Active Customers

Keep those zombies out of your business

It is the first week of the month, and every month this is the week I get notifications for a bunch of subscription charges on my credit card. Some of those charges I vaguely recognise. These are products I signed up for, at some point, but haven’t been using in a really long time - if I ever used them at all in the first place.

Why don’t I just go ahead and cancel my subscription then? Well, I intend to. It is just that I make a mental note of canceling those subscriptions, put a pin in it, and before I know it, it is the next month showing me the next notification. (Yes sir, I am lazy. You got that right.)

I cancelled a few of these subscriptions early this year, and most probably will cancel a few more this week (fingers crossed), but these active running zombie subscriptions aren’t what we are talking about here. The subject of this discussion is me - the faux customer.

As a customer, I am completely and utterly useless to these businesses. Yes, I do send a few dollars every month to their revenue pool, but revenue is not the biggest value your customer generates for your business. It is his usage behavior. How is he using your product, which sections and features is he most engaging in, which features is he struggling with, what does he do first every single time he logs in.

There can be many more activity patterns just like these, and obviously they could vary based on your product. But, you measure these on a macro level, and you start getting a much better understanding of what your product means to your customers. And that is something you must want to know, because what matters more than how you describe your product is how your customers would do so. It helps you give a clear direction to the way your product and your business should be moving, and it shapes up your entire sales, marketing and even pricing strategies.

A zombie customer just corrupts your understanding. The more zombies there are, the higher that MRR number grows, the more it would be able to distract you from the fact that you are losing out on invaluable customer usage pattern and insights.

So instead of plainly tracking MRR or number of customers, keep an eye out on your actual active users. Not the typical vanity metric definition of your DAUs and MAUs, actual active users. People who are actively engaging with and using your product.

But isn’t MRR important

To the health of your business, yes! It is imperative. It helps you know if your business is going to be afloat or not. It helps you plan out your team’s expansion, earmark a dollar figure to marketing and promotional activities, and a bunch of other things. And if you are an early stage startup, MRR is critical for survival.

But as far as the future of your business goes, it would be the active customers who will help save the day.

Let’s look at the MRR figure again, with a special emphasis on your customer type this time.

Say you have two customers - one, a zombie, and two, someone who has been using your product for a few weeks/months. Both of them are churning out now. What can you do at this stage?

The customer who had been active for weeks/months, you can talk to them, figure out the reasons behind them churning out. There are many possible reasons, and every reason could give you an opportunity to stop him from churning out:

  1. It is the product capabilities. The customer has some needs that your product just doesn’t stand up to. At the very least, in this scenario, you will understand your customers’ expectations, and at best, you may be able to get creative and help solve their need even with the current limitations your product may have. It is also a good idea to understand the motivation behind them sticking around for all this time - irrespective of whether or not you are able to retain them today.
  2. The pricing. Maybe they aren’t quite happy with the prices you have. This is trickier, but still important. You need to understand where this sudden discontent is coming from. Is it a competitor or are they going to be using the product less frequently so the price tag no longer feels justified to them?All of that is valuable information. For example, if they are going to use the product less frequently, and you keep on running into such customers again and again, it may be time to introduce a metered strategy to your pricing. (Also, a personal recommendation - avoid negotiating on price, no good comes out of it.)

Personally, I am not a big fan of pricing war. Whether fighting it out with a competitor, or just with the expectations of a customer, lowering my prices is a strategy I rarely use or recommend. Why? Because there are no winners. Not even the customer who would have just saved a bunch of money having won the pricing negotiation. If I am a business offering my services at less than ideal prices, it seriously eats up on my ability to expand, dedicate time, money and resources on the product, offer quality and quick customer support. It affects my performance across the board. In many cases, it could pose a threat to my survival. And in almost all of those cases, the customer suffers. So believe me when I tell you, there are no survivors in a pricing war.

But if it is a zombie customer, what can you even do? As a customer they already feel they signed up for a product they weren’t going to use, they have already spent hundreds of dollars on your product, and they are even today probably as new to your product as someone new signing up. So, chances are, there is very little you can say that will make them stay.

And you know what this means? That MRR figure we were so reliant on, the zombie managed to corrupt it as well. I can depend on the revenue my active customer sends my way. Because even when he wishes to stop, I have a fair shot at retaining him. The zombie revenue is pure wild card; it can go up in smoke any time. I can’t depend on that, and neither should you.

So what do you do?

Two things:

#1. Focus on your active customers. Listen to them, treat them well, pamper them, worship them.

See how can you make the product even more meaningful to them. Stop letting the noise of everything else distract you.

#2. Wake up the zombies

Have a methodology to ensure more and more customers who signed up actually start using the product. Yes, user onboarding. And then keep an eye out to make sure they keep on using the product. Anytime there is an anomalous behavior, see what you can do to fix it, instead of just waiting it out, cashing in those dollar bills rolling in every month.

Keep the percentage of zombies as low as possible. Your business will thank you for it.

That’s it for today, see you tomorrow.

Cheers Abhishek

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