putting customers first

July 5, 2017

Across the world, some of the best companies are popular today because of their products and product-driven approach. This is quite evident in the case of companies such as Apple Inc, where 63% of the revenue comes from the iPhone alone.2 In the case of some other technology companies such as Facebook or Google, it is hard to imagine them as product-based; however, what they build are products too. In fact, any company building or producing anything that satisfies a market need is a product-based company. Here are some key principles and concepts to be aware of when building consumer products. Although the focus is on consumer products, most of these principles apply to almost all other products too.

metrics and product-market fit

Most companies are aware of the term ‘product-market fit’ but do not have a systematic and mathematical way to assess it. However, it has a clear definition and can be measured from a consumer-product perspective. The first step to determining whether you have the right fit is to define what a churned user is. A churned user for any company is one who used to use their product but no longer does so. The exact definition here may be different for different consumer products. For example, for Facebook a churned user may be someone who has not visited the app for 28 consecutive days; for Apple, it could be someone who used to be an iPhone user but no longer uses it. Once ‘churn’ has been defined, product-market fit is visible simply by looking at the retention curves for each cohort of users. When this is plotted over time you get a graph similar to exhibit 01.

Such a graph gives a clear picture of whether or not you have product-market fit. If the graph for your business flatlines for every cohort, you have a viable long term business. If, however, you see this graph eventually hit the X-axis for every single cohort, then that is not a good sign. This situation would imply that, in the long term, you leak every single one of your users and this shows you have a  retention problem. Thinking deeply about retention is the key to any successful long-term product.

chart1user research

It still surprises me how many times I have spoken to entrepreneurs who have built products and continue to develop products without speaking to their users. This problem has been exacerbated by famous quotes that have become popular such as “customers don’t know what they want” (Steve Jobs). While it is probably true that the specific details and design of your product are something users know very little about, it is equally true that no one knows more about their problems than the users themselves.

Companies should think of user research over all product lifecycle and stages. Initially user research should form the basis of anything you build. You can understand the specific needs of users when you have spoken to enough people and start seeing a trend. A lot of the successful consumer companies in the Silicon Valley did exactly this. Doordash, Twitch, and even research teams that try to understand why customers use Airbnb the way they do.

Hiring PhDs or researchers in psychology and behavioral economics has become a common trend among top companies in Silicon Valley. These people head UX research teams responsible for investigating and characterizing user patterns. All popular product companies such as Facebook, Snapchat, and Google hire such people. But many companies overlook such candidates due to the perception that they do not possess enough technical skills. This is a serious mistake on the part of companies hoping to succeed or create a space for themselves in an often crowded market. Understanding the ways consumers use the product is essential to position a company at the exact market intersection that is desired.

simplicity and prioritization

One of the most important responsibilities of people building products is to keep the product simple. I always recommend companies to keep trying to make things simple in every department; and when they cannot make things any simpler, I ask them to simplify further anyway. It is extremely rare and unlikely for the end-user to completely understand the various aspects of how the product has been built and how they should be using it. A lot of companies try to broaden their products’ appeal by baking in various features they know people want. This variety of features attempts to capture disjointed sets of users in the hope that since each group has what they want, they will all love the product.

Such reductive thinking, however, does not account for how users actually think about products. Most people  WhatsApp spoke extensively to their users to understand what they needed to build. This association should extend well into becoming a larger company.
Companies such as Airbnb even today have user  decide whether they like the product within just a few minutes of interacting with or using it. If understanding how the myriad features serve their specific needs takes longer than this small amount of time, you have lost this user; possibly forever. Simplicity allows a deep relationship to form between a limited set of users and the product, and this is what matters most. It is not surprising, then, to see that most companies spend a lot of time doing one thing really well before trying to do more. Whatsapp was a one-to-one messaging platform for a long time before it considered adding features such as group chat. Similarly, when one thinks about Netflix, for the longest time all Netflix did was surface interesting movies and shows; Snapchat only had disappearing photos.

Prioritizing what matters most is therefore probably the most important skill for a product thinker. If you can build something that your users absolutely love, even if the number of users is initially only a few thousand, it will provide a much firm base to build the rest of the company upon.

Consumer products are incredibly tricky to get right. Unlike businesses which have a strong, clear sense of value for parts of their organization, users rarely know how much a product is worth to them. Consumers, however, also have very clear needs and effective products address those head-on. Focusing on addressing these needs is the most important part of building products and thinking about how to determine, measure, and service these needs is critical. While determining product-market fit, speaking to users and keeping things simple will be sufficient to build a great product company, in my experience, without these in place, one will almost always fail.

01 https://www.marketingweek.com/2014/09/09/3-in-4-fmcg-launches-fail-within-a-year/

02 http://www.visualcapitalist.com/chart-5-tech-giants-make-billions/