Is it better for Monzo to focus on acquiring new customers or increasing engagement of existing users?

Introduction

The trade-off between focusing on acquiring new customers or increasing engagement of existing users is a critical decision for Monzo's growth strategy. This scenario involves balancing short-term user acquisition with long-term user retention and value creation. I'll analyze this trade-off by examining Monzo's current position, potential impacts, and key metrics, then design an experiment to inform our decision.

Step 1

Clarifying Questions (3 minutes)

• Based on Monzo's current market position, I'm thinking we might be in a growth phase. Could you share our current market share and growth rate compared to traditional banks and other neobanks?

Why it matters: Helps determine if we need aggressive acquisition or focus on retention Expected answer: Moderate market share with high growth rate Impact on approach: High growth might justify continued acquisition focus

• Considering our revenue model, I assume we generate income from interchange fees, premium subscriptions, and lending. What's our current revenue breakdown, and are there any new revenue streams we're exploring?

Why it matters: Aligns strategy with primary revenue drivers Expected answer: Diverse revenue streams with focus on increasing lending Impact on approach: May influence whether we prioritize acquisition or engagement based on most profitable user behaviors

• Looking at user segments, I'm curious about our user retention rates across different cohorts. Can you provide insights on our 30-day, 90-day, and annual retention rates?

Why it matters: Identifies potential engagement issues Expected answer: Strong short-term retention, drop-off in long-term Impact on approach: Low long-term retention would suggest focusing on engagement

• Regarding our technical capabilities, how scalable is our current infrastructure for handling a significant influx of new users?

Why it matters: Ensures we can support aggressive growth Expected answer: Highly scalable cloud infrastructure Impact on approach: Strong scalability might support acquisition focus

• Considering our current team structure, how are our resources allocated between user acquisition and engagement initiatives?

Why it matters: Identifies potential resource constraints Expected answer: Balanced allocation with slight bias towards acquisition Impact on approach: Might need to reallocate resources based on chosen strategy