Subscription Commerce Glossary

Plain-English definitions of the metrics and models that run a subscription business — written for Shopify merchants, not finance majors. Each entry includes a formula, a worked example, and FAQs.

• Annual Recurring Revenue
  Annual Recurring Revenue (ARR) is the total amount of predictable, recurring revenue a subscription business expects to receive from its active subscriptions over a 12-month period, normalized to a yearly figure.
• Monthly Recurring Revenue
  Monthly Recurring Revenue (MRR) is the total predictable revenue a subscription business earns from all active subscriptions in a given month, normalized to a monthly amount.
• Subscribe & Save
  Subscribe and Save is a subscription model where customers receive automatic, recurring deliveries of a product in exchange for a discount off the one-time price — popularized by Amazon and widely used by Shopify brands for consumable goods.
• Subscription Churn
  Subscription churn is the rate at which subscribers cancel or lapse over a given period.
• Recurring Revenue Model
  A recurring revenue model is a business model in which customers pay on a repeating schedule — weekly, monthly, or yearly — for ongoing access to a product or service, producing predictable income instead of one-time sales.
• Customer Lifetime Value
  Customer Lifetime Value (LTV or CLV) is the total revenue a business expects to earn from a single customer over the entire span of their relationship.
• Dunning
  Dunning is the automated process of recovering failed subscription payments — retrying declined charges on a schedule and sending reminder emails or SMS with card-update links — to prevent involuntary churn.
• Net Revenue Retention
  Net Revenue Retention (NRR), also called net dollar retention, is the percentage of recurring revenue retained from existing customers over a period, including expansion and after subtracting downgrades and churn.
• Average Order Value
  Average Order Value (AOV) is the average amount a customer spends per order, calculated as total revenue divided by the number of orders.
• Prepaid Subscriptions
  A prepaid subscription is a plan where the customer pays up front for a fixed number of deliveries (for example, 3, 6, or 12 months) instead of being billed each cycle — improving cash flow and retention for the merchant.
• Cohort Retention
  Cohort retention analysis groups subscribers by the period they signed up (a cohort) and tracks what percentage remain active over time, revealing how retention and churn evolve across the customer lifecycle.
• Customer Acquisition Cost
  Customer Acquisition Cost (CAC) is the total sales and marketing spend required to acquire one new customer, calculated as total acquisition cost divided by the number of new customers gained in a period.
• ARPU
  ARPU (Average Revenue Per User), sometimes ARPA (per account), is the average recurring revenue generated by each active customer in a period, calculated as total recurring revenue divided by the number of active customers.
• Customer Retention Rate
  Customer retention rate is the percentage of customers a business keeps over a period, excluding new customers acquired.
• LTV:CAC Ratio
  The LTV:CAC ratio compares customer lifetime value (LTV) to customer acquisition cost (CAC), showing how many dollars of lifetime value each dollar of acquisition spend produces.

Why these terms matter

Running a subscription program on Shopify means living in a new vocabulary. Your monthly sales number no longer tells the real story — what matters is your predictable recurring base (MRR and ARR), how fast you’re losing it (churn), and how you grow it (subscribe and save and the broader recurring revenue model). RecurX tracks all of these automatically so you can act on them instead of calculating them.