The most important metric for consumer startups (and why it isn’t churn) with Kent Bennett - Ep 3 | Summary and Q&A

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January 23, 2020
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Bessemer Venture Partners
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The most important metric for consumer startups (and why it isn’t churn) with Kent Bennett - Ep 3

TL;DR

Churn, or the rate at which existing customers stop using a product, is an important metric to gauge the health of a consumer business.

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Key Insights

  • 🧑‍⚕️ Churn, or customer attrition, is a vital metric for evaluating the health of a consumer business.
  • ☠️ Looking beyond churn rates, examining the engagement graph provides a more nuanced understanding of customer behavior.
  • ✋ The goal for a successful consumer business is to build a stable base of engaged customers who have a high level of long-term loyalty.
  • 🎚️ Customer engagement should be consistently monitored and improved to avoid a decline in engagement levels.
  • ✋ A decline in customer engagement after an initial period of high engagement could indicate a problem that needs addressing.
  • 👶 New customer growth can hide underlying issues with customer engagement, emphasizing the importance of analyzing customer cohorts.
  • 🥺 Improving onboarding experiences can lead to higher and more sustained levels of customer engagement over time.

Transcript

so you think you might have a killer product now it's time to find out if you have a good business and what's the question most investors love to ask you first what's your churn what do they mean by this if you think about all of the revenue or clicks or eyeball minutes you have today from all of your existing customers and then you think about som... Read More

Questions & Answers

Q: What is churn, and why is it important for a consumer business?

Churn refers to the rate at which existing customers stop using a product. It is crucial for a consumer business because it provides insights into customer retention and the overall health of the business. High churn rates can indicate issues with the product or customer satisfaction.

Q: Is there an ideal churn rate for a healthy consumer business?

There is no one-size-fits-all answer to this question as the ideal churn rate can vary depending on the industry, product, and target market. However, generally, a lower churn rate is desirable, and a rate of 3-10% is considered good for a healthy consumer business.

Q: How should businesses evaluate the health of their consumers?

Instead of relying solely on churn rates, businesses should analyze the engagement graph of their customers over time. This graph shows how customer engagement changes throughout their relationship with the company, providing a more comprehensive understanding of consumer health.

Q: What does a flatline in the engagement graph indicate?

A flatline in the engagement graph signifies that some customers have reached a mature stage of engagement and have become loyal to the product or brand. This stable base of engaged customers is a positive sign for a consumer business.

Summary & Key Takeaways

  • Churn, the rate at which existing customers stop using a product, is a crucial factor in evaluating the success of a consumer business.

  • Instead of focusing on a single number to measure churn, it is essential to examine the engagement graph of customers over time.

  • A stable base of engaged customers is the foundation for building a successful consumer business.

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