Yeah, that's the Churn Equation. The thing us SaaS folks spend most of our time worrying about (whether we know it or not).
Given a constant influx of potential customers at a known conversion rate, along with a known churn rate of existing customers, you can find an exact dollar figure that you will eventually plateau at.
It sucks. Especially when you're starting out because the "In" side of the equation is small and there's not much you can do about it.
Fortunately, as the article points out, there are a few knobs you can tweak. Churn is a nice one, since all it takes is a good product. Conversion is harder, because it involves dark magic like sales and psychology and web design skills.
Once you get it figured out, though, there's another formula you can use to determine how much you're allowed to spend to pour one new user into the top of your Trial funnel. If you can get that up to a level that justifies advertising, you can open the valve as far as your budget allows and start moving that plateau point upwards.
EDIT: I've been writing about this stuff lately, if anybody else likes geeking out on it:
Given a constant influx of potential customers at a known conversion rate, along with a known churn rate of existing customers, you can find an exact dollar figure that you will eventually plateau at.
It sucks. Especially when you're starting out because the "In" side of the equation is small and there's not much you can do about it.
Fortunately, as the article points out, there are a few knobs you can tweak. Churn is a nice one, since all it takes is a good product. Conversion is harder, because it involves dark magic like sales and psychology and web design skills.
Once you get it figured out, though, there's another formula you can use to determine how much you're allowed to spend to pour one new user into the top of your Trial funnel. If you can get that up to a level that justifies advertising, you can open the valve as far as your budget allows and start moving that plateau point upwards.
EDIT: I've been writing about this stuff lately, if anybody else likes geeking out on it:
http://www.expatsoftware.com/Articles/things-worth-knowing-a...