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Financialization of everything and everything strikes again; we're now routinely applying quality of income measurements to determine book of business value - t
by ABCLAW 9y ago
Financialization of everything and everything strikes again; we're now routinely applying quality of income measurements to determine book of business value - this means that increasing the current revenue take from recurring customers gives you a huge expected customer LTV bump prior to the increased churn. During this period, your numbers look great, so analysts pop up your ratings, which affords you access to cheaper capital - or alternately you can cash in and sell with a higher valuation multiple on your book.
In larger firms, you'd think the incentive would be to account for the drop-off caused by eroded goodwill, but functionally there's a middle level manager who is using this spike in numbers to jump to another role before the piper has to be paid by his replacement. Even if the company blows up, he can lateral safely with his new title.
- DenisM 9y agoI would think the board would setup independent quality of business monitoring commitee as a matter of course. Is that, like, a thing?
- ABCLAW 9y agoSure but in the gap between your changes and the long term change in churn, a third party isn't going to be able to quantitatively monitor future churn rates before they happen. The solution doesn't fix the problem, because the problem is that quality of business models just plain don't sample for customer goodwill - they measure sales metrics rather than feelings. So the sales metrics are gamed at the expense of the consumer feelings that create the metrics in the first place.
- Benjammer 9y agoThe dark side of data rears it's ugly head.
- pishpash 9y agoMore like the dark side of stupid B-school ideas that should be discarded in the dustbin of history. The data is there if one cares to measure them and incentivize properly. But why would they favor that? They are intelligently blind.
- danmaz74 9y ago> they measure sales metrics rather than feelings The term you're looking for is "brand". Measuring a brand's value is much more difficult than measuring sales, but it's not something new that no company do.
- rogerbinns 9y agoNet Promoter Score - https://en.wikipedia.org/wiki/Net_Promoter https://en.wikipedia.org/wiki/Net_Promoter - is used to measure just this. > Net Promoter or Net Promoter Score (NPS) is a management tool that can be used to gauge the loyalty of a firm's customer relationships It asks one question: > How likely is it that you would recommend our company/product/service to a friend or colleague? The wikipedia article provides more details including criticism.
- ABCLAW 9y agoNPS doesn't measure future goodwill (or present goodwill for that matter). Rationally it may have some correlation, but it isn't a silver bullet even when understood and used properly (which it often isn't). Instead you often get people trying to game their local NPS scores; not quite the same problem, but similar.
- DenisM 9y agoI believe any brand loyalty metric would be helpful if tracked consistently over time. If sales are climbing and loyalty is cratering it's time for the board to step in and ask questions.
- klenwell 9y agoWell put. I think I saw this very dynamic in action with my car insurance this year. AAA tried to bump it 40% over the previous year with no claims in previous 5 years and no changes in major underlying parameters. I think mileage may have gone up slightly but I'm still well below the norm. Well, I guess AAA finally hit that "gap between your changes and the long term change in churn" for me. I dropped them for GEICO. But even before I left, I called them back and gave them a chance to match the GEICO quote. Their phone agent seemed to have no path in her script to consider or escalate this offer. It sounds like we may need a catchy term for that gap you mentioned, the one where as a consumer I'm ready to jump but the alternatives (if any still exist) don't feel like they're worth the trouble. (I'm at that point with my cable internet provider.) Something like the "Recurry" or "Gamey Valley".
- GFischer 9y agoI worked in insurance that kind of increases do work (for the insurer), but we did it in the "boiling the frog slowly" way so there was no 40% trigger to wake you up. We had little churn, if you stayed a customer after a slight rise, 90% stayed for the next slow rise.
- Scoundreller 9y agoThe big pharma approach vs. the Martin Shkreli approach.
- confounded 9y ago> It sounds like we may need a catchy term for that gap you mentioned, the one where as a consumer I'm ready to jump but the alternatives (if any still exist) don't feel like they're worth the trouble. Captive customers? Rubes?
- rm_-rf_slash 9y agoI call it a friction trap. Somethings gotta change and it’s certainly possible, but the friction is discouraging so you stay in the trap.
- Vibrelli 9y ago
- justaguyhere 9y agoAll these companies are putting in a good amount of effort in "gaming" their clientele (for lack of a better word) - I wonder if they spent this brain cycles and time and other resources in actually improving their product, their support and generally treating their customers as human beings instead of Profit/Loss items, how much would it pay off in the long term. All these gimmicks work short term, until someone figures it out (like this article). But if everyone is doing it then it wouldn't make a difference I guess.
- xster 9y agoWe need a startup that uses the same market forces to slowly chip away from the capitalists. i.e. a collective labour and legal assistance group that has economy of scale and/or ML that's cheap enough for everyone and uses its userbase to collectively punish companies that uses belligerent gamifications against its customers by automating bill payments and underpaying every single bill by a small amount that makes it financially penalizing to resort to collection agencies etc. A consumer protection equivalent of unions + zombie botnets.
- justaguyhere 9y agoNothing will change until people shop responsibly and not give their money to shitty companies. But for that to happen, we need reliable info on what places to avoid (how do I know if a particular place is owned by walmart, koch or whoever I want to avoid?).
- confounded 9y agoWikipedia?
- nroets 9y agoCooperatives is the best thing you will get. (A company owned by its clients). But clients around generally clueless how to run businesses. So they either don't excersize their voting rights or they vote for incompetent managers. One solution is cooperatives that have no operational assets and outsource everything. Then they still have bulk buying power.