Prepaid KPIs: What Can They Tell You?
The interplay between prepaid KPIs is the topic of today’s post. If you haven’t had a chance to review the seven KPIs that all prepaid programs should track, catch up by reading Part 1 and Part 2 of this blog series.
The intelligence that can be gleaned by examining KPIs in relation to each other is where things get interesting. When you consider KPIs individually, they help inform decision-making related to specific areas of a prepaid program. But together, they can shed light on higher-level issues that may be impacting the success of the program. Let me give an example.
This diagram maps out the relationship between Average Revenue per Card and Churn.
If you look at the upper left quadrant, you will see a state in which there is high Average Revenue per Card but also high Churn. Despite the good revenue per card, the program will still die a quick death because of the high churn rate. If you move diagonal – when there is low average revenue per card and low churn – this will be a slow death. The lower churn rate will extend the life of the program but it will eventually die because not enough revenue is being brought in. The ideal state, obviously, is the upper right quadrant when you have a healthy average revenue per card and a controlled churn rate. What this diagram illustrates is how quickly and easily you can get a sense of a program’s general state of health, just by looking at two KPIs side by side.
Here is another example, using Average Revenue per Card, Customer Acquisition Cost & Churn. By looking at these three KPIs, you can not only map out the point at which you will recoup your acquisition cost, but you can also see immediately if your program is sustainable.
The graph shows how long it will take to recoup a Customer Acquisition Cost of $50 based on various Average Revenue per Card measures. As you can see, the higher the Average Revenue per Card, the shorter it will take to recoup the acquisition cost. Now consider a situation in which customers churn at three months. The program will not be able to recoup the Customer Acquisition Cost! This would be a dire situation indeed requiring drastic and immediate action. Either the program would need to create more customer engagement to extend the average life of the accounts and reduce churn. Other options would be to figure out a way to generate a higher Average Revenue per Card in order to recoup Acquisition Cost faster or optimizing the acquisition strategy in order to reduce Acquisition Cost.
There are countless opportunities to gain valuable insight and identify high level trends by analyzing KPIs in conjunction with each other. If any of you are doing this in your programs today, please chime and let us know what you find most impactful. Your experiences will be interesting to hear!