Lennart Schneider is Founder of Subscribe Now, helping decision-makers in the subscription economy attract subscribers and keep them happy.
Over the past two years, I have written a book about subscription management based on more than 80 interviews with experts from some of the largest subscription businesses in the German-speaking world.
From the very beginning, I knew that one of the book’s central elements would be a subscription funnel framework that could be applied not only to news and media companies, but to almost any subscription business—from software and automotive to fitness clubs.
What initially sounded like a straightforward task turned out to be one of the biggest challenges of the entire project. Over the years, I have come across countless versions of subscription funnels and flywheels and have designed dozens of my own. While each had its strengths and worked well in specific contexts, most were either too tailored to the news industry or too simplistic to provide meaningful guidance across different subscription businesses. In many cases, the stages also lacked clear boundaries and tended to overlap.
That’s why I set out to develop a new subscription funnel model. It maps the different stages a subscriber can move through over the course of their lifecycle and, more importantly, highlights the conversion rates between those stages—the key levers for improving the overall performance of a subscription business.
At first glance, the model may seem a little complex, but I’m confident that it becomes intuitive once you walk through each stage.
Let’s take a closer look at how it works in this excerpt from the book:
- Reach
Reach includes every interaction with potential subscribers, whether through your own channels or through partners, referrals, paid advertising, or other touchpoints.
a) Anonymous contacts: most of these contacts remain anonymous. They have interacted with your brand, but you cannot identify or contact them directly.
b) Leads: Leads are potential customers whose identity is known and who can ideally be contacted directly. Examples include newsletter subscribers, freemium users, registered accounts, or prospects collected through sales or telephone campaigns.
- Trials
Trial users are people who are testing the subscription through a free or discounted offer while deciding whether the product provides enough value to justify becoming paying subscribers.
- Active subscribers
Active subscribers are customers who have paid at least one regular subscription fee. Later in this article, I’ll explain in more detail where I draw the line between trial users and active subscribers.
Within the subscriber base, customers often move between different pricing tiers through upgrades and downgrades, increasing or decreasing their customer value.
A subset of active subscribers consists of customers with expiring subscriptions. When subscribers cancel, their subscription usually remains active until the end of the current billing period. In other words, the cancellation has been submitted but has not yet taken effect. During this remaining term, there is still an opportunity to persuade customers to reverse their cancellation.
- Former subscribers
Once a subscription has expired, customers become former subscribers. If they have given permission to be contacted, the win-back process begins. Former subscribers effectively become qualified leads again and can be targeted with dedicated retention and reactivation campaigns to encourage them to subscribe again.
Let’s go through these stages in detail:
1. Reach
The first step in any subscription business is making sure that potential customers become aware of your brand, your product, and your subscription offering. To achieve this, you should continuously expand the range of channels through which you reach your target audience. In addition to your own website, these channels may include social media, podcasts, public relations, events, partnerships, and many other customer touchpoints.
However, reach alone is not enough. What matters is reaching the right people. Ten million impressions may sound impressive, but they have little value if the audience has no genuine interest in your product. That’s why every subscription business should define an Ideal Customer Profile (ICP)—a description of the customers who are most likely to become successful, long-term subscribers.
Very few products are truly designed for everyone. Instead, companies should focus on the people or organizations that have a real need for what they offer. If you cannot clearly define your target audience, you risk wasting both time and marketing budget on customers who are unlikely to convert. An ICP therefore defines not only who you want to attract, but also who you deliberately choose not to target.
The best starting point is your existing subscriber base. Analyze your most valuable customers, identify the characteristics they have in common, and use those insights to guide future acquisition efforts. At the same time, you should regularly challenge your assumptions and explore whether there are attractive customer segments beyond your current audience.
For the digital subscription of a regional newspaper, an Ideal Customer Profile might look something like this:
Potential subscribers have lived in the region for several years, feel connected to their local community, and are interested in topics such as local politics, schools, transportation, public safety, sports, real estate, and local events. They are typically between 35 and 64 years old, employed, and have started a family. Many own their homes and expect to remain in the region for years to come. Although this profile is still relatively broad, it also illustrates that younger audiences or digital nomads may currently be much harder to convert into paying subscribers and therefore might not be the primary focus of acquisition efforts.
At the same time, additional customer segments may exist outside this core audience. For example, people who no longer live in the region may still have a strong interest in the local football club. The German newspaper Ruhr Nachrichten identified exactly this opportunity and introduced a separate, lower-priced BVB subscription for Borussia Dortmund fans living outside its core distribution area. This represents a second Ideal Customer Profile that can be targeted independently and generates up to 2,500 additional subscribers during a single football season.
Once you have identified the right audience, the next challenge is to create a positive first impression and spark genuine interest. Or, as Lucas von Gwinner and Dirk von Gehlen would put it, to build a strong brand. In their book Macht Marke, they argue that a brand is far more than a company’s name or logo—it is its reputation.
Before people decide to subscribe, they need to understand what your brand stands for and why it solves their problem better than any competing alternative. Strong brands communicate a clear positioning that differentiates them from competitors. As a result, they not only increase awareness but also improve conversion rates and strengthen long-term customer retention.
2. Leads
Before asking people to commit to a subscription, it is often worth getting to know them first and gradually introducing them to your product. A well-designed lead generation strategy helps build a large pool of potential subscribers whom you can engage with on an ongoing basis.
Compared with anonymous visitors, leads are significantly more likely to become subscribers. Because you know more about them, you can tailor your communication and offers to their individual interests, needs, and stage in the customer journey.
One of the key metrics at this stage is the Lead Rate, which measures the percentage of people reached who are willing to share their contact information and give permission to be contacted.
For example, if 5,000 out of 100,000 people reached provide their email address and marketing consent, the Lead Rate is 5%.
Lead generation serves two important purposes. First, it creates an owned audience that you can contact repeatedly without relying solely on paid advertising or third-party platforms. Second, it allows you to build trust over time before presenting a subscription offer. Especially for products that require a high level of commitment or involve a longer purchasing decision, this gradual relationship-building can significantly improve conversion rates.
3. Trials
In most cases, customers can only determine whether a subscription is worth paying for after they have experienced the product firsthand. Free or discounted trial offers lower the barrier to entry and encourage potential subscribers to give the product a try.
There is no universal formula for determining the ideal trial length or discount level. Companies continue to experiment with different approaches, and in my interviews I have seen everything from one-day trials to introductory offers lasting two years. Some businesses prefer short trials that generate revenue quickly, while others use longer trial periods to help customers build lasting habits, making the subscription an integral part of their daily lives before they begin paying the full price.
One of the most important phases of any subscription begins during the trial: onboarding. Effective onboarding helps new customers discover the value of their subscription as quickly as possible. The sooner they experience meaningful benefits and establish regular usage habits, the more likely they are to become long-term subscribers.
The Trial Start Rate measures the percentage of people reached who begin a trial. For example, if 2,000 out of 100,000 people reached start a trial, the Trial Start Rate is 2%.
The Lead-to-Trial Rate, on the other hand, measures how many known leads convert into trial users. If 500 out of 5,000 leads sign up for a trial, the Lead-to-Trial Rate is 10%.
Not every trial results in a paid subscription. Users who decide not to continue after the trial often return to the lead pool. If they have given permission to be contacted, they can be nurtured through future marketing campaigns and may eventually decide to subscribe.
4. Active subscribers
Active subscribers are the foundation of every subscription business. They generate predictable, recurring revenue and therefore determine the long-term health of the business. At this stage, the primary objective is to retain subscribers for as long as possible while increasing their lifetime value through upgrades and cross-selling where appropriate.
The Conversion Rate measures the percentage of people reached who become paying subscribers. For example, if 1,000 out of 100,000 people reached purchase a subscription, the overall Conversion Rate is 1%.
Like most funnel metrics, this KPI can also be broken down by funnel stage. If 200 of those 1,000 subscriptions originated from 2,000 trial users, the Trial-to-Paid Conversion Rate is 10%. Likewise, if 750 out of 5,000 leads purchase a full subscription, the Lead-to-Paid Conversion Rate is 15%.
One important question remains: When does a trial become an active subscription?
In practice, the boundary is not always clear. Many subscription businesses offer heavily discounted introductory pricing before customers begin paying the regular rate. However, not every discounted offer should be classified as a trial. A clear definition is essential because it directly affects the accuracy of key performance indicators such as retention and churn.
Consider the following examples:
1. DIE ZEIT
The German newspaper DIE ZEIT offers a print subscription in which the first 13 issues cost €5 each before increasing to €7.50. Since subscribers pay roughly two-thirds of the regular price from the very first issue and generate at least €65 in revenue, I would classify them as active subscribers from day one.
2. BILDplus
A BILDplus subscription costs €1.99 per month during the first year before increasing to €7.99 and can be cancelled at any time. In this case, I would consider only the first month part of the trial period. Once the subscription renews, customers become active subscribers, even though they continue to receive a substantial introductory discount.
3. The New York Times
The annual All Access subscription is sometimes available for $20 instead of the regular $90. Because these customers pay only around one-fifth of the standard price—and many are likely to cancel before ever paying full price—there are two reasonable approaches. They can either be treated as long-running trial users or as heavily discounted active subscribers.
Why does this distinction matter?
Cancellation rates during trial periods are typically much higher than among established subscribers. For that reason, trial users are generally excluded from core KPIs such as Retention Rate and Churn Rate. An inconsistent or poorly defined distinction between trials and paid subscribers can therefore distort these metrics and make performance comparisons misleading.
The Retention Rate measures the percentage of active subscribers who remain subscribed from one period to the next. If you begin the month with 10,000 subscribers and 9,500 are still active at the end of the month, your monthly Retention Rate is 95%.
The Upgrade Rate and Downgrade Rate measure how frequently subscribers move between pricing tiers. For example, if 200 out of 4,000 subscribers on the Basic or Standard plan upgrade to a higher-tier subscription within a month, the monthly Upgrade Rate is 5%.
4.5 Expiring subscriptions
Expiring subscriptions are subscriptions that have already been cancelled but remain active until the end of the current billing period. Although this stage is often overlooked, it can last for a surprisingly long time.
For example, a customer with an annual subscription may cancel on the very first day simply to avoid missing the cancellation deadline. Even though they have already submitted their cancellation, they remain an active subscriber for another 365 days. That also means you have 365 opportunities to convince them to stay. In many cases, a cancellation is not a final decision against the subscription but simply a precaution to avoid an unwanted renewal.
The Cancellation Rate measures the percentage of subscribers who submit a cancellation request during a given period. If 300 out of 10,000 active subscribers cancel within a month, the monthly Cancellation Rate is 3%.
The Cancellation Rate should not be confused with the Churn Rate. The two metrics often differ because a cancellation usually occurs well before the subscription actually ends.
For example, if a customer cancels in January but still has six months remaining on an annual subscription, they contribute to the Cancellation Rate in January but only enter the Churn Rate in June—provided they do not withdraw their cancellation beforehand.
In addition, the Churn Rate includes not only voluntary cancellations but also involuntary churn, such as failed payments or expired payment methods.
The Reactivation Rate measures how many subscribers reverse their cancellation before their subscription expires. If 30 out of 300 cancelling subscribers decide to stay before the end of their billing period, the Reactivation Rate is 10%.
Finally, the Save Rate measures the percentage of subscribers who begin the cancellation process but never complete it. In other words, it captures the cancellations that were successfully prevented before they were ever submitted.
4.6 Former subscribers
Once a subscription has expired, the customer becomes a former subscriber and the win-back process begins. Provided you still have permission to contact them, former subscribers can be reached through email, phone calls, push notifications, or other marketing channels with tailored offers and messages designed to encourage them to return.
From the perspective of the subscription funnel, former subscribers effectively become highly qualified leads again. Unlike new prospects, they already know your product, have experienced its value, and have demonstrated a willingness to pay in the past. As a result, win-back campaigns often achieve significantly higher conversion rates than campaigns targeting first-time subscribers.
As a subscription business matures, win-back becomes increasingly important because a growing share of the addressable market has already subscribed at least once. Over time, acquisition efforts naturally shift from attracting entirely new customers to re-engaging former ones.
For that reason, it is useful to measure how many people you are targeting have previously been subscribers. The Former Subscriber Rate measures the percentage of contacts—such as recipients of an email campaign or visitors reaching a paywall—who have held a subscription before.
This metric provides an indication of how frequently you are “fishing in the same pond.” While it is often impossible to identify former subscribers across third-party channels such as social media, logged-in users on your own website can usually be matched to their subscription history.
In some industries, particularly video streaming, customers regularly pause and restart their subscriptions depending on the content available. In these markets, cancellation is often not the end of the customer relationship but simply a temporary break.
The Win-Back Rate measures the percentage of former subscribers who return within a given period. For example, if 1,000 out of 5,000 former subscribers purchase another subscription within one year, the annual Win-Back Rate is 20%.
Viewed as a whole, the subscription funnel is not a linear process but a continuous cycle. Every former subscriber represents a potential future customer, making retention and reactivation just as important as acquiring new subscribers.
