What Counts as a Customer?
How tech companies decide what gets included in their customer metrics
As a tech CFO, pricing is one of the most difficult undertakings I’ve personally wrestled with.
The journey to price optimization is complex, but you don't have to navigate it alone.
BlueRocket's pricing experts have all operated companies before. And they’ve used that hands-on experience to help companies like Salesforce, Gitlab, Brex, Zendesk, and Google optimize their pricing.
Readers of this newsletter get a pricing conversation with BlueRocket’s CEO Jason Kap.
Out of all the confusing metrics out there, you’d think “customer count” would be one of the simplest.
Think again…
Some considerations that can make customer count trickier:
Free trial periods
Active, but free, users
Prosumer customers (who act more like individuals, rather than companies)
Method of payment (personal credit card vs business credit card vs ACH)
Sales channel (self serve vs sales team)
In my opinion, companies are becoming more liberal in the way they define what a customer is. Part of the change is due to the rapid adoption of Product Led Growth strategies, which allow customers to self serve and sometimes buy before they try, as well as usage based pricing, which tends to start customers at a lower level than they would be on a typical seat based subscription plan.
And the elephant is the room is that many companies move the goal posts, to put it simply, it makes them look better. There are some perverse incentives to not report certain cohorts as customers. Things companies potentially improve by excluding certain groups of users:
Decreasing total churn
Increasing net dollar retention rate
Increasing average deal size
As a tip, whenever you analyze a company, you should start from the position of “anyone who paid you within the last 12 months is a customer” and then work backwards from there.
Run the Numbers
Apple | Spotify | YouTube
I spoke with Mesh’s CFO Anna King. On this episode we cover:
The juxtaposition of automation and story telling, and how one supercharges the other
The biggest changes in the CFO tool stack in the last couple of years
Marrying production data with financial data for better insights
What we think we’ll look back at as an extinct technology - like the DVD player - in 20 years - physical credit cards?
Why cash is still king
Her story about working at Freddie mac during the mortgage crisis, and what it taught her about how fast or slow changes in the global economic landscape take to catalyze
Her path to leadership as a woman, and how she tries to create a culture of inclusion
And combatting imposter syndrome, and mantras she uses to fight through doubt
Quote I’ve Been Pondering
“That was when I realized I had become a pro.
I had not yet had a success.
But I had had a real failure.”
-The War of Art by Steven Pressfield