Product Growth Playbook

Growth and comfort never co-exist !

That's is what Ginni Rometty, Chairman ad CEO of IBM said in 3rd quarter of 2017, after 22 straight quarters if declining revenue. And said - "be prepared to spot growth opportunities when they present themselves".

In a last few days, I had an opportunity to browse through the works of Tiffani Bova, the Global Growth Evangelist.

Two cents on growth → "Companies that reach into a bag of old tricks without careful consideration of the changing marketing dynamics risk getting trapped in a vicious downward cycle, repeating the same actions and yielding ever worse results over time. The cost of misalignment between the perception and reality can be huge. (by Tiffani Bova)

It's been a long since the world has evolved from Ansoff Matrix, a practical framework designed by Igor Ansoff for thinking about how can be achieved through a product strategy. But the old is new again. Unfortunately, still most of the company when think of growth, they think only of "Customer acquisition at any cost" as their growth strategy, which are primarily driven by carrots. But then, soon they realize it's un-sustainable, since resources are never infinite. The cost of misalignment between perception and reality can be huge. Hence, lets try understanding these four-growth-levers, (referring to the work of Ms. T. Bova). She suggests 10, which I tried summarizing into 4, for the sake of simplicity.

1. Customer Experience : Inspire additional purchases and advocacy
2. Customer Base Penetration : Sell more existing products to existing customers
3. Market Acceleration : Expand into new markets with existing products
4. Product Expansion & Diversification : Sell new products to existing markets, Sell new products to new customers

#1 Customer Experience

It is the sum of all of a brand's touch points, both online and offline, through both human representatives and now technology (such as bots, AI, and "things"). Customer experience is based on the feelings that arise once customers engage with your products, employees and various sales, service and marketing channels.

Customer remember the experience they have with a brand longer than they remember the price they paid.

Reference of it's importance :

• 86% of customers are willing to spend more for a better customer experience
• 70% of buying experiences are based on how customers feel they are being treated
• Companies that excel in the customer experience grow revenues 4-8% above the market
• 43% of consumers would pay up to 10% more for a personalized shopping experience

Recommendations :

• Regardless of what industry you are in, what segment you serve, become the customer-led company, one that is obsessively focused on customers and their experiences.
• Make every employee understand her role in delivering the experience wrapped product or service to the customer.
• Make customer onboarding welcoming across access types (web or mobile). Make user belonged to the product.
• Make customer journey frictionless. Simplify narratives. Contextualize features. Keep design minimalistic and intuitive.
• Predict customer's mental model, and provide necessary support to their curious implicit questions and fears.

Examples :

• Sephora : They have relentlessly been focused on inventing new ways to make beauty shopping experience fun and engaging for its customers i.e. Experiential Retail. Their store's fluidic layout allows shoppers to bounce from brand to brand with little effort. Their "Assisted self-service" let customers actually try products before they bought them. Their personalized experience strategies which includes - Beauty tip, Color IQ, insider loyalty program, and leveraging technologies like Augmented reality.
• Shake Shack : barely spends any money on marketing, instead focuses on the quality of food and the hospitality of its employees to create "raving fans" of the the brand. If there is a kid crying, Shake Shack walk over with a free cup of custard, for example. A compelling experience isn't just about one thing - it's a combination of many things.
• Starbucks : the company with industry-leading NPS (Net Promoter Score) of 77 against the industry average of 40. How they did it? - CEO invited emails directly from customers; Replaced it's espresso machines with Mastrena, a sophisticated swiss-made machine (i.e. better technology, quicker service); Launched reward cards; Removed items from store, which otherwise overpowered smell of coffee; Launched "My Starbucks ideas" where customer can share what they wanted.

Measure it :

NPS (Net Promoter Score) with CSAT (Customer Satisfaction), and combined with Cohort Analysis.

#2 Customer Base Penetration

It is all about acquiring new customers and retaining the acquired ones. While acquiring a new customer is one way to grow, but landing them and then "expanding" how much they spend with you going forward is another.

Reference of it's importance :

• Customers acquired based on carrots, majority disappears after collecting the gratification, up to 80-90%
• Acquiring a new customer is anywhere from 5 - 20% more expensive than retaining an existing one.
• The probability of selling to an existing customer is 60-70%, The probability of selling a new prospect is 5-20%
• The loyal customers are 4 times likely to refer. Cohort of such acquisitions is far superior than any other acquisition channel.

Recommendations :

• Experiment, experiment and experiment and find the customer acquisition channels which works for you. Brainstorm, define and set your acquisition goals. Thence, find the channels which work from you from these nineteen channels (as detailed by Gabriel in his book traction) - 1. Viral Marketing, 2. Public Relations, 3. Unconventional PR, 4. Search Engine Marketing, 5. Social and Display Ads, 6. Offline Ads, 7. Search Engine Optimization, 8. Content Marketing, 9. Email Marketing, 10. Engineering as marketing, 11. Target market blogs, 12. Business Development, 13. Sales, 14. Affiliate Programs, 15. Existing platforms, 16. Trade shows, 17, offline events, 18. Speaking engagements, 19. Community building.
• Sort out the basics aka the basic tactical stuff : Desired configuration of SEO and ASO, Add the right keywords (use keywordtool.io), Setup inbound links, Get your product reviewed on other sites, Focus on indexing your product for searches.
• Specially for mobile applications, ASO matters a lot, refer the cheat sheet by Localytics
• Optimize & simplify referrals. Make it visible and easy to use.
• Keep your customers safe and protected from competitors stealing them away. Take advantage of big data, analytics and CRM systems to identify and engage with your most loyal customers. Those most -valued customers can be engaged at a deeper level with relevant personalized content, offers, messages that nourish positive brand sentiment.

Examples :

• Red Bull uses content and events as its sales team. Everything revolves around one concept : creating content around what its audience loves and experiences people would be interested in even if they don't care about energy drink brands.
• McDonald, which reduces the numbers of products they used to sell to focus on most requested item (Egg McMuffin), and then launching all day breakfast menu (which of course had Egg McMuffin)
• Paytm, which ensures integration of all possible billers and merchants in India; along with the bill due amount, and making their discoverability and usability within product super simple and easy, Which when coupled with reminder services, increased customer loyalty, hence the retention.

Measure it :

Breadth of use

• Total user, New users, Repeat users
• Number of sessions per user
• Number of actions per session
• Segments & Spread - demographic (Age, Gender..), psychographic (Attitudes, Personality traits, Interests…), Behavioral (Purchasing habit, spending habits…), Geographic (Country, climate, rural/urban…)
• Bounce rate

Frequency and Depth of use

• DAU, MAU
• Ratio DAU/MAU (Good if > 20%; Amazing if > 50%)
• CRR (Customer Retention Rate) aka Retention Cohort = Customers_at_end_of_calculated_period - New_customers / Customers_at_start_of_calculated_period x 100
• % of product features used regularly ( → Value drivers)
• Churn rate

Efficiency

• Usability score
• Journey abandonment rate
• Time to transaction

Revenue

• (CAC) Customer acquisition cost
• (CAC) Customer acquisition cost Per Acquisition Channel
• (MRR) Monthly Recurring Revenue = MRR_Month_beginning + MRR_New_Customers + MRR_Upgrade_Existing_Customer - MRR_Downgrade - MRR_Churned_Customers
• (ARR) Annual Recurring Revenue = MRR x 12
• (ARPU) Average Revenue per user
• (AOV) Average Order Value
• (CLTV) Customer Lifetime Value = ARPU * Avg. Customer Lifetime

#3 Market Acceleration

It is the path of taking a brand's existing product into new markets. Do note that it is not about selling entirely new products into new market. However, it might require certain changes and customizations in existing products to accommodate local, or retargeted market needs.

Reference of it's importance :

• China now accounts for 42% of global ecommerce - more than France, Japan, UK, US combined
• Frost & Sullivan found 63% of respondent in a survey said they view customers in emerging markets as a future source of profits.
• in 2020, one of five e-commerce dollars is being generated by cross border commerce.

Recommendations :

• Context of the new market must be understood carefully. Since, the hidden complexities, its varying customer demands, it's geographic limitations might be far different than anticipated.
• Choose a target where customers already spent money buying more or less the same or similar kind of product. Getting a prospective customer to buy something familiar is much less risky than asking them to buy something that they don't understand.
• Hire local talent / team, who understand local language and culture. Sense of connectedness is very important while expanding into new geography.
• If entering the new geo which is already crowded, then instead of attacking them head-on, start at the edge of the category, with an innovating variants of your existing products. (Think big, Act Big, Start Small, Win Big in long run .. which means, the quickest path to getting big in a new market is to aim small)
• Don't hesitate on forging partnerships. (for example : in retail, partnerships been key to early growth)
• Remember !! Companies who choose to stick with what has worked in the past, without taking into considerations shifting buying patterns of its target customers, risk being left behind.

Examples :

• When Under Armour went public in 2005, only 2% of it's revenue came from outside North America; However, in 2017 it grew to 47%, thanks to partnerships and their own locally flavored brand stores.
• Uber started out as an alternative to traditional taxi services with which people were already familiar — reimagined with their new business model, went local in a local flavour; to an extent that they even customized certain features within their mobile app for the locals specifically.
• Paytm partnered with Yahoo Japan and Softbank Japan and replicated the success of Paytm in Japan (customizing the app and locally branding it as PayPay).

Measure it :

• Users spread across geographies
• Users cohort across geographies
• Revenue spread across geographies
• AOV (Average Order Value) across geographies
• Market share against the sellable addressable market

Product Expansion & Diversification

The first and most important reason for any new product development should be to provide "value" to a customer by solving a personal, business or societal need.

Great companies are built on great products. — Elon Musk

Reference of it's importance :

• Existing customers are 50% more likely to try new products and spend 31% more, hen compared to new customers
• Consumers want more new products on the market that are affordable, healthy, convenient and environment friendly.
• Almost 63% say they like it when manufacturers introduce new products, and more than 57% say they purchases a new product during their last shopping trip.

Recommendations :

• Remember! The new and increasing value within product is what keeps customers coming back and companies growing.
• What the market demands today is much greater flexibility and focus on the customer, otherwise known as being "customer-led". This is where a company seeks to determine what products a customer might want in the future.
• It is a bad idea to expand your product offering when you haven't thought through holistically the implications of doing so.
• Failures (during product expansion / diversification) will be part of the learning curve, which is why culture really matters.
• Do find out, why your customers like your brand, like your products, and are willing to spend money with you.
• The more product you develop, the greater the customer insight you will need to stay on top of. Keeping up with the pace of the changing market context is hard in one product category or customer segment — multiplying that by two or three can overwhelm a company.

Examples :

• John Deere could have resisted the change in market context, believing that its long-standing history in the farming community would continue to engender customer loyalty. Instead, it realized that the proven John Deere hardware with new software capabilities would be a game changer for the future of business. (notice the shift from product centric to customer centric)
• Netflix rethought the entire value proposition and go-to-market, and understood that customers were buying the experience of watching a movie with family and friends; and totally changed the streaming landscape.
• Marvel, despite multiple failures survived since it was focused on taking an existing "comic book character" to a new medium (film), which allowed it to stay close to storytelling and its loyal customer base.

Measure it :

Refer Section #1, 2, 3

/* In the post above, I've shamelessly quoted work of many geniuses (whom I really admire); and I am totally unapologetic about this. It's always occurred to me while writing any blog or piece of content that I'm not really a writer; instead I'm just a sincere messenger, who collects best of other people's knowledge and pass it along. So, a big thanks to you all whose work I've quoted above. */

Thank you !