Welcome to the world of beauty subscription boxes! If you're familiar with this industry, you know that it's been growing at an impressive rate. According to recent reports, the global beauty box market is expected to reach $8.4 billion by 2027. As an experienced entrepreneur, I can tell you that it's crucial to keep track of KPIs to ensure success. Let's take a closer look at the top seven beauty subscription box KPI metrics that you need to track and calculate.
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- Monthly Recurring Revenue: One of the most critical metrics for any subscription-based business is MRR. Tracking this metric allows you to gauge your business's performance and make informed decisions to optimize revenue growth.
- Customer Satisfaction Score: An excellent CSAT score keeps your customers coming back for more, generating higher revenue. Moreover, it helps you identify areas where you must make changes to improve the overall customer experience.
- Number of New Subscribers per Month: This KPI reflects the number of new subscribers acquired during a month. A steady increase in new subscribers is a good sign for your business's growth and shows that you're doing things right.
These are just some of the KPIs that you need to monitor in your beauty subscription box business. In the following sections, we'll dive deep into each of these KPIs, discussing how to track and calculate them. By tracking these metrics, you can keep your business on the growth track and outpace your competitors. Let's get started!
Customer satisfaction score
Customer satisfaction score (CSS) is a metric used to measure how satisfied customers are with a product or service. This KPI is crucial for beauty subscription box businesses as it helps track customer loyalty and retention.
Definition
CSS is a metric used to collect data from surveys after a customer's purchase. The surveys are often in the form of questionnaires that ask customers how satisfied they are with their purchase.
Use Case
CSS is used by beauty subscription businesses to gauge how well they are performing in providing their customers with satisfactory products. The data collected can be analyzed to identify areas of improvement in product quality and customer service. This analysis can help to improve future products and ultimately increase customer satisfaction.
How To Calculate KPI
Calculation Example
If a beauty subscription box company surveys 500 customers, and 400 customers say they are satisfied, then the CSS would be calculated as follows:
This means that the CSS for this company is 80%.
KPI Advantages
- Helps track customer loyalty and retention
- Provides valuable data for analysis and improvement
- Useful in monitoring the effectiveness of customer service
KPI Disadvantages
- Responses can be biased if customers are incentivized to provide positive feedback
- Surveys can be time-consuming for customers, leading to low response rates
- Does not always reflect actual customer behavior
KPI Industry Benchmarks
The benchmark range for CSS can vary greatly depending on the industry. However, most industries have a range from 70% to 90%. In the beauty subscription box industry, a CSS benchmark of 80% is considered good.
Tips & Tricks
- Offer incentives such as discounts or free products to encourage more customers to respond to surveys.
- Survey a diverse range of customers to gain a more accurate understanding of customer satisfaction.
- Use CSS in conjunction with other KPIs such as customer acquisition cost to gain deeper insights into customer behavior.
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Beauty Subscription Box Financial Model
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Monthly Recurring Revenue
Definition
Monthly Recurring Revenue (MRR) is the amount of revenue a business receives on a monthly basis from its subscription-based services or products. It is an important metric for measuring the growth and success of a subscription-based business.Use Case
MRR is an essential KPI for subscription-based businesses as it provides data to help these companies scale and grow. It allows businesses to measure the revenue they will generate on a regular basis, based on their current subscribers. This information is important for budgeting, forecasting, and planning purposes.How to Calculate KPI
To calculate MRR, add up the total revenue generated by your subscribers over a month. This includes all recurring charges, such as monthly fees, upgrades, and add-ons.Calculation Example
Let's say your business has 100 subscribers, and the average monthly recurring charge is $50. Your MRR would be:KPI Advantages
MRR is a critical metric for subscription businesses as it provides an ongoing understanding of their revenue. Businesses can use this information to make informed decisions about growth strategies and profitability.KPI Disadvantages
MRR may not give a complete picture of a business's health, as it only measures recurring revenue. It does not consider one-time charges or the fluctuation of individual subscribers.KPI Industry Benchmarks for the KPI: Monthly Recurring Revenue
The industry benchmark for MRR varies widely depending on the industry. For example, a software as a service (SaaS) business generally has higher MRR than a subscription-based retail business. Overall, the typical range of the SaaS companies is 5 to 7 times of the industry average MRR.Tips & Tricks
- Offering discounts for annual subscriptions can boost MRR.
- Increase MRR by upselling additional products or services.
- Ensure the accuracy of your subscriber counts and recurring charges to get an accurate MRR calculation.
Customer Retention Rate
Definition
Customer retention rate is the percentage of customers who continue to use a particular product or service over a given period of time. It is a key metric in determining the loyalty of a customer base.
Use Case
It is important to track customer retention rate as it helps businesses understand how successful they are in keeping their customers happy and engaged. By improving customer retention rates, businesses can reduce customer acquisition costs and increase revenue.
How to Calculate KPI
The customer retention rate is calculated by dividing the number of customers at the end of a given period by the number of customers at the beginning of that period and multiplying the result by 100. The formula for customer retention rate is:
Where:
- E = number of customers at the end of the period
- N = number of new customers during the period
- S = number of customers at the start of the period
Calculation Example
Let's say a beauty subscription box had 1,000 customers at the beginning of the quarter, gained 500 new customers during the quarter, and ended the quarter with 900 customers. The customer retention rate for the quarter would be:
KPI Advantages
- Helps businesses understand customer loyalty
- Can be used to identify areas of improvement in customer service or product offerings
- Reduces customer acquisition costs
KPI Disadvantages
- Does not take into account reasons for customer churn
- May not be an accurate representation of customer satisfaction
- May not reflect the true value of customers who may not make frequent purchases
KPI Industry Benchmarks
The average customer retention rate varies by industry, but typically ranges from 20% to 80%. For the beauty subscription box industry, a retention rate of 40% is considered average, while a rate of 60% or higher is considered excellent.
Tips & Tricks:
- Engage with customers through personalized experiences to improve retention rates.
- Offer incentives or rewards programs to encourage customer loyalty.
- Conduct customer surveys or feedback sessions to better understand customer needs and preferences.
Number of new subscribers per month
Definition
The Number of new subscribers per month KPI tracks the number of new customers that subscribe to the beauty subscription box service each month.
Use Case
This KPI is used to analyze the growth rate of the subscription box service and helps to identify the success of marketing campaigns that are meant to attract new customers.
How To Calculate KPI
(Number of new subscribers in the current month - Number of new subscribers in the previous month)/Number of new subscribers in the previous month
Calculation Example
If the number of new subscribers in the previous month was 500 and the number of new subscribers in the current month is 600, then the calculation will be:
(600 – 500)/500 = 0.2 or 20%
KPI Advantages
- Provides insight into the effectiveness of marketing campaigns.
- Helps identify trends and predict future growth of the business.
KPI Disadvantages
- Does not take into consideration the churn rate of customers.
- Does not factor in the customer lifetime value.
KPI Industry Benchmarks for the KPI: 'Number of new subscribers per month'
The industry average for the number of new subscribers per month is 15%.
Tips & Tricks
- Offer incentives to existing customers to refer friends and family.
- Partner with beauty influencers to attract new subscribers.
- Target specific demographics with personalized marketing campaigns.
Engagement rate on social media
Definition
Engagement rate on social media measures the level of interaction on a particular post or content on social media platforms. The metric encompasses the likes, comments, shares, and saves of a particular post.
Use Case
Engagement rate on social media is a significant KPI in the beauty subscription box business. It provides an insight into the type of content that generates more interest among the target audience. By tracking the engagement levels on various posts, companies can tailor their content to the interests of their subscribers, leading to higher retention rates.
How To Calculate KPI
The formula for calculating the engagement rate on social media is given as:
Calculation Example
Company A has posted a picture on their Instagram page, which has received 1500 likes, 250 comments, 350 shares, and 150 saves. The post reached a total of 10,000 people.
Using the formula above, we can calculate the engagement rate as follows:
Thus, the engagement rate on social media for Company A's post is 22.5%.
KPI Advantages
- Provides insight into the type of content that resonates with subscribers
- Helps in tailoring content to meet the interests of subscribers, resulting in higher retention rates
- Enables the identification of influencers who generate the highest engagement rates, leading to effective influencer collaborations
KPI Disadvantages
- Engagement rate can be artificially inflated through the use of bots or paid engagement services
- Engagement rate does not measure the quality of the interactions
KPI Industry Benchmarks for the KPI: 'Engagement rate on social media'
- The average engagement rate on Instagram is between 1-3%
- The average engagement rate on Facebook is between 0.09-0.15%
Tips & Tricks
- Create content that resonates with the target audience
- Engage with subscribers through responses to comments, and by asking for feedback
- Monitor engagement rates on a regular basis to make adjustments in content strategies
Cost per acquisition
Definition
Cost per acquisition (CPA) is a marketing KPI that calculates the total amount of money spent on acquiring a new customer. This includes all marketing expenses, such as advertising, promotions, and discounts.
Use Case
CPA is a useful metric for businesses to monitor their marketing spends and determine the profitability of acquiring new customers. It helps businesses to identify the most effective marketing channels and campaigns to optimize their marketing budget.
How To Calculate KPI
The formula to calculate CPA is as follows:
Calculation Example
Let's say a beauty subscription box has a total marketing expenditure of $10,000 in a month. The subscription box acquired 1,000 new customers in that month. The CPA for that month would be:
Therefore, the beauty subscription box spent $10 to acquire each new customer.
KPI Advantages
- Helps businesses monitor and optimize their marketing spending.
- Enables businesses to identify the most effective marketing channels.
- Provides a clear understanding of the cost of acquiring a new customer.
KPI Disadvantages
- Does not consider lifetime customer value, which could be higher than the acquisition cost in the long run.
- May not reflect the true cost of customer acquisition as it does not account for all activities that contribute to the acquisition, such as brand awareness and customer retention.
KPI Industry Benchmarks for the KPI: 'Cost per acquisition'
The industry benchmarks for CPA vary depending on the nature of the business and the marketing channels used. However, it is generally considered good practice to keep CPA below ⅓ of the lifetime customer value.
Tips and Tricks
- Regularly monitor multiple marketing channels to determine their effectiveness and optimize your marketing spend.
- Offer incentives to encourage referrals and customer retention. This can help to reduce CPA in the long run.
- Track both online and offline marketing activities to get a full picture of the cost of customer acquisition.
Customer lifetime value
Definition
Customer lifetime value (CLV) is the total amount of money a customer is expected to spend on a business’s products or services during their lifetime. It is a critical metric that helps businesses determine the value of a customer to their organization in monetary terms.Use Case
CLV helps businesses understand the value of a customer over time and, therefore, the amount of resources they should invest in customer acquisition and retention efforts. For example, if a beauty subscription box company knows that their average customer has a high CLV, they may be willing to spend more money on marketing to attract new customers.How To Calculate KPI
CLV can be calculated using the following formula:Calculation Example
Suppose a beauty subscription box company has an average monthly revenue per customer of $50, and customers stay subscribed for an average of 12 months. Suppose also that the cost of acquiring a new customer is $100. The CLV for this business would be:KPI Advantages
CLV is a valuable metric because it helps businesses make more informed decisions around customer acquisition and retention. By knowing the expected revenue from a customer, businesses can better allocate their resources to areas that will bring the most value.KPI Disadvantages
The calculation of CLV relies on assumptions and estimates which can be difficult to accurately predict. Additionally, businesses need to have reliable data on average monthly revenue per customer, customer lifespan, and customer acquisition cost to accurately calculate CLV.KPI Industry Benchmarks for the KPI: 'Customer lifetime value'
The benchmark for CLV varies depending on the industry and business model. According to a study by RJMetrics, a benchmark for CLV in the beauty industry is between $250-$300 over a 12 month period.Tips & Tricks
- Consider offering loyalty rewards programs to increase customer retention and boost CLV.
- Regularly analyze customer behavior to identify changes in purchasing patterns and adjust CLV calculations accordingly.
- Use CLV in conjunction with other metrics, such as customer satisfaction and churn rate, to gain a comprehensive view of customer value.
In conclusion, the beauty subscription box market is experiencing exponential growth and is expected to reach $8.4 billion by 2027. As an entrepreneur in this industry, it's crucial to track key performance indicators (KPIs) to ensure your business's success. The monthly recurring revenue is a crucial metric to help you make informed decisions to optimize revenue growth. The customer satisfaction score is another essential KPI as it generates higher revenue and helps identify areas for improving the overall customer experience. Lastly, monitoring the number of new subscribers per month is essential to gauge your business's growth. By tracking these metrics, you can stay ahead of the competition and ensure your business's long-term success.
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