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.
• ACH Billing
  ACH billing is the practice of collecting payments by debiting a customer’s bank account directly through the Automated Clearing House (ACH) network, instead of charging a credit or debit card.
• Upsell
  An upsell is an offer that persuades a customer to buy a higher-value version of what they are already buying — a larger size, a premium tier, an annual plan, or an add-on that increases the order total.
• Cross-Selling
  Cross-selling is offering a customer additional, complementary products alongside the one they are already buying — “goes-well-with” recommendations that grow the basket rather than upgrading the original item.
• DTC / D2C
  DTC (direct-to-consumer, also written D2C) is a business model in which a brand sells directly to end customers through its own channels — typically its own online store — instead of selling through retailers, wholesalers, or marketplaces.
• Recurring Payments
  A recurring payment is a charge collected automatically from a customer on a fixed schedule — weekly, monthly, or annually — using stored payment credentials, until the customer cancels or the agreement ends.
• Billing Cycle
  A billing cycle is the recurring interval between one charge and the next — for example every 30 days, every month on the same date, or annually — that determines when a subscriber is billed and when their order ships.
• Involuntary Churn
  Involuntary churn is the loss of subscribers who did not choose to cancel — their subscription ended because a recurring payment failed (expired card, insufficient funds, bank decline) and was never recovered.
• Subscription Business Model
  A subscription business model sells ongoing access to a product or service for a recurring fee on a fixed schedule, generating predictable recurring revenue instead of one-time sales.
• Automatic Payments
  An automatic payment is a charge that a business collects from a customer’s stored payment method on a pre-agreed schedule — no action required from the customer at billing time.
• Payment Processor
  A payment processor is the company that moves a payment from the customer’s bank or card to the merchant’s account — authorizing the charge, routing it through the card networks or ACH, and settling the funds.
• Revenue Recognition
  Revenue recognition is the accounting principle that revenue is recorded when it is earned — when the goods or services are delivered — not when the cash is received.
• Accrued Revenue
  Accrued revenue is revenue a business has earned by delivering goods or services but has not yet billed or been paid for.

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.