COVID-19 Zombie Apocalypse

June 3, 2020

Bo Chipman- SVP, Client Partner


Although it sounds like a bad movie title, the coming COVID-induced Zombie Apocalypse is all too real for many companies. Zombies are corpses brought to life by witchcraft, literally the living dead. Many companies have created Zombie customers during the current pandemic. Like their move counterparts, these zombies may do some real damage before they die.

 

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A Zombie customer is one a company has kept alive artificially through the magic of financial incentives. Those incentives generally take the form of reduced or waived payments for services. Companies from a wide variety of industries have supported customers in this way. Gyms have suspended membership fees. Financial services companies have waived interest and even principal payments. Insurance companies are reducing premiums. This list goes on.

 

Absent these incentives, many zombie customers would have fallen off the books. Companies have kept them on the books to limit damage during the pandemic. However, many of these customers will not recover quickly as the broader economy, and they will not be able to pay once companies require payment. At that point, companies will face a day of reckoning when they must remove these zombie customers from the books.

 

Companies with zombie customers should take the following steps to prevent a bloodbath.

 

1. Admit You Have A Problem:

Zombies are hard to ignore, but some companies are adept a burying even the biggest problems. The first place to start is by quantifying the zombies and doing some basic scenario planning to understand the potential impact of losing these customers. Churn will increase, and the active customer base will decline. Future revenue projections will also take a hit unless Accounting has written off these accounts already.

 

2. Understand Your Zombies:

The next step is to profile your zombies to understand their key attributes and behaviors. Profiling should include demographic attributes, prior performance, potential performance, and other characteristics the business can use for decisioning. Understanding customer issues and intentions through consumer surveys is an initiative business should consider. Zombies may reward their creators by providing candid insights into future behavior.

 

3. Make Hard Choices:

Not all zombies can be saved, and many may not be worth saving. Businesses need to make hard choices about where to invest retention efforts. Segments that were not profitable in the past should be the first casualties. Businesses should allow natural attrition to occur in these cases. Profitable segments are more challenging. Businesses should determine whether expected future value exceeds the cost of saving the business. Segments that do not meet this basic requirement should be allowed to attrite as well.

 

4.  Design Segmented Strategies:  

Businesses should leverage information from the profiling exercise to design strategies that are appropriate to different customer segments. Potential value should guide investment. Communication preferences, prior purchase behavior and engagement, and segment knowledge should all inform communication strategies and offers.

 

5. Start Now:  

It is never too early to begin planning. The problem is not going away, and it has significant implications for future performance in the post-pandemic period. Losing all zombies would be a disaster from many businesses. Investing in unsavable customers may be equally damaging. Understanding where to invest takes time as does creating and launching viable retention strategies.

 

Many businesses have made hard decisions to prevent customer attrition during the COVID crisis. These efforts have created an army of zombie customers that may continue to haunt businesses well after the pandemic begins to recede. With analysis, careful planning, and great execution, businesses can save a portion of these customers, and help put the business on a good financial footing going forward despite the obstacles.

 


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