The Subscription Economy Index (SEI) by Zuora grabbed headlines by demonstrating subscription industry revenue is growing four times faster than the S&P 500. While this illustrates what we already knew within the subscription industry, there are a lot more revelations within the SEI report. Most notable is where the revenue growth is coming from.

While most subscription companies focus their energy on acquiring new members, this study illustrated that almost half of subscription revenue growth comes by increasing Average Revenue Per Account (ARPA). While upgrading, and increasing, average subscription rates is important, the fastest way to increase ARPA is to reduce churn rates. The impact is substantial.

The single fastest way to increase your revenue by double-digit percentages is to lower your churn rate. Even small improvements create large increases in revenue. The SEI study went on to reveal that the companies surveyed experienced an average subscription churn rate of 28%. I got out the calculator to run some numbers to illustrate the revenue-increasing magic of lower churn rates.

If you have a monthly subscription rate of $50.00, your average lifetime subscriber value (LSV) is $179.00. If you can achieve a churn rate of 25%, just 10% better than average, your LSV increases by 11% to $198.00. Working harder to retain your current subscribers to come in at 22%, beating the average by 20%, increases LSV by 25%. And if you really invest in your subscribers to reduce your churn rate to 20%, you’ll be 30% better than average with your LSV 43% higher, at $255.

To increase your revenue by 43% with new customer growth, you’d have to increase your new customer growth rate to 143%. Searching for new subscribers to replace your current subscribers is not the best way to increase your revenue. It’s always easier to keep the subscribers you have.

Decreasing churn can feel daunting, but small improvements can have a huge impact on your overall churn rates. There is an important place to start: the first three months of your subscription.

Between 50% and 75% of all churn occurs within the first three months of a subscription. There are a lot of reasons, but most important, your member has become less excited. The single-biggest mistake subscription companies make is to stop selling when someone becomes a subscriber. Once you get the sale, you fulfill what you promise and move on to the next sale. But by creating a three-month marketing campaign that on boards your new subscriber, gets her engaged in your tribe and builds a long-term connection, you can reduce your churn rate within the first three months and make a huge improvement on your overall average churn rate.