October 25, 2011

Death Spiral: Customer Age

Pay really close attention to the average age of your customer.

I mean this!

By and large, most businesses have a customer base that ages as time passes, it's just the way life works.  In other words, if you had a 45 year old customer in 2001, you probably have a 48 year old customer in 2011.

Businesses locked in a Death Spiral often have a rapidly aging customer base.  The 45 year old customer in 2001 becomes a 53 year old customer in 2011, and will become a 61 year old customer in 2021.

This is a simple metric that everybody can track, with a simple demographic overlay.  Spend a few pennies, and see if your customer base is aging at a disproportionate rate.  If it is, you know you may have a business that has future potential to be locked into a Death Spiral.

2 comments:

  1. Jrant8:50 AM

    Kevin, I've really enjoyed your Death Spiral series. If you see one (or more) of these trends in your own company, what course of action do you recommend? Do you call attention to the negative trend(s)? Try to reverse them somehow? (eg If Management is frantically throwing money at marketing, does marketing suggest they spend the money elsewhere?) Or should you just start updating your resume?

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  2. I think you call attention to the trends, in context.

    In other words, when you're in a meeting and people are lamenting that sales are down 3% and nothing they can do reverses the trend, then you start sharing the facts as part of a story/solution.

    You tell folks that the average age of your customer is increasing. You tell people that you are having a hard time attracting new customers. You tell people that only your best customers are purchasing, and that they are not increasing items per order orders per year. You tell folks that this means that the brand is not resonating with anybody except your core customer base, and that the core customer base is shrinking.

    Now, you can start thinking about solutions. But the education process needs to happen in context with other activities where leaders are sensing that something is broken.

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