By Morten Suhr Hansen
When we talk about growth in subscription businesses, the discussion often revolves around two classic metrics: acquiring new customers and churn. This makes sense because without new customers, and with too many leaving, it’s hard to build momentum. But the truth is that the most overlooked, and perhaps most important, growth engine lies elsewhere: in your existing customers.
One metric that is gaining traction is “Potential Expansion Revenue,” or PER. Simply put, PER measures the revenue you can generate by expanding the value of the customers you already have.
Over the past year, I’ve noted how more and more subscription companies struggle to attract new customers while experiencing rising churn. So it makes perfect sense to focus on the potential within your existing customer base. Yet, in many organizations, this remains neglected. Too often, we chase new customers and forget the loyal ones. At the same time, we may hesitate to touch those who are already stable subscribers. That’s a costly mistake.
Understanding PER – How to measure your customer base potential
How do you measure your subscription business’s Potential Expansion Revenue? It’s actually quite simple:
- Map your product universe: What upgrade, add-on, or cross-sell opportunities exist?
- Analyze your customer base: How many are currently at lower tiers, and what would the difference be if they moved up?
- Calculate the total: PER = (Number of customers × potential additional revenue per customer).
To make it concrete, imagine how it could look for different types of subscription businesses:
- A B2B software company sells subscriptions at multiple levels. Many customers are on a “basic” plan but have both the need and means to move to “pro” or “enterprise.” PER is the difference between what they currently pay and what they would pay at a higher tier.
- A streaming service has many single-user subscribers, but many live in households where a family plan would make sense and cost more. PER measures the potential from upgrades.
- A meal kit subscription delivers 3-4 meals per week. Customers also buy many meals and groceries elsewhere. PER measures the potential to expand their subscriptions to more meals or additional product types.
Ignite your growth engine…
At Subscrybe, we’ve seen many examples where working with PER boosts both top-line revenue and profits. Once companies recognize the potential, they see that PER is not just a theoretical metric—it’s a growth engine waiting to be switched on.
So, how do you ignite your growth engine?
Start by measuring PER. You will almost certainly discover untapped value within your existing customer base. Once you quantify it, it becomes far easier to focus your efforts and get the organization to prioritize expansion initiatives.
Next, segment your customers. Identify who is most likely to upgrade or purchase more.
Plan how to integrate expansion opportunities into your existing customer flows. What should “trigger” a customer in the relevant segments to see the options you want to present?
Ensure ongoing follow-up to continually measure how your PER evolves and to track how effectively you’re capturing the potential.
…But only if you can!
Perhaps your biggest challenge is that your subscription business currently offers no upgrades or cross-sell opportunities. If that’s the case, that’s the first obstacle to tackle. You need to innovate your subscription model—explore new ways to package your offerings. Only then can you start unlocking the potential within your existing customer base.
