Oddbean new post about login | logout @d050de92 Boringly, what it really means is that they've made enough money from you to cover the cost of customer acquisition, so they actually earn *more* profit from you than other subscribers from hereon in, even if they drop the cost. Finding customers like you costs money; but it's cheaper to retain you as a customer than to replace you with a new customer.
@92f75699 @d050de92 In a way, it functions as price discovery. How much are people willing to pay for their service? How many new people sign up if the price is $10/mo? How long do existing people stay subscribed at the price point of $10/mo? How many existing people stay if you lower the price to $5/mo? Now you know more about how to price your service, whether you should charge $9 or $6 to optimize customer retention
@1ecb9e32 @d050de92 It doesn't really work that way. If you spend $2mn to advertise a service and you get 50,000 subscribers, then you've spent $40 to get each customer. Excluding marketing, if you normally make $50 profit per year from a customer, then you make $10 profit in the first year after acquisition costs - but $50 profit in the second year. So you can drop your charges $20 for the customer in year 2, and *still* earn more profit than a new customer.