This is a real McKinsey case based on interviews conducted in April 2022 in a European office. The context and content of the case have been adjusted to maintain privacy, however, the exercise types remain the same.
Let’s assume our client is Poliglot, a popular language app. Poliglot is five years old, originally from the US, but available worldwide. The app currently offers the possibility of learning over twenty languages for free, with extra benefits (e.g., no ads, additional exercises) available to premium members.
Historically, the app has been very successful and has seen significant growth over the past few years. However, over the past year, the app noticed a stagnating usage and app adoption. Considering that the market is very competitive, the client expects a decline in the customer base unless the root causes are identified and addressed.
As a consequence, the CEO of the company that owns the app asked us to support them in figuring out the reasons for the decline and laying out a plan for growth.
What are some of the reasons for why the app has seen a stagnating trend within its customer base?
To help us get a better understanding of the small fluctuations in the customer base, the client has shared with us an exhibit containing the number of active users in the customer base over the course of a year. What are some of the insights that you can generate based on this chart?
The client is inspired by the insights you shared earlier and is letting us know that the peaks in the active customer base indeed coincide with promotional campaigns they are running over social media. They agree that these campaigns have had limited effect in terms of converting the additional customers into premium customers or even retaining them as long-term active users on the platform.
What are the three-four levers they could pull to maximize the revenue out of their active base of customers?
The client decided they would like to focus within the coming year on increasing their overall app adoption and number of premium users, in an effort to fun other qualitative upgrades there are developing for the app.
Currently, they have 5 million downloads of the app. 4 million of these lead to actual users opening the app, out of which 3 million make an account. 0.5M sign up for a premium plan. The leadership team in charge of the app claims they developed a set of measures to increase the total downloads to 7 million, as well as increase the conversation rate between those who open the account and who end up creating an account by 15 p.p. They would like to understand by how many percentage points does the conversion rate have to increase between those who create an account and who purchase the premium plan in order to reach a total base of 1.2 million users with a premium plan.
The CEO drops by for a short update from the team. Considering the work done until know, what is your recommendation at this stage?