Nivi · December 14th, 2009
Sean Ellis recently sat down with us and explained how to bring products to market. You should listen to this interview for ideas on how to get to product/market fit, how to measure fit, and how to survey your users so you can improve fit.
If you don’t know Sean from his blog or tweets, he lead marketing from launch to IPO filing at LogMeIn and Uproar. His firm, 12in6, then worked with Xobni (Khosla), Dropbox (Sequoia), Eventbrite (Sequoia), Grockit (Benchmark)… the list goes on. 12in6 “helps startups unlock their full growth potential by focusing on the core value perceived by their most passionate users.”
This is the first time Sean has done an interview on the record. I’m really psyched he’s making his insights public — this interview is a must-listen. We’ve broken the interview into two parts: 1) before fit and 2) after fit. This post contains Part 1 (and here’s Part 2.)
This inteview is free — thanks to KISSmetrics
KISSmetrics built survey.io with Sean — now they’re collaborating on KISSMetrics, a new tool for funnel optimization.
You’ll get more out of this interview if you also read:
- An example of the survey.io survey Sean uses before fit. (Several phrases we use in the interview mean the same thing: Product/market fit = Fit = 40% of surveyed users consider the product a “must-have” = 40% of surveyed users would be “very disappointed” if they could no longer use the product.)
- The startup pyramid.
- Some of our favorite posts by Sean.
Here’s an outline and transcript of Part 1.
- Half the marketing battle is the product
- Must-have products make marketing much easier
- How PayPal built a must-have product
- Understand the must-have users
- How to get to product/market fit
- How not to get to fit
- Should I launch?
- You can’t set a deadline on fit
- How to communicate with the board during fit
- How to use positioning to improve fit
- It’s frustrating to try to grow without fit
- How many users do you need to determine fit?
- Who do you survey?
- What is promise?
- Don’t over-position your product during fit
- Pivot the business around the love
- Focus the product on the love
- Create a great experience around the love
- Create a business model around the love
- First find the love
- Are recommendations a good indicator of fit?
- The must-have metric is a good indicator of fit
- Preview of Part 2: What comes after fit?
Nivi: Hi, this is Nivi from Venture Hacks, and I’m here with Sean Ellis. We’re going to talk about how to bring a startup’s product to market.
This interview is broken up into two parts: before product/market fit and after product/market fit. Or to put it another way, what are the set of activities you have to do to get the product/market fit, and then once you’re there, what are the set of activities you have to do to prepare for sustainable growth.
I’m super psyched about this interview. This is Sean’s first-ever interview on the record. We’re going to jump right into it.
Half the marketing battle is the product
Sean Ellis: The whole idea that’s gotten me to where I am right now, where I’m doing multiple companies, is basically that I’m just trying to get lots of cycles, up front, in that really critical zone — I call it the fail zone — that if you don’t get that done right, the company will fail. And if you figure that part out, then it’s really a question of how much success is the business going to have?
Particularly, one of the things that I’ve learned that’s been a little humbling through the experience is that if nobody wants the product, it doesn’t matter how effective the marketer is, you’re going to have a really hard time being successful. And if people want the product, you don’t have to be that great a marketer — the product is just so much easier to market. So half the battle, I’ve realized over time, is just finding the right company with a product that people actually need, and that there’s a big enough market that can support growth for that business.
Must-have products make marketing much easier
Nivi: Yeah, and what might be interesting for some people to hear is what’s in that grey zone between nobody wants the product, to a lot of people consider the product to be a must-have. For example, sites that have great marketing and distribution through viral marketing, but they don’t necessarily have any real must-have-it-ness with their customers or with their users.
Sean: All right, so the question really being: the grey-zone products that fall between those must-have products, and products that maybe aren’t as strong of a must-have, but can you be successful with those?
I am just figuring this out as I go along. I know that there is no right answer on any of these things. What I do know is that if you have a must-have product, your chances of success are very high.
And the way that I figure out if a product is a must-have or not is: what percentage of people are telling me that they’d be very disappointed if they could no longer use it? But it seems like you find a lot of categories where you might say that it’s a nice-to-have, rather than a must-have.
And I think that the difference is that for a nice-to-have product — so, something where not a lot of people say they’d be very disappointed without it — that you probably can be successful, but it’s going to take a lot of effort on the marketing side to make up for those product deficiencies.
I think if you really step back and say, as a business, that ultimately our goal is to create a successful, fast growing business, that people really need our product, and that over time we have a defensible business where it’s really hard for somebody to come in and provide an alternative product where we start losing customers, that in an early stage startup you have an opportunity to put a product out there, get that initial user feedback, and then you have two choices.
If that feedback is really strong and the users say that they’d be very disappointed without it, in a large percentage, then you can try to grow the business.
Alternatively, if they come back and say that they wouldn’t be that disappointed without the product, then you have the choices where you can either try to grow it or you can decide that you’re not going to try and grow the business. And to me, my recommendation has always been to decide not to grow the business if it doesn’t have a lot of people that are real passionate about the solutions.
Actually, you can operate a startup at a pretty low cost if you basically have a small engineering team and you’re putting product out there and you’re not spending a lot to get people on there, but you’re really engaging the people that do come in. You can engage them much better if there aren’t that many people, so you’re in a position where it may take you a year or two years, but you can really, over time, start to evolve a product into being something that someone wants.
Maybe you find early on that absolutely nobody wants the product, and in that case you might want to do a complete restart on the business.
And when I’m presenting to groups, the example that I always point to, mostly so that people know that there’s hope if they don’t have great product/market fit initially….
How PayPal built a must-have product
Sean: That product/market fit is how I describe having a large percentage of people that would be very disappointed without the product. If you’re above 40% of the people saying they’d be very disappointed, I tend to say you’ve found product/market fit, and if you’re less than that, you haven’t.
So a lot of times I meet with companies that are maybe in the 15% to 20% range on that, and it’s very discouraging. You’ve worked very hard to put out a product, so the example that I give them is PayPal, where the initial product that they came out with was a cryptography product where you would use a PDA to store access codes for servers, and it was better than carrying a bunch of individual devices to access those servers. And the problem they were solving was that there was a lot of clutter in carrying those devices, and they were going to consolidate them all onto a single hand-held.
In “Founders at Work” there is a great case study on this. What Max Levchin says in “Founders at Work” is that they put the product out there and “nobody really needed it.” That was a direct quote — “nobody really needed it.” So what they decided…. Most companies would try to interpret the data and keep blasting away and say that somebody needs it. They just don’t get it yet.
Nivi: We need more distribution….
Sean: Yeah, they blame marketing, they blame sales, but ultimately, it took a lot of guts, and just honesty, to say: You know what? We created something that nobody really needs.
So what they did at that point was they stepped back. They asked what are we good at? We’re good at developing for a handheld PDA. We’re good at security. What else can we do with these skill assets that we have? And they decided that they were going to get into the mobile PDA payment space, where basically, people could beam payments back and forth.
And on the initial vision they were able to raise a couple hundred thousand dollars. On this new vision, they were able to get a prototype out on that initial money that they had raised, and they were able to raise… I think it was four million dollars. I don’t remember the exact number on it. And they actually beamed the VC money over so they had a good enough prototype to be able to accept the payment via this PDA payment. And then they were off to the races, and they started executing the business.
I think, in that case, my guess is that if they had surveyed those users who were using PDAs to make payments; it was more of a party trick. It was something that there wasn’t a real big need for, but they got users on there. They got lots of users on there, and they were able to get those users coming back. But, I’d put it in that probably-nice-to-have category.
Nice-to-have is kind of a scary thing, because you get enough success that you want to keep at it. But they were very fortunate in that they sort of stumbled into what ultimately became their market, which was, of course, the web-payment platform that PayPal is today. And that was really a function of people just starting to use it that way. And so, that’s why I focus a lot with companies on helping them figure out the use cases behind their product. If the people who have one use case consider it much more of a must-have than people who have a different use case, then that’s probably the business you’re going to be able to build a successful business on.
Understand the must-have users
Nivi: So, do you ask the must-have users what they use the product for?
Sean: I ask everybody what they use the product for, and I’m trying to see, really, who has the most passion around the product. And usually it breaks down by use cases, sometimes by user types. It’s really just looking through the initial data to really understand who really needs this product, and it can be on demographics, it can be on use cases, it can be on a lot of different things. But once you really understand a group that really needs the product, then you start to have that true North for the business — the part that you can actually start to build a business that will grow and thrive around if they represent a big enough market.
Nivi: Right. In that product/market fit stage that you’re talking about, which is basically the bottom layer of your pyramid, what don’t you do? For example: PR, trying to get a lot of distribution, increasing your burn.
Sean: Well, it depends a little bit on the type of business that you have.
So just one quick thing on wrapping up the PayPal example was, by the time they pulled the plug on their mobile-payment business they actually had, I think it was 1,000 times more people using the web payments. They had obvious traction, so they didn’t need to necessarily get that from a survey. They could just see that they had the traction there at that point. They could say: You know what? That’s where our real business is. Even though they fought it, initially, because they had different preconceptions about where their business would be.
How to get to product/market fit
Sean: I purposely try to avoid working with companies that are pre-product/market fit, because they’re in such a risk zone that, one, it’s going to hurt my reputation if I string too many of those together, and two, to ask people, who have a product that people don’t need, to pay me to help them with marketing would just not be the right thing to do. It would be a mistake for them to pay me, and it’s just not smart, from my perspective, to stake my reputation on their success.
But I found myself working with one fairly recently, on a very short, almost advisory project, of just helping them out. And my advice to them was to really be laser focused on that number and to really monitor that very-disappointed number.
So, one of the things that I’ve seen work well for companies that are in the 20% range, or even lower, of the user saying they’d be very disappointed without it, is to focus on, one, why those people would be very disappointed without it, and to really start to say, OK, this is our best signal of value that we’re creating.
And then, to look at the feedback from the people who would only be somewhat disappointed without it. Ignore the people who say they would not be disappointed without it, because they’re so far from being satisfied.
But then look at those somewhat disappointed people, and look at feedback from those people — particularly on what changes they’d like to see in the product. And look for things that relate to the very-disappointed feedback. If you take all feedback equally, you’re going to have a very broad product experience that is very disjointed.
And I think one of the mistakes when people are too responsive to user feedback is that it’s a product that does everything, because if you try to please everybody, you’re essentially going to have a very unfocused product. But if you use the feedback from your very-disappointed people to give you that focus, and now you’re looking for feedback from everyone else that relates to what the very-disappointed people have told you…
Nivi: Like with PayPal, for example.
Sean: I think, using PayPal as an example, if they had surveyed all of their users, I’m assuming that a lot of the people who were doing the hand-held payments would basically have been saying that they’re only somewhat disappointed without it. And then the people who were doing the web payments would be saying that they’d be very disappointed without it. But some of the people on the web payments would be saying somewhat-disappointed, and they would say: if only I felt more comfortable about security; or, if only I could do it faster; or, if only you could give me better records of payments that have been made.
So you could take the feedback from the somewhat-disappointed who were using hand-held payments, and act on that to try to get there, but then you’re not really honing in on where the passion is.
Or, you could take it from the other side, saying, OK, these people may be a little pickier about what defines something that’s a must-have, but the feedback that they’re giving would improve the experience for the people who already say it’s a must-have. So, it’s really trying to just hone a consistent, core-product vision that is already starting to crystallize based on the feedback from the really passionate users.
Nivi: Yeah, that’s great. So in this case, it’s related in the sense that somewhat-disappointed people are using the same segment of features in PayPal.
Sean: Yeah. It’s that use case.
Nivi: Use case.
Sean: Yeah. They’re suggesting improvements to the use case that’s consistent with the most gratified users there are.
How not to get to fit
Nivi: Great! Yeah. So that’s a great idea in terms of getting what you need to do to get product/market fit, and I’d like to talk more about that, but it would also be great to hear what you don’t do.
Sean: I think the thing that you don’t do — and I’ll make one caveat in a second, on this — is that you don’t aggressively try to grow the business. Particularly, you’re not trying to do business development relationships. Maybe you can spend enough to create some flow so you actually get people giving you the feedback on the product, but one thing I wouldn’t do is obsess over ROI on that flow.
Your goal is not to figure out that repeatable, scalable customer acquisition engine at that point. Your goal is to get enough people in there to where you can react to their feedback and hone the product experience on their feedback.
Should I launch?
Nivi: How about a launch?
Sean: This is very debatable. A lot of people would say that a launch is a really important event. For me, I’ve never been big into launches. Launch is a one-off. With launch, you’re going to get a group of people in one time, and you’re going to get some feedback on them. And yes, they may be cheaper because you got some good press around it, but you haven’t learned anything about how to grow the business with a launch. So for me, I’m much more….
I wrote a blog post way back when. I think it was called “Launch with a Trickle,” and that’s much more of my focus on things. Just get enough people on there as early as you can, so that you can react to their feedback. And you may find that they absolutely love the product. Then hone in on why they love the product. And then get the messaging right and the experience right, so that you’re delivering that better. Once you’ve kind of tightened up and you’ve got that validation that a lot of people love your product — hopefully more than 40% say they’d be very disappointed without it — then you can step on the accelerator and a big launch might make sense at that point.
You can’t set a deadline on fit
Sean: But what I see too many companies do is set a date. They say, we’re going to have our launch on January 14th, and they’re two months away from that and they’re working towards… I mean, it’s either time or it’s not time.
Nivi: Yeah, and you can’t set a deadline on product/market fit. Right? That is the point in time, in the growth of a company, where you basically are unable to predict anything.
Sean: Right. And all you’re going to do then is make the mistake of being too aggressive too early, or piss off your investors by missing that date for the launch.
So it’s much better to say, our clear objective — the next milestone that we need to get to before we do all of these things — is to actually make sure that enough people love this product. As soon as we get there, then we have to figure out why, and make sure that we’re really honing every piece of the business to reflect why people love the product.
How to communicate with the board during fit
Nivi: Right. So, on that topic, how do you communicate with the board and set expectations when you’re trying to get to the product/market fit stage?
Sean: What I’ve found is that people either get it or they don’t.
Nivi: What are the responses of the people that don’t get it, like from a board perspective? What have you heard board members say directly, or secondhand?
Sean: They’re just: You’ve got to go for it! You’ve got to go for it! It’s good enough. It’s good enough. And they just want to accelerate the business.
I have a great example of a company that was about 15% or 20% on product/market fit and I loosely advised them at no cost, because I was going to spend some time in Scotland and they’re based in Scotland. And I wanted to get to know these guys better because I was going to be spending a week over there. So we just worked together over a period of time.
And when we first started working together they were at the 15% or 20% very-disappointed number, and they explained to me that their board of directors was just pushing them on: We’ve got to get to this growth number! We’ve got to get to this growth number!
And they took the time to really explain: This is our goal right now. We don’t think our product is good enough to accelerate this business. Our goal is to take the feedback from the users that we have and keep getting our product better.
In the process of doing that, they had the very painful process of actually having to lower projections on growth, and doing it week after week, and frustrating their board of directors through that process. But they did exactly the right thing, because today their very-disappointed number is over 50%.
And when I met with them when I was in Scotland about a month-and-a-half ago, they were at a really exciting point where they said they keep going back to their board of directors and saying: Hey! We’re going to revise those numbers up. They kept going and saying the numbers are too low. It’s going to be better than that, because now that they have the product right they could really focus on that, and they weren’t going to have the….
You can grow when your product/market fit is lower than that, but you’re going to grow a lot slower than you otherwise would, and you’re not going to address the real problem. And you’re going to have a very frustrating experience trying to grow that business over the next several years, versus saying: Let’s keep our costs really low, let’s get the product right, and when we’re focused on growth, no excuses. Now we’re absolutely accelerating that business and it’s going to be much easier to grow the business at that point.
And ultimately, you take it a year out or two years out, you’re going to have a much bigger userbase doing it that way than if you’re trying to grow through the whole period of time.
How to use positioning to improve fit
Nivi: Now, what changes should they make to get to that number, without getting into the specifics of the business?
Sean: I don’t know. I didn’t work with them, so all I know is that they did the things that I’ve mentioned, where they really took the feedback of the very-disappointed people, really tried to look for the signal of who loves this product. Somebody loves it. Who loves it? Why do they love it? How can we really put a stake in the ground around that and try to make that piece better, and try to play down the other pieces?
Nivi: Then maybe reposition?
Sean: Yes. Some of it’s definitely through repositioning.
I have another company that I worked with that was before I had [done] that. This was really the company that helped me come up with the idea that I was going to survey people ahead of time, because I got into two companies at the exact same time who were both at about [where] 7% of their users said they’d be very disappointed, and found myself in the “oh, crap!” moment of figuring out that now I’m going to have to help these guys transition to growth and grow, but they’re not ready for it yet. And why did I wait until I had a six-month contract with them to run the survey? From now on I’m going to survey it ahead of time.
But at one of those two companies, we were able to see a really strong signal in the 7% that said they’d be very disappointed without it, reposition on that signal… [interrupted]
Nivi: So how do you reposition on the signal. In this case, did you get a little bit more data…?
Sean: We just found out — I mean, I can’t give any specifics on it — they had a product that had lots of different features, and each one of those products could be a product in itself. They built a really big suite of tools, within a product, and everyone who said they’d be very disappointed was focused on just one of those. So we basically only talked about the one they were focused on, and we didn’t talk about any of the other things.
Nivi: To the user, say, on a landing page or on the home page.
Sean: Exactly — on the home page we only highlighted that and said we’ll introduce the other stuff after we get them in. One of the benefits with that was that we were really able to simplify messaging. Having a really complex product set that you have to present people is way harder than simplifying that and only highlighting one. So, we basically highlighted the most important must-have product from the group, and hid some of the other products, and as a result we could be much clearer in what the benefit was for the people coming through and what we were actually offering.
So, one week later, on the next cohort of people coming through, we were over 40% because they had a very different expectation of what this product was, just by changing the messaging and focusing their first user experience on just this one piece of the business.
Nivi: Right. So, with no real change in the product, but a change in the messaging and a little bit of first-user experience change, you got a huge uptick in the must-haves.
Sean: Yup, exactly. And the interesting thing is that business, probably out of every business that I’ve worked with, is the one that I think has the opportunity to be a multi-billion dollar business, and one that I’m most excited about. And when I first saw that 7% number, it was the one that I thought: how do I get out of this? So now I’m really happy that I stuck with it, and I’m happy that we were able to figure those things out. And I’m really good friends with the founders.
It’s frustrating to try to grow without fit
Sean: When everything’s going well, the chemistry gets much stronger and it’s just a much more enjoyable place to be. That’s just one of the things that I’ve learned, is that in a company with a low product/market fit, it’s not a fun place to be. It’s frustrating trying to grow that business.
And for a company that can really embrace the fact that: You know what? We missed. The product that we created just isn’t something that people really seem to want or need.
Nivi: And we don’t really measure ourselves through growth right now, either.
Sean: Yeah. So for us, we’ve got a lot of money in the bank. Somehow we got lucky enough to raise the venture capital. If we try to grow we’re going to waste a lot of that money trying to grow. Let’s just keep our costs way down, get just enough users in there and either do a complete reset on the business — like PayPal did, which I think most companies don’t need to do — or just find the love.
In my last blog post I talk about “just find the love.” Somebody loves it. Somebody really needs that, and once you find that, that’s the stake in the ground that you can figure out how to create a successful business.
How many users do you need to determine fit?
Nivi: And what is just enough users?
Sean: That’s a good question. I think it kind of depends on the business, but ideally, if you have a product that ultimately is going to cost thousands of dollars, then it’s just not going to be realistic that you can bring in a hundred every day on that product. But if you have a product that’s going to have a 10% upgrade rate or a 10% purchase rate, and it’s going to be $100, then that’s a product that you probably want to try to have a pretty constant flow of around 100 new people a day.
And whatever it costs to get to that 100 new people a day is a really good flow to iterate on. If you can only be at 30 or 40, that’s probably OK.
Nivi: And how about on the output side of that — the people that you’re going to survey, the people that have gotten to the finish line? How many people do you need to be talking to, to get a good signal there?
Sean: I look for around 30 responses as a minimum. It really depends. If you have a very low percentage of users that say they’d be very disappointed… Say you’ve got 30 responses and you’ve only got 5% that say they’d be very disappointed without it, that’s not a whole lot to work with on finding a signal.
But I ran a survey this morning with a business that has 70% of their users that say they’d be very disappointed. We got a very strong signal on 42 responses.
Nivi: OK. Right.
Sean: Really, it kind of depends, first, on how strong that number is. And then what you’re trying to do is get enough responses in there to find some sort of signal that either says: We completely missed, or that [there are] very few people we’ve hit with, so we want to make sure that we survey enough people that we’ve got maybe 10 or 20 people who say they’d be very disappointed, that we can start to hone in on the feedback that they’re giving.
Who do you survey?
Nivi: And do you ever have trouble defining what that finish line should be? For example: active monthly users, people who just signed up for the product, or is it… [interrupted]
Sean: Do you mean on who to survey?
Sean: What I tend to do is say, people who have been back at least once.
And I think for a consumer product you shouldn’t be charging at this point; it should be free at this point, because the money side already starts to put a big filter out there. Even if you had a trial, people would make up their mind pretty quickly. If they decide they’re not going to buy it, then they’re not going to say they’d be very disappointed without it, and not buy it. So, just pulling money off until you can get that signal is pretty important.
For me, I define what is actually the experience that we think is the experience that gives them a full taste for the product, then I want to make sure that people have at least done that when they come back to us.
Nivi: So in the case of PayPal what would that be?
Sean: That they’ve at least made a payment with PayPal or accepted a payment.
Nivi: One payment?
Sean: Yeah. And then, that they’ve been on the site within the last two weeks.
What is promise?
Sean: So those would be kind of the two pieces. You just asked about intent and the value proposition in some of those things, so I think the important starting point is that the promise or the differentiated value proposition is really based on whatever signal that you find. Where you find the love on the product, that’s what you’re trying to do there.
Nivi: And you call that promise.
Sean: Promise is one of the names I use for it, but it’s all synonymous with just the value proposition, the differentiated value proposition of just what is this product going to do for you. What is the unique piece about it?
Nivi: Right. So in the PayPal case: send money to friends online.
Sean: Yeah. I think that would be… And at the time, that was fairly differentiated. Now you can use credit cards and other things, so something that remembers your log-in information might be trying to differentiate from just Visa or Master Card or American Express.
Don’t over-position your product during fit
Sean: But what I was going to say with that is that there are two periods where that becomes important. One, before you have product/market fit you’re trying to find that signal, so you can do some sort of early positioning to try to highlight that. But the problem is, too much positioning is going to steer your users in a certain direction. So, early on, a lot of times it’s good to actually be very feature-function oriented.
Sean: Because unless you have a real strong signal…. You can experiment with it, like, OK, let’s bring people in and we’ll give them this message and we’ll see what their very-disappointed number does, just on this group of people. We’ll survey them separately.
But in general, if you don’t have a real strong signal, then it can be kind of dangerous to shape their experience by highlighting some unique attributes that turn out not to be the important unique attributes.
Nivi: Because it might be inconsistent with…?
Sean: Because you’re going to shape their experience so much that they may miss the other thing that would have been the thing that would really thrill them.
Nivi: Right. So give me an example of how I would do that.
Sean: X Corp. is a prime example on that. In the early days at X Corp., it was just one of those things that I realized that if I really focused on homepage messaging it was going to take me a really long time to get some level of consensus, and that’s just the way that the business….
The way most startups operate, early on, is that everyone has opinion around what the homepage looks like and what it says. And so, what I realized is that getting a lot of those early users, we were going to be getting them through search anyway, so I basically said I’d let everyone else figure out what’s going to be on the homepage, I’m just going to take people in through landing pages.
With landing pages you know what the person’s intent is when they’re coming in through a specific search word, so you can really hone things in a more segmented way.
But our homepage ended up being very feature-function oriented, and the group we initially built the product for ended up being a relatively small percentage — especially on a revenue side — of where the business ultimately ended up generating a lot of revenue. So I think if I had taken a traditional marketing approach to that I would have been very benefit-oriented right from the beginning. And I probably would have positioned it away from what ended up being the really interesting market for us, because I would have given so many details about how they should use the product that this other group may not even have considered using the product.
And so, as a result of having, essentially a group of engineers be able to initially determine the wording for the homepage, they just focused on the features that they created, with not a lot of why someone would need it. And that turned out to be the best thing that could happen because, ultimately for us, by the time I really started looking for that signal, the signal was very different than what we would have initially had if I had positioned out of the gate for that.
Pivot the business around the love
Sean: A big theme that I keep coming back to is, where is the love? It’s basically just finding out which users are passionate about the product. What is the use case on the product that those people have? Why do they actually love the product? And that gives you a good core of information to guide every part of your business. So messaging, you want to reflect that, but also, now that you know that, you want to make sure that you can really get a lot more people to that particular type of use case and that particular type of gratifying experience. So understanding user gratification is really critical in all of it.
First of all, you want to know that you have enough that you can try to grow the business — that you actually have something that will be growable. And then in growing the business, having that gratification should give you guidance on everything. So product roadmap should be a function of how people are gratified with the product and who’s gratified, so it should give you a lot more focus on that product roadmap as opposed to a lot of feature feedback and ideas and different things that, over time…
You know, initially you have to kind of scatter-shoot it. You have to cast a fairly wide net of things that might please people, but once you really know where that gratification is, that’s where you really want to double down, and that’s your business. Before, everything’s an experiment. But your business is really on where that gratification or where that love is.
Nivi: Does that go to what is the primary benefit of the product in your Survey.io?
Sean: Yes. That’s where I start to see it. I start to see it in each of those questions. I can start to see, in the very-disappointed question there’s a: why did they pick that? You can start to see it in there, as well.
Ultimately, that’s the first thing that I’m trying to look at. One, do enough people love this product? And two, why do they love this product? And then everything that I’m doing is basically helping the business to — I wouldn’t say reposition, because reposition is associated with messaging — realign itself around that really strong user gratification. And once you have that alignment around that, it gives you a lot more direction.
Early on, everything is an assumption, everything is vision, but once you have users on there you can finally start to find that nugget of value.
Focus the product on the love
Sean: And one of the things, if you really step back and ask a lot of entrepreneurs why startups fail, a lot of people rightly focus on lack of focus as being what causes a lot of startups to fail. But then the question is, OK, if it’s lack of focus, what should you be focused on? Obviously, lots of focus on the wrong thing is still going to cause you to fail, so then it’s a big question of what you should be focused on. And for me, ultimately it’s that strong signal that this is something that users really love about the product. So understanding who loves that product — who really has that need — that starts to give you guidance on who you’re going to target going forward.
What other things can we do that can enhance that use case — that can make that particular use case? How can we prioritize those feature enhancements, the parts of the product roadmap that relate to that, and maybe drop some of the things that are the wild cards that we’ve had in there for a while?
The thing that amazes me is a lot of startups have got a little side-product project of a completely unrelated product or something else, which I think, early on when you don’t have product/market fit, is probably not a bad idea. You’re throwing a lot of stuff out there to start to see what sticks.
But once you’ve found that signal, you’re ahead of 90% of the startups out there. So once you find that strong signal, your ability to be really successful is focusing on that strong user gratification and passion and figuring out how to get more users to it, more of the right types of users to it. How can we make it even better — but, that part better, not all parts better, that part better?
Create a great experience around the love
Sean: How can we completely refine that brand experience?
Now is the time to go and get a better designer to come in and really get the graphics perfect on that part. Now is the time to bring in someone who is the absolute wordsmith to get the descriptions perfect on the website, but making sure that they’re being very responsive to that user feedback and they’re not just being a wordsmith by what they think is what’s important to people.
Create a business model around the love
Nivi: Business model?
Sean: Business model is absolutely a function of that. You want to make sure that you are not trying to monetize something that’s not important to users. If users tell you they’d be very disappointed without it, the other thing that they’re telling you is that you could keep cranking that price up for a long time before they change to being somewhat disappointed without it.
And if you’re really focusing on that to determine your price and how you charge for the product, you’re going to have a lot more signals.
First find the love
Sean: So I think that’s a big theme that startups should look at, is focus, and focus on what and when.
The “when” — early on your focus is on just trying to find some love within your product. Find somebody who loves something about your product. And you can get that day one, before your product is even developed, just by talking to people and saying: Hey, this is the problem that we think people have out there and this is how we’re going to try and solve that. Does that seem like something that would be useful for you?
Nivi: The customer development approach.
Sean: Yeah, the customer development approach. Steve Blank has a really good book that’s documenting everything on that and has written a lot more about that.
I purposely, again, have stayed out of that area because it’s so high risk, and you can’t be good at everything so that’s the part that I’ve said I’m not going to try to be good at.
But essentially from day one, it’s all about that search for something that somebody really needs.
Are recommendations a good indicator of fit?
Nivi: Going back to the must-have — that metric — you don’t see user recommendation in that metric there, as well?
Sean: It’s interesting; I see a lot of correlation on success in businesses with the must-have.
I had somebody contact me recently who had a 70% must-have number and they are adding 20,000 new users a day with great monetization, and they just started recently. It was just one of those things that wasn’t surprising to me to see all that success because they have that strong must-have number without really even having a marketer in the company.
So the must-have, I think, is really big, but there are a lot of people that have good recommendation numbers that struggle, and part of that is that… I think YouTube videos is a prime example that sometimes you just see some really funny things that you want to share with other people, but ultimately would you be very disappointed if you couldn’t? Probably not.
Nivi: Right. So it could be a false-positive. But let’s say for the folks that do have the 40% must-have, do you see a correlation of recommendations then?
Sean: Not necessarily. Sometimes I see it really high. A company that I surveyed today, with surveys rolling in right now, was 90% recommend rate, but sometimes I see it being pretty low on a company that’s doing really well. Sometimes I see, as I said before, companies that are pretty low on the must-have, but high on the recommendation rate. So I actually don’t think that’s a good proxy for success, but I haven’t studied it enough to know for sure.
The must-have metric is a good indicator of fit
The only thing that I do know is, on the must-have number, I’ve probably looked at 150 companies now on that number and I could maybe point to one or two that were less than 40% that had any kind of traction and success. And over 40%, everybody had some success. And maybe it’s 35%, maybe it’s 45%, but somewhere around there you get enough people.
The only thing I tend to find a challenge with is that some companies have a must-have number that’s around 40%, but then the feedback is all over the board on why they consider it a must-have and that becomes really hard for being able to find any kind of signal to base the business on. So that’s a different problem, and I haven’t figured out how to deal with that.
Nivi: There are too many segments in the customer base.
Sean: Yeah. Everybody loves it, but for different reasons. Then maybe you have to figure out which one of those reasons represents the biggest target user group and hone in on that.
What comes after fit?
Nivi: Right. One thing you talk about is, once you have the product/market fit, trying to get through the next few steps as quickly as possible. So it would be great if you could talk about that, and also, for people that don’t know what the pyramid looks like, what are the next few steps?
Sean: Sure. As I said, if you don’t have product/market fit, you want to be obsessively focused on getting there, however you’re defining product/market fit. I think the easiest kind of definition to work toward is trying to get 40% of your users to say they’d be very disappointed without it.
And during that period you’re trying to stay very low burn and very conservative on all of your expenses within the business. And once you find 40% of your users that say they’d be very disappointed without the product, then you’re in a position that you have a business that can grow now. So then the question is: do you try to grow the business right then or are there some things that you can still do that are going to make it even easier to grow when you’re focused on that? And what I’ve found in working with so many companies at this stage is that you’re definitely better off waiting a little time until you try to grow the business.
Nivi: And what does it mean to grow the business? You’re talking about spending money to acquire users, essentially.
Sean: Acquiring users, for a lot of businesses, means starting to spend money, but it might also mean really trying to crank up the virality of the business, or it might be SEO that doesn’t require a lot of spending.
Nivi: But it’s time and money that you require for people… [interrupted]
Sean: Yeah, and focus. The time piece, you could say, has time or focus. But it’s essentially saying…