Kindel’s 2nd Law – Companies with subscription-based business models eventually behave in ways hostile to their customers.
Charlie Kindel – July 2019
Once a company gets addicted to annuity-based revenue, all it can do is focus on the lifetime value (LTV) of a customer, the cost to acquire a customer (CAC), and churn (the rate at which customers unsubscribe0. These things are the opposite of customer obsession.
Eventually, the motions of the company become dominated by
a) Acquiring more debt to pay for ever-increasing CAC and
b) Working to reduce churn.
Ever-increasing debt leads to a business dominated by trying to pay down that debt.
Churn can only be reduced in two ways:
1) By making the product/service better or
2) By making it harder for customers to leave the service.
The cost of paying down debt, and the company’s required focus on it, mean efforts to enhance the value of the product get harder and harder to justify. Companies default to reducing churn by doing things hostile to customers.
Examples:
- Where’s the one-click unsubscribe button for your cable TV sub? Ever ask yourself why they make it so hard to un-subscribe?
- Why is it so hard to find the “log-in” button on websites? The company is more interested in acquiring new customers than serving existing ones.
- Why does Apple and the carriers make it so hard to just buy a phone?
- That device you bought? Notice how the company that built it makes it hard for you to use it with other products?
- Why do apps pop up messages phrased to scare customers like “Warning, you are leaving the Apple”:
Feel free to comment below with more examples; I’ll add them this post.
See Also:
Kindel’s Law – Every payment system eventually becomes an anti-fraud system.
Kindel’s 3rd Law – Amazon will enter every existing business, channel, and market. If said business, channel, or market doesn’t already exist, they will try to invent it.
RSS - Posts