Zombies and Lattes

It’s scary out there.

Costs are up, valuations are down, sales are dragging, and customers are more fickle than ever.

And suppose you’re running a subscription-based business, especially software, e-commerce, and mobile apps. In that case, you’re probably agonizing over how to take your base from Grim Reaper to Growth as fast as possible!

Tough times serve as a wake-up call to all of us; from the head of sales to the procurement manager, uncertainty drives fear, and fear heightens our sensitivities. But fear also unlocks a spine-tingling horror that will decompose any unsuspecting business.

The Zombie Apocalypse!

If you are a subscription-based business offering a cheap entry point, you likely have inactive paying accounts, or Zombies, in your customer base. These users stick around and pay bill after bill but rarely or never use your product. Zombies are customers who lurk in your metrics and give you a false sense of traction and product-market fit, but you might be in for a frightful awakening if you try to upgrade them or raise your prices.

But why would someone make a purchase and not use it?

I have a theory called the “latte line.”

Cost of various different lattes, about $5, which applies to the Stanford study

It comes from the psychology of $5 bucks or the average price of a latte at any swanky cafe.

The theory is simple – most consumers will make an impulsive or easily forgettable purchase for $ 5 bucks.

Stanford ran a famous experiment by giving $5 to two groups of students in a contest to see who could get the highest ROI in 2 hours.

“They [the students] understood that five dollars is essentially nothing and decided to reinterpret the problem more broadly: What can we do to make money if we start with absolutely nothing?”

It was easy for the students to take risks on such a nominal amount, with the winning group generating a whopping $650 by reframing the $5 as a distraction and selling their 3-minute presentation slot to a nearby company wanting to recruit students.

Five dollars is easy to say, quick to grasp, and a snap to recover, priming us to view it as an inconsequential spend. It has a charm similar to 99 cents in that people are familiar with and friendly to the amount. And before you know it, it’s mysteriously disappearing from your wallet.

So, how do you keep the Zombies from grabbing your ankles with their decrepit hands and pulling your business down into a suffocating grave? Well, you’ll need more than a No-Pun Intended Joke Book and Plant-based Peashooters, that’s for sure.

Resurrect them from the dead by engaging them and giving them a path to the light – here are three steps to bring your zombies back to life:

Find your zombies: You can’t fix what you can’t see, and Zombie users love to crawl into your product’s deep, dark corners. The best way to spot dormant customers is to know what usage looks like in an ideal state. Map out what activities your customers should do within a specific time window. Better yet, do this by cohort or different segments. Amplitude explains how to measure dormant users over their life cycle, and Userpilot offers excellent advice on pinpointing inactive users in SaaS. The point is to know what living looks like so you can quickly see the dead.

Get inside their heads: It sounds dangerous, but it’s worth it! Compared to acquiring a net new customer, it is 2X cheaper to upsell an existing customer and 8X cheaper to retain one (2019 Report on Product Led Growth). Growthmatik walks through how to restore inactive users using RFM Segmentation by honing in on metrics around Recency, Frequency, and Monetary. The trick is to keep your messages relevant to them with helpful reminders, promotions, and content. Go for quality over quantity.

Stop them from turning: Engaging with them before they become mindless flesh-eating corpses is best. Retool your onboarding within the first few months of usage to build an easy path to the “wow moment.” And while you’re at it, ensure you attract the right customers that fit your ideal customer profile. You can do a product fit survey, similar to Superhuman, and dig into those who say something is holding them back. Address those gaps to keep your customers alive and avoid the thirst for brains.

Apply these steps to do your best Pedro Pascal impression and keep Zombie customers at bay.

The more you contain them, the more you can grow your account base to a healthy profit-making machine. But beware not to skip a step, or you might find yourself confronting an army of moaning ghouls shuffling along and chewing away on your growth without remorse.

Me? I’ll be in my bunker, sipping on a hot pumpkin spice latte made with two pumps, extra whip, and steamed Austrian goat’s milk.

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