What is "Cost per Subscription"?

"Cost per Subscription" (CPS) is a metric used in app marketing that measures the average cost incurred by a marketer for acquiring each new subscription to their app. It represents the amount of money spent on marketing and user acquisition activities divided by the number of subscriptions gained within a specific timeframe.

For example, if a subscription-based company spends $10,000 on a marketing campaign and generates 1,000 new subscriptions, the CPS would be $10 ($10,000 divided by 1,000).

Why "Cost per Subscription" is important?

CPS is important in app marketing for several reasons:

• Acquisition efficiency: CPS provides insights into the efficiency and effectiveness of user acquisition efforts. By calculating the cost per subscription, app marketers can determine how efficiently they are acquiring new users and whether the cost aligns with their marketing budget. It helps evaluate the return on investment (ROI) of marketing campaigns and identify areas for improvement.

• Budget allocation: Understanding CPS helps marketers allocate their marketing budget effectively. By knowing the cost per subscription, marketers can estimate the resources required to acquire a certain number of subscriptions and adjust their budget allocation accordingly. It helps optimize spending and allocate resources to channels or campaigns that generate the most cost-effective subscriptions.

• ROI measurement: CPS is an important metric for measuring the return on investment of marketing activities. By comparing the cost per subscription with the lifetime value (LTV) of a subscriber, marketers can assess the profitability and sustainability of their user acquisition efforts. If CPS is significantly higher than LTV, it may indicate the need to refine marketing strategies or improve the app's monetization and retention mechanisms.

• Campaign optimization: Monitoring CPS allows marketers to identify opportunities for campaign optimization. By analyzing CPS across different channels, campaigns, or targeting segments, marketers can identify which marketing efforts are generating the most cost-effective subscriptions. It helps optimize marketing strategies, refine targeting, and allocate resources to the most efficient channels or campaigns.

• Pricing and monetization strategy: CPS can provide insights into the pricing and monetization strategy of an app. If CPS is high, it may indicate that the app's pricing model or monetization strategy needs adjustment to improve the acquisition cost. Marketers can assess whether the app's pricing aligns with its value proposition and make informed decisions about pricing adjustments or exploring alternative monetization strategies.

• Competitive analysis: Comparing CPS with industry benchmarks or competitors' performance can provide insights into the competitiveness of an app. If CPS is significantly higher than competitors, it may indicate the need to refine user acquisition strategies, improve app positioning, or explore pricing adjustments to stay competitive in the market.

How to Calculate "Cost per Subscription"?

To calculate Cost per Subscription (CPS), you need two key pieces of information: the total amount spent on marketing and user acquisition activities and the number of subscriptions acquired within a specific timeframe. The formula for CPS is as follows:

CPS = Total Marketing Spend / Number of Subscriptions

Here's an example to illustrate the calculation of CPS:

Let's say an app marketer spent $10,000 on marketing and user acquisition efforts in a month and acquired 500 new subscriptions during that period. To calculate CPS:

CPS = $10,000 / 500
CPS = $20

In this example, the Cost per Subscription (CPS) is $20. It means that the marketer spent, on average, $20 to acquire each new subscription to their app during that specific month.

It's important to note that CPS is typically calculated for a specific timeframe and can vary over time. It's also recommended to track and analyze CPS over multiple periods to identify trends, compare performance, and make informed decisions about marketing strategies and budget allocation.