7.2 Metrics Are Your Early Warning System

What do warning signs look like in real life?

1. Flat or declining sales volume

   Your new smartwatch sold 20,000 units in its launch month. Six months later, monthly sales have dropped to 4,000—despite ongoing promotions.

2. Price sensitivity increasing

   Customers once paid $199 for your product without hesitation. Now, discount requests are common, and a competitor has launched a $149 alternative, stealing market share.

3. Rising customer acquisition costs (CAC)

   You used to spend $25 on ads to gain a customer. Now it’s $60—and rising. Promotions and influencers are delivering fewer conversions than before.

4. Weak repeat purchase rates

   Only 10% of customers reorder within 90 days, far below the 30% industry benchmark. First-time buyers aren’t becoming loyal advocates.

5. Negative customer feedback

   Online reviews mention:

   “Product looks great but broke after two months.”

   “Not worth the premium price.”

   “Customer service was slow and unhelpful.”

These dashboard lights don’t just tell you something’s wrong—they tell you where to go next. Few companies have followed the signals more skillfully than Netflix.

Netflix famously began as a DVD rental service. By closely monitoring customer preferences and recognizing the limitations of physical media—such as slow delivery and rising shipping costs—they identified early warning signs. Pivoting to streaming wasn’t merely a technological shift; it was a strategic response to clear customer data.

The pivot paid off!

• Lower customer acquisition cost (CAC) through an enhanced customer experience

• Increased repeat engagement and loyalty due to the convenience of streaming

• Higher customer lifetime value (CLV) as subscribers consumed more content over time

In 2022, facing intensified competition and market saturation, Netflix introduced an ad-supported tier priced at $6.99 per month. This move aimed to attract price-sensitive consumers and open new revenue streams. By 2024, the ad-supported plan accounted for more than half of all new Netflix sign-ups in regions where it was available.

To further capitalize on this growth, Netflix announced plans to launch its in-house advertising technology platform by the end of 2025. This initiative is designed to enhance advertisers’ ability to buy ads, gain insights, and measure campaign impact more effectively.

Math Tip: What’s a Pivot Worth?

Customer Insight: Why the Pivot Worked