%.

3. Net Profit Margin % EN: Net income / revenue. Pseudo: NI / Revenue * 100 Why: Recurring revenue still needs to drop profit to the bottom line. Benchmark: Large mature subs businesses (e.g., Spotify) moved to positive NP margins; best-in-class SaaS aim double-digit NP margins at scale.

4. Active Subscribers (Subs) EN: Paying customers at period end. Pseudo: Subs_end = Subs_start + New - Churned Why: The “count” lever of ARR (ARR = Subs × ARPU). Benchmark: Netflix 301.6 M; Spotify 263 M; B2B SaaS counts vary—growth rate matters more than absolute.

5. ARPU / ARPA EN: Average revenue per user/account. Pseudo: Recurring_Revenue / Avg_Subs Why: Monetization depth; can rise via price hikes, tiering, upsells. Benchmark: Streaming ARPU spans $4–$14/mo globally; enterprise SaaS ARPA often >$50k/yr.

6. Net Revenue Retention % (NRR) EN: (Starting ARR from existing customers ± expansion − contraction − churn) / Starting ARR. Pseudo: (ARR_existing_end / ARR_existing_start) * 100 Why: Land-and-expand scorecard. >100% means base grows without new logos. Benchmark: Public/private SaaS medians ~101% NRR, top quartile >120%.

7. New Subscribers EN: Gross adds in period. Pseudo: count(new_customer_ids) Why: Pipeline health; offsets churn to grow the base. Benchmark: Aim that New Subs ≥ Churned Subs to lift net adds.

8. Churn % (Logo or Revenue) EN: % of customers (or ARR) lost in period. Pseudo: Churned_Customers / Start_Customers * 100 (logo) or Lost_ARR / Start_ARR * 100 Why: Leaky-bucket killer; drives LTV. Benchmark: B2B SaaS best-in-class <10% annual logo churn; consumer subs 3–5% monthly common.

9. Expansion / Upsell Rev % EN: Additional ARR from existing customers / starting ARR. Pseudo: Expansion_ARR / Start_ARR * 100 Why: Determines NRR >100%; cheaper than net-new. Benchmark: Top PLG SaaS drive 15–30% expansion annually.

10. Base Plan Price EN: Published price for entry tier. Pseudo: Plan_price_monthly Why: Anchor for ARPU and upgrade ladders; careful adjustments yield ARPU gains without spiking churn. Benchmark: Streaming base plans $7–15; SMB SaaS $20–50; enterprise tiers negotiated.

11. Gross Retention % (GRR) EN: % of starting ARR retained excluding expansion. Pseudo: (ARR_existing_end_excl_expansion / ARR_existing_start) * 100 Why: Purist retention health; insulation from upsell masking churn. Benchmark: SaaS GRR median ~90%.

12. Cross-sell Rate EN: % of customers buying ≥2 products/modules. Pseudo: Customers_multi_product / Total_Customers * 100 Why: Depth of relationship; diversifies revenue per account. Benchmark: Top enterprise suites push >30% cross-sell penetration.

13. Customer Acquisition Cost (CAC) EN: Sales & marketing spend per new paying customer. Pseudo: S&M_spend_period / New_Paying_Customers Why: Efficiency of growth engine; ties to payback and LTV economics. Benchmark: SaaS CAC often $200–$600 for SMB, thousands for enterprise.

14. Payback Months EN: Months to recover CAC from gross margin dollars. Pseudo: CAC / (ARPU * GM%) Why: Shorter payback = faster cash recycle, less burn. Benchmark: Best-in-class SaaS ≤12 months; median 15–16 months.

15. Customer Lifetime Value (LTV) EN: Gross margin dollars expected from a customer over life. Pseudo: (ARPU * GM%) / Churn_rate Why: Sets the ceiling for rational CAC. Benchmark: Wildly variable; LTV/CAC ratio is key.

16. LTV/CAC Ratio EN: LTV divided by CAC. Pseudo: LTV / CAC Why: Sanity check: too low = unprofitable growth; too high = under-investment. Benchmark: “Rule of thumb” 3:1 ideal, <2:1 dangerous, >5:1 may mean under-investing.