Aug 13, 2015

Read Time 2 min

Platform leakage, college churn and building moats


“Platform leakage” really hurt Homejoy

Homejoy, which offered on-demand home services (think Uber for house cleaning!), shut down recently. And while there were a bunch of reasons for that, this article talked a bit about “platform leakage“, where a client finding a quality vendor and taking them off the platform. In Homejoy’s case, this would mean that I ask the cleaning crew that I found through Homejoy if I can pay and schedule them directly. So a happy customer but no longer a customer.

97% retention? You bet it takes pressure off!

Ultimate Software, which makes software for HR departments announced a quarter with nice growth.  CEO Scott Scherr says “”When you have 97% retention of that revenue, it’s obviously a good business model,” Why, yes it is! So Ultimate folks, how about 102% retention?

Colleges fight churn too

Hodges University in Florida is looking to increase their retention rate, which is ~60% for second-year students returning after Year 1 (an improvement from 49% in the previous year).  The national rate in 67%. Interestingly, the School President thinks the reason students leave school has more to do with customer service than the typical reasons they give, like financial troubles and a school not having the right academic programs. So the “product” seems fine, but the customer service needs fine-tuning.

Netflix has a moat!

A moat against churn, it turns out. RBC Capital Markets surveyed Netflix customers and found them unlikely to cancel their subscription, even if the price goes up. I guess that is want happens when (1) you offer a quality product (2) where there is not much in the way of a substitution. So I guess it’s not so surprising that Netflix’s stock is near or at an all-time high.

Freemium is, uh…, not the new hotness

Once the hot trend that all SaaS businesses need to think about, Freemium is now seen more soberly. Thank goodness; I hated seeing business bum-rush a pricing model. For certain businesses, it remains a wonderful business model. But the new thinking is to be concern about the conversion rate from free to premium, your businesses ability to support the free users, and whether or not the free users are a good fit at all.


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