For the first time in his life, Phil Hobden purchased a product after watching a pitch on the flagship BBC programme. But the story didn’t end well!
‘A few weeks ago I watched a pitch on the popular BBC TV reality show Dragons’ Den, a programme which has consumed me for many years. I’ve seen loads of good ideas and products put forward by ‘contestants’ but I can never remember going straight out and buying one based on the pitch.
However, that all changed after seeing this particular edition of the show. I was completely blown away on this occasion. Not by the pitch itself but rather by the concept. So for the first time I rushed out, signed up and started using this product. And that’s where the problems started.
The programme itself is simple. Someone delivers a great pitch and the next day thousands of people sign up to the product or service. But the truth is: Businesses only have those sign-ups for a short amount of time before they become a ‘churn risk‘. ‘Churn’ (sometimes described as ‘attrition rate’) is a key metric used in the business world.
It is most commonly applied to businesses with a subscriber-based service model, taking into account profitability, turnover and cost of acquisition (CAC). From an investors’ perspective, if you sign up 100,000 new users, but a week later 90% ‘churn’, then that’s worse than signing up 10,000 users and retaining 95% of them for three or more months. That’s because it will push up your CAC considerably.
So what went wrong for me? Put simply, it came down to a service issue. There were a few technical issues but that’s no big deal or so I thought. These things do happen. I work for a tech platform, so get used to things not working 100% of the time. Gremlins do occur. So I responded by asking a question in the online support chat box ‘ and waited.
I received an automatic response the following day, plus a few others which did nothing to address the issue at hand. I responded and waited for more replies from this business. Then waited, and waited longer. So I began the entire process all over again, but was met with more silence. I peppered the chat box with more messages, simply seeking an update to my previous enquiries but there was still no constructive reply.
And now, a week later, still no response or even an acknowledgement of the issues I had raised. I even tried to make contact via LinkedIn, but no luck. I now consider myself as one of the ‘churned’. According to social media, I may not have been the only one suffering from this lack of even adequate service. And this is the challenge, perhaps problem, with a show such as Dragons Den. While it’s a great way to attract investors into a business, it still has to be managed correctly.
We witness this when it comes to funding. A good example is a manufacturing business which takes on a new contract and suddenly doubles its turnover. It can all happen so quickly, and without the opportunity to prepare properly. The problem is often receiving payment, which can take as long as 60 days if you happen to join forces with a major supermarket chain.
Not only do you have to double the output, just to fulfil an order, you also have significantly increased costs, followed by a lengthy wait for payment. How’s your cash flow looking? This shortfall can be managed initially but often requires external funding such as accepting ‘invoice finance’ to solve your problems.
In some ways it’s a good problem to have, because you know the money will eventually arrive. But you still need to find the funding to bridge that gap. However, it’s not quite so easy to solve if you are signing up users to a platform or service.
Across all industries, the average mobile app retention rate is 29% after 90 days. That’s a 71% ‘churn rate’. Most of them will never come back, so you have to get it correct first time. If you are promoting your product on one of the bigger platforms, you must scale certain areas to ensure you retain these valuable users ‘ otherwise they’ll go elsewhere.
I used to work for a company which secured investment for a service and opted to scale at a rapid pace. Suddenly there were more sales, more marketing, and more of everything. But the problems arrived because they lacked the technical knowledge to scale with it.
The outcome being: There was such a time lag in the new product getting to where it needed to be, that the money quickly ran out before the true impact of the product was fully realised. This led to cut backs while lessons were learned the hard way.
As for my own story, will I return in the future? Possibly! I’ve experienced this before and on some occasions remained loyal. The big issue for this particular company is: How will the general public respond as a whole? Will they stick, or will they move onto the next big thing? And the moral of the story is: First impressions really do count.‘