LifeLock 2013 Annual Report Download - page 45

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We define member retention rate as the percentage of members on the last day of the prior year who remain members on the last
day of the current year, or for quarterly presentations, the percentage of members on the last day of the comparable quarterly period in the prior year who
remain members on the last day of the current quarterly period. A number of factors may increase our member retention rate, including increases in the
number of members enrolled on an annual subscription, increases in the number of alerts a member receives, increases in the number of members enrolled in
our premium services, and increases in the number of members enrolled through strategic partners with which the member has a strong association.
Conversely, factors reducing our member retention rate may include increases in the number of members enrolled on a monthly subscription, increases in the
number of members enrolled in our basic LifeLock service, and the end of programs in our embedded product and breach channels. We monitor our member
retention rate because it provides a measure of member satisfaction and the revenue that we expect to recognize in the future.
As of December 31, 2013, our member retention rate was 87.8 %, an increase of 0.7% points from December 31, 2012. This continued improvement
was due to a variety of factors, including consumer awareness and media coverage of identity theft, and our focus on customer service and operational
efficiencies.
We calculate average cost of acquisition per member as our sales and marketing expense for our consumer
segment during the relevant period divided by our gross new members for the period. A number of factors may influence this metric, including shifts in the
mix of our media spend. For example, when we engage in marketing efforts to build our brand, our cost of acquisition per member increases in the short term
with the expectation that it will decrease over the long term. In addition, when we introduce new partnerships in our embedded product channel, such as our
partnership with AOL in the fourth quarter of 2011, our average cost of acquisition per member decreases due to the volume of members that enroll in our
consumer services in a relatively short period of time. We monitor average cost of acquisition per member to evaluate the efficiency of our marketing programs
in acquiring new members. For the year ended December 31, 2013, our average cost of acquisition per member was $160, up from $150 for the year ended
December 31, 2012. Although our average cost of acquisition per member increased period-over-period, the continued improvements in our member retention
rate and the increasing monthly average revenue per member, primarily from the continued penetration of our LifeLock Ultimate service, results in a higher
lifetime value of a member relationship which enables us to absorb a higher average cost of acquisition per member.
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