28 Jul 09 Adoption vs Retention

A lot of business plans we see are a technology push where we have a technology in search of a problem and customer. The way to build a business and put together a business plan is to detail a customer problem/pain and look for possible solutions. Any solution found should have a way to acquire and retain customers. Also such a solution should if possible ride on an existing related growing solution to a customer problem and customer retention solutions. Once you retain customers business models to monetize will follow.

At the heart most business plans is customer adoption and not customer retention. Entrepreneurs and investors alike do not understand how behaviors change after adoption. Social networks, e-commerce portals and other internet portals are typical examples of businesses where entrepreneurs need to be able to come up with plans for keeping up with growth in customer adoption which can move from being linear to exponential very quickly. One needs to come up with scenarios and lead indicators to see which behaviors are being enacted to then bring in actions to grow further, lead and win in the market. Adoption does not guarantee winning it guarantees survival, retention guarantees us a win. It’s a theme even investor’s overlook while funding companies.

Amazon.com is one of the best examples of successful customer adoption, retention and continuous change and adaption to keep retention up while understanding how to react to exponential growth from a very linear growth pattern. This is still a challenge for Twitter and Facebook while retention is still up we will need to see what new innovative services and products they come up with to maintain this retention while keeping growth high so monetization can follow . Friends Reunited is an example of good customer adoption which then did not keep up the innovation in bringing new ways to retain customers and got stuck in ways to make money without understanding how to retain customers while the likes of Facebook, Bebo and Myspace too over most of their regular customers.  While all above is known fact – the issue I am trying to point out is that most such companies have no plan to understand indicators of exponential growth and no plan to understand how customer retention is important. There is a need also to understand that customer retention comes from not being stagnant but by keeping innovation up and bringing in new products and services regularly. Is it any surprise that Bebo and Myspace will keep seeing retention numbers go down?

Tags: business plan, customer adoption, customer retention, start-up, technology