editor’s note: Homejoy, former silicon valley darling, recently announced that shut down, for reasons vary. By chance? Inevitable? For services, but also the right person. Good growth rate, higher retention rates. Contract as the main body of the service, how to out of your way?

homemaking company Homejoy was 2.5 hours household cleaning services, charging $85. But in order to attract new customers as much as possible, the company introduced a preferential promotional price of $19. So guess, when the user number of promotion experience after use, will continue to spend?

the answer is very simple, I don’t need to please move the MBA, master of business administration, can be very sure that said, the promotion gimmick is terrible, there won’t be repeat customers. That is the case, the Homejoy also therefore, eventually had to announced on Friday shut down, and just before that, the silicon valley darling, looks like a great future.

Homejoy co-founder and chief executive of Adora Cheung told us technology website Re/code , to shut down the “decisive factor” is the company faces lawsuits, the four lawsuits from procter & gamble company personnel, who claimed they were wrongly classified as contract workers. It may be true – the cost of a lawsuit, the resulting debt crisis, rooted is not small number. But the former employees of the company and the industry, according to relevant personage Homejoy was shut down at the end of the day or customer acquisition way out of the question.

a Homejoy former employees had told Forbes, founder of Cheung, too care about new customer growth, but never to try and save the retention rate of poorly. On group-buying websites to attract customers, at the core of service failed to improve well, because it had no ability to conduct professional training for contractors.

there is a former employee of Forbes expressed the same view: “keep rate obviously in a great mess, this is the crux of the we lose.” But because the topic is sensitive, the former employees declined to be named.

Homejoy user retention rate change depends on the figure how to divide, but no matter how, is not optimistic. A former employee, according to one month subscription service users only 15% to 20% again. But another source said that in some other market, also somebody do the relevant test, retention rates were raised to 30% to 30%. Enemy Handy Homejoy said that more than 35% of customers within a month subscription service again, and in a larger market, the interest rate can also be up to 45%. But Homejoy and Handy declined to comment for this article.

the co-founder and chief executive of Oisin Hanrahan, said: “our product is almost entirely a cyclical business, our focus is the number of repeated use. This clear, repeatability, is we have to consider.”

Homejoy co-founder Adora and Aaron Cheung, brother and sister

The growth mode of

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Homejoy faced a lot of pressure, to raise billions of dollars ($38 million) in 2013, the Homejoy financing, must conform to the investor expectations, give them see great growth. The pressure is not Homejoy a special case, many successful start-up companies have met almost the same problem. In order to meet these expectations, Homejoy constantly accelerate the pace of expansion, large areas to explore new international markets, once within six months, just open place in 30 cities. Former employees, say the speed too much, is not favorable to the development of the company.

a former employee of mentioned above also revealed: “Cheung always hang growth in his mouth… Because we must through the growth to attract investors, raising the next round of capital. She is really think, once the companies to stop the pace of fast growth, will face death.”

employees have said before, the Homejoy paid dearly for their growth. When it enters a new market, want to seize the new customer, can through the company and will help the group-buying websites, or a discount on their website. 75% of its reservation, is by the discount, instead of word of mouth or natural flow.

discounts, discounts or discounts, this not only makes Homejoy lost important capital, also brought the wrong consumer groups. Had a lot of people enjoy discount, he will never booked again, because they do not want to or not able to pay full price 25 to $35 per hour. Homejoy last year to do the price adjustment, renew the old customers more cheaply, to encourage repeat business. In response, however, some customers have canceled appointments, choose to book a cheaper, but lost vested income.

a German company and Homejoy similar called Helpling, its co-founder Benedikt Franke said: “the high discount will lead to the opposite effect, it might be sending the wrong signal, or the signal is passed to the wrong people.” It is self-evident, but just and Handy Hanrahan, Franke also like drag Homejoy out every lay a gun, show their extraordinary, said he would never fall Homejoy, by the way. He also played for example: “send T-shirt free man, a fool not to, but you have to do is brand t-shirts, not cheap.”

last summer Homejoy launched promotion preferential $19/time, continuous promotion for several months. But one former employee says that, in general, it is difficult to predict customer retention rates, usually attract a customer to pay, than get more feedback from customers. With declining performance indicators, and the morale of the employees have also been badly affected. Employees know the company raised the money, but will round empirical will cut meat to change, because they have obtained financing to reduce.

another former employees also said: “now look back, feeling really no meaning. If you do the current core business is not good, also expand new markets? I think they are fooling themselves, use the inflated growth to numb themselves. They have money in the bank, so don’t care can immediately to make a profit. Yes, as a start-up company, our task is not to make money, but we want to get a new user, we are going to the growth of the hockey type, have the user base can we grow, and to open up new markets.”

as contractors, Homejoy cleaner failed to professional training, this makes it hard for quality of service, user retention rates would be in jeopardy

training dilemma

is not only a group of customer retention rate is low, directly seek also have a loss, the main reason is the quality of service is too casual, not professional just, different cleaning personnel service level is uneven. Because Homejoy cleanup crews are contractors, the company can’t give them the cleanness of even the most basic training, and even many people have never engaged in the professional cleaning work.

business manager before Homejoy Anton Zietsman said: “the law limits the development of our, we have no way of cleaning personnel training, this is banned in law. Even, we couldn’t give them a good equipment. This leads to a customer experience in general, the customer retention rate goes low.” A taxi and Uber that kind of service is subjective enough, house cleaning subjective than a taxi service, more sensitive, a bad experience, probably means losing a customer forever.

from this perspective, we’ve had four suits, is not the main cause of the company shut down. Behind the four litigation, there is a deeper problem: in our current this mode, to achieve sustained rate, almost impossible. If Homejoy on its cleaning personnel training, and so will be prosecuted, if not training, cleaning personnel’s service quality is not guaranteed, the business will naturally affected, it is an infinite loop.

Homejoy themselves are aware of the problem, is also trying to find a solution. Company had made a test in Chicago, where some of them has been conducted for cleaner training, let them make in bed, leave a Homejoy trademark figure, put the pillow in a special way, or left in the house a few sweet little CARDS, candy. This move clearly beyond the scope of contract and interfere with freedom of cleaning personnel but fruitful. A former employee, service feedback significantly better at that time, customer retention rates also promoted. But, want to in the global promotion of the test is not easy, it will lead to more employees of the company filed, and if companies don’t take these contractors to become formal employees, will face great risks.

Homejoy a large part of those who will be upto will act as a commission payable to cleaner, sometimes up to half. That, of course, depends on customer satisfaction. But in order to get a higher commission, cleaning staff will contact the customer directly, so as to skip the Homejoy platform. Homejoy tried to solve this problem, but it is too difficult for the company don’t understand how much cleaner and single customer contact in private.

a former employee said: “may our retention rates isn’t so bad, but the single wire connection is available.”

as a taxi application Uber Lyft, deep pockets, they can not afraid of a lawsuit. But as there is the companies, want to contract more training, and don’t want to put the contract into part-time employees, people can choose his own training. For Homejoy, one thing is very clear, if you don’t want to break the law, will not be able to training contract, but your service level is uneven, company finally can end only.

Zietsman predicted: “within the next 12 to 24 months, there will be more and more service-oriented platform encountered such a problem.” Like Fusion Kevin Roose points out, many with contract as the main body of the company, once the wholesale funding, will have the same experience as Homejoy. Will slowly run out of funds, and investors are eager to find a way, let them back to this. The company had to work hard to find a way to ensure the quality of service, to ensure repeat business. Or will have the risk on the Amazon and Google out of the market. The two companies have started their own family services, and deep pockets, don’t have to live on this profit.

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