Subscription Marketplace with Channel Segmentation

Business Context

• Business Model: Subscription marketplace
• Stage: Growth stage (12 months in market)
• Data Availability: Channel-specific churn rates available

Recommended Method: Simple LTV with Channel Segmentation

With 12 months of data and clear channel-specific retention patterns, Simple LTV with segmentation is appropriate.

Overall LTV Calculation

Using blended metrics:

• ARPU: $120/month
• Blended Churn Rate: 4% monthly
• Gross Margin: 70%

Overall LTV = ($120 / 0.04) x 0.70 = $2,100

Segmented LTV Analysis

Organic Channel

• Churn Rate: 3% monthly
• Customer Lifetime: 1 / 0.03 = 33.33 months

Organic LTV = ($120 / 0.03) x 0.70 = $2,800

Paid Search Channel

• Churn Rate: 5% monthly
• Customer Lifetime: 1 / 0.05 = 20 months

Paid Search LTV = ($120 / 0.05) x 0.70 = $1,680

Referral Channel

• Churn Rate: 2% monthly
• Customer Lifetime: 1 / 0.02 = 50 months

Referral LTV = ($120 / 0.02) x 0.70 = $4,200

LTV:CAC Ratio Analysis

Key Insights

1. Referral channel is a gold mine: 28:1 LTV:CAC ratio with $4,200 LTV - 50% better than organic and 2.5x better than paid search.

2. Retention varies dramatically by channel: 3% delta between referral (2%) and paid search (5%) creates 150% LTV difference ($4,200 vs $1,680).

3. All channels are profitable: Even paid search with the weakest unit economics delivers healthy 4.8:1 LTV:CAC.

4. Payback periods are excellent: All channels under 3 months. Referral pays back in 1.3 months.

Actionable Recommendations

Immediate Actions:

1. Build a systematic referral program: With 28:1 LTV:CAC, invest heavily here. Consider spending $500-800 per referral acquisition and still maintain 5:1+ unit economics.

2. Increase referral incentives aggressively: Current $150 CAC is far below what economics support. Test doubling rewards to accelerate this channel.

3. Study referral customer profile: Understand WHY referral customers have 2% churn. These are your ideal customer profile - use insights to improve other channels.

Strategic Considerations:

4. Scale organic 2-3x: 14:1 ratio with 1.7 month payback justifies significant investment in content, SEO, and community building.

5. Optimize paid search targeting: 5% churn suggests marginal fit. Tighten targeting to acquire customers more similar to organic/referral segments. A 2% churn reduction would increase LTV to $2,800 (+67%).

6. Create referral amplification campaigns: Launch “refer 3 friends, get X” campaigns. With economics this strong, aggressive incentives will pay off.

Red Flags to Monitor:

• Watch for referral channel saturation (if volume stalls, economics may deteriorate)
• Monitor paid search churn closely - 5% is acceptable but not stellar
• Track whether referral quality degrades as you scale incentives