And one of the most important part in a subscription business model is cross-selling and upselling the
product.
And that's why let's understand a simple strategy that was used by Shopify to increase their cross-selling
and upselling opportunity in subscription business model.
A company normally sell a free or a cheap basic product to their customer, and then they will sell
the expensive refills to Shopify, have a free basic product that you can use, and you can build your
own ecommerce store in just $40.
But if you wanted to increase the functionality of your eCommerce store, let's say you wanted to introduce
a chat bot in your eCommerce store or email marketing tool to drop emails to your customer, or let's
say our tool like privy that allows you to post customer review.
Then you have to use Shopify apps and these apps will cost you a specific amount.
Let's say a chat bot will cost you ten or $15.
And similarly, an email marketing tool and a review tool will also cost you ten or $15 and you have
to pay additionally for all these add ons that are there on Shopify.
Now, if I give you a comparison, let's say if you just use the basic version of Shopify, then you
are paying $30 every single month and that's your monthly recurring revenue.
And if you multiply this $30, that is your monthly recurring revenue with 12, you will have your yearly
recurring revenue as three $60 per year.
This is using Shopify without apps, but every single ecommerce store is using at least ten different
apps like chat bot email marketing or a review tool or a wallet tool.
And that's why they are using ten apps on an average.
And if those people are paying $10 for every single app on an average, then they are paying one $30
as a monthly recurring revenue.
And if you multiply one $30 with 12, they are paying 1560 dollars every single year.
So now you can see that this is the power of cross-selling or upselling your product.
So Shopify is cross-selling and upselling all of these things in the form of their add ons or refills
so that people can install as many functionality as they want in this ecommerce store.
They can install a plug in to manage their wallet.
You have a plugin for SEO.
You have a plugin for product recommendation.
And just like Shopify, there are so many companies that use subscription business model companies like
Air Table, iCloud, Google Drive, Fresh Work, LinkedIn, Zoho, Slack, HubSpot Monday.
There are thousands of companies that use this subscription business model.
Now, if you want to create a successful subscription business model, then you have to major success
in your business.
So I'm going to give you five important metrics that you have to measure so that you can measure success
in your subscription business model.
And we'll go deep into all these five metrics by the end of this course.
But let me give you a high level overview of these five important metrics that you have to measure.
The first one is your meter.
That is your monthly recurring revenue.
So what is the amount of revenue that you are generating from the exact same customer every single month?
That's your monthly recurring revenue.
And this is super important for all subscription business model.
So whether you are selling a software product or a consumer product, Amra is super important.
If you are using a subscription business model, second is your average revenue per user.
That means what is the average revenue you are generating from every single user?
And to increase the average revenue per user, you always try to cross-sell and upsell the product.
The third one is your customer lifetime value.
That means what is the total amount of value you are generating from one single customer.
If a customer will last with your brand for a longer period of time, they will have a higher customer
lifetime value.
And there are multiple ways by which you can increase the customer lifetime value.
Fourth one is your customer acquisition cost.
So what is the amount of money that you are spending in acquiring one customer?
That's your customer acquisition cost.
So you need to make sure that your customer lifetime value should be greater than your customer acquisition
cost so that you can make your unit economics positive.
And that's a super important metric you need to measure.
And we'll talk about all of these metrics by the end of this specific course.