Product Growth Through User Engagement, Partnerships & Monetization

Swapna Malekar at UXDX Community: Testing and Scaling the User Journey. Video: https://youtu.be/TyMKjU3CJaQ

Readable transcript: edited from the recording's captions for readability (fillers and false starts removed, punctuation and section headings added). Wording is the speaker's own. Timestamps are positions in the video. Names marked [?] could not be verified against the audio.

What this talk covers

[00:00:00] Thank you so much, thanks Rory, that was a great introduction and I hope I'm able to do justice to this presentation, to this talk. I know we want to talk about product growth, and my initial proposal was to talk about user engagement, user monetization as well as partnerships. But as I was going through my talk and also writing down my thoughts, my thought process in creating this deck, I was like, I think it's more about, let's take a step back and think about the entire product life cycle, from user acquisition to user engagement to user conversion to user retention. That is what I'm going to talk about, and obviously it's a very broad topic, and hopefully we will have multiple discussions even after this talk.

[00:00:54] Also, feel free to share your questions. I'm assuming this can be an interactive session, but if not, we can go through the presentation and then we can tackle all the questions at the end of the conversation. So, product growth from user acquisition to retention: basically how do you growth hack your products, or your products and services?

[00:01:16] Let's get the basics right. Actually, even before going into the basics: how do I know about product growth? I lead certain enterprise search experiences at Microsoft, but there have been a whole lot of other experiences that I have been a part of even before my role at Microsoft today. Starting with a data intelligence platform back in the day in 2016, where we collaborated with a market research company and built the platform from the ground up, and my role was to help monetize our users. It was a subscription-based SaaS platform, so we learned a lot about monetization and just user engagement, creating those feedback and growth loops within the product in order to grow the business.

[00:02:10] Then I worked at a bank as well, where we built a financial banking platform for our customers and clients, and one of the projects that I worked on was acquiring users, but then also optimizing the funnel, optimizing the onboarding funnel to make sure users have a frictionless experience when they come back into the product. Then more recently, within Microsoft, and in partnership, for OneDrive, which is a photos or a content storage application, in that ecosystem I led user acquisition and monetization for that entire end-to-end flow, right from the time when users click a photo to sync their photos into OneDrive and then they hopefully convert or subscribe or buy a subscription to OneDrive.

[00:03:10] Then more recently, as I said, I worked in the enterprise search space, which is just gaining momentum in the world today with the new large language models and GPT models coming through. But as of today my main focus is on retention, customer satisfaction or user satisfaction, as well as engagement of users. So this is where my expertise or my experience with product growth comes in, and hopefully I'm able to provide some insights to you that you might not know about, or at least inspire some new thoughts in your mind which can help you in your product as well.

What product growth is

[00:03:52] Product growth: the what. Basically, what is product growth? The caveat here is that product growth is not the same as product-led growth, which we will come to in some time. Product growth can be defined as increasing the value of your business for your customers, starting from your customers obviously because they are your users, then your stakeholders, your employees, your shareholders and investors. I'm assuming this would be the prioritization as well when you're creating value for your business. Again, this definition you might or might not find online. This is a definition that I've created according to how I see product growth.

[00:04:35] This value can expand through at least a few different perspectives. One is you're increasing the revenue for your product or for your business, you're improving the revenue margins within the product through monetization, and that's how you're growing the product. The second one is you're increasing the number of users, or you're expanding your user base through new user acquisition, and that is how you're growing your product. The third one can be the usage of a product: you're improving the usage of a product and that's how your users are getting engaged into the platform, into your product or services, and that's how you grow the value of the product itself.

[00:05:18] The fourth one can be through user retention. Basically you're increasing the customer lifetime value of your existing customers so that they retain over a long period of time and create less churn, and that can also be a way for you to grow your product. So product growth can mean different kinds of value that you create across the product life cycle, right from acquisition, activation, engagement, conversion, monetization to retention. It can expand through all stages of your product funnel or your product life cycle.

Product-led growth as one type of product growth

[00:06:05] Then we have the different types of product growth. When we say product-led growth, it is different from product growth. When I say product growth it's an all-encompassing concept about growing your product through whichever means. Within product growth you have three types of product growth, and there would be a fourth one as well, which I can get to in some time.

[00:06:35] In product-led, as the name suggests, the product itself is the driver. The product growth comes through investing into new experiences, developing new experiences, enhancing existing experiences or optimizing existing features within the product, solving for your user challenges or optimizing solutions for existing user pain points. So basically the product is the driver for your growth. You're investing a lot into the product development process, into creating new experiences and features, optimizing your product to help with your product growth.

[00:07:15] You can trigger product-led growth by investing into new product initiatives such as big rocks and bets. You can experiment with your existing features, you can optimize the different funnels in your product, you can fine tune the processes, and you can also drive other product developments such as reducing the number of bugs, reducing technical debt in your system. In other words, the product itself is responsible for acquiring, signing up, retaining and ensuring the loyalty of your customers, and for example creating an ecosystem or generating new lines of business.

[00:07:58] When I say creating an ecosystem, that means for example Apple bundling its products into one. When I say creating new lines or complementary businesses, it can be Netflix foraying into video gaming, or Amazon's extension into finance. These are also some of the ways of product-led growth, because the product is expanding in itself and it is creating value for their users and customers. Almost all software and digital products, for example Netflix and Twitter and Meta, in today's day and age are product-led, in combination with other types of growth, which is marketing-led and sales-led. But mostly a lot of our software products and services are usually product-led, and at various stages of their product life cycle they can leverage marketing and sales into their ecosystem to fast track their growth.

Sales-led growth

[00:08:49] Which leads us into sales-led growth, SLG. Again, it's a traditional growth approach that comes through, as the name suggests, improving the sales strategies, improving the processes and the sales funnel of a product, and it can be manifested in different formats. For example, you might have aggressive quarterly or semester-wide growth or sales targets. You would have to close on or convert qualified leads. You might have customer and client relationship building processes. You would need to upsell, you would need to convert your accounts and retain your existing accounts. So sales itself, or sales and outreach, is the primary driver of revenue and retention, and it's the main profit center of the company.

[00:09:38] But also the sales funnel can be relatively long. It contains cold calling, generating leads, qualifying leads, bringing them into the funnel through customer demos, presentations, free trials, then converting those leads into paying customers, and then upselling them, retaining them to generate a lifetime value. All of these activities go into a sales funnel, and that is why a sales funnel is usually a long process, depending obviously on the product or service that you're trying to put out there.

[00:10:11] Examples of sales-led growth consist of service-led companies with complex products such as Microsoft, Salesforce, any industrial instrument companies or manufacturing companies. These products require some hand holding, or actually a lot of hand holding, require expertise and training for their users, and that's why they need an extensive enterprise sales team to help the product grow.

Marketing-led growth

[00:10:44] The next one is a marketing-led strategy, or marketing-led product growth, which is another traditional growth approach that introduces new marketing loops into the product ecosystem. That helps the company to differentiate the product, to reinvent the narrative, or to identify and articulate the value of the brand or the value of the product, to grow the product brand, and thus everything else follows, such as an increase in revenue, users or usage.

[00:11:16] So whatever the end goal is, if you're investing a lot into your marketing budget to help you define or re-evaluate the brand value of your product, or the value that you're creating for your customers, or when you want to reinvent the narrative, or you want to differentiate the product in some capacity, that is when marketing-led growth comes in. Or if you want to have a very fast track growth in combination with any of the previous growth approaches, you can go into marketing-led growth.

[00:11:44] Again, there are different types of marketing-led growth strategies. It can be content marketing, where you're writing blogs, articles, creating videos, basically generating content. Social media marketing, social channels such as Instagram, Snapchat, Meta, for social shares and referrals. Product marketing, for example free trials, upgrades, limited time offers, for example 100 GB for six months on Google Photos. Then paid media marketing, where you have pay-per-click advertising, branded content and display ads. And then last but not the least, you have traditional marketing as well, where you have your news and print and on-the-field marketing tactics. All of these encompass various kinds of channel marketing or product marketing techniques to help you grow the product.

[00:12:37] Very specific examples include traditional product companies such as Coca-Cola or Starbucks or Procter and Gamble. Again, this is not to say that other companies do not use marketing-led approaches. As I said, even a software company can use a combination of any and all of these approaches. For example, there might be a product in your company, in an enterprise company such as Microsoft, which might just use product-led instead of product-led and sales-led. So there are so many different examples and permutations and combinations that can happen, depending on the size of your company, depending on the kind of product or the kind of market or industry that your product operates in.

[00:13:19] There is another type of product growth called customer-led, which I recently read about, where customer feedback is a core part of generating user value. You're getting a lot of feedback from your users, from your customers, and that is used to incrementally drive improvements in your customer experience, into your product. But for all purposes we can club this into product-led growth, because improving the customer experience is part and parcel of the product development and enhancement process by itself. So I would just club customer-led growth into product-led growth, just to keep it very concise.

How to measure product growth

[00:14:03] Before we jump into product-led growth, which is where my experience lies, let's talk about how do we measure product growth. I think this is a new way of envisioning the kinds of metrics, or the ways you can measure or track the growth of your product, through different stages of the product life cycle, which can be when you're introducing a product in the market, the introduction phase, the growth phase, the maturity phase and then the saturation phase. But then you can also track different metrics based on the different stages of the product itself, which can be acquisition, activation, engagement, conversion, monetization and then retention.

[00:14:52] Whichever way you track it, you can obviously track multiple metrics, you can focus on multiple goals at a given point in time. For example, if I already have a product in the market but I'm, let's say, GPT-ifying my existing product, I might look into acquisition as well as, let's say, monetization, depending on my business priorities or depending on what I'm seeing in the market. Or if my product is pretty new in the market, I might just focus on acquisition and then defer the revenue generation to a later date.

[00:15:28] Let's talk about each of these. There's also the one metric that counts, or the North Star metric, depending on the stage that your company is at. It might depend on your long-term vision, your company priorities, your competition in the market, your market or industry fluctuations or conditions. In reality you will be focusing on a couple of these stages at a given point in time in the product funnel, whether it's acquisition, activation, engagement, conversion or retention.

The introduction phase

[00:15:58] The first one is the introduction phase, where let's assume that you are launching a new product in the market. You've developed this new product, and the company has let's say raised significant funds through investors. Now in this case your main objective might be to grow the number of users. You want to acquire users very quickly, you want to activate users on the platform very quickly, and you want to compete aggressively. You want to capture the market very quickly and then move on from there and create this monopoly in your target market. In this case, as I said, you might defer revenue generation to a later date. In this phase, metrics such as number of acquired users, visitor to sign-up rate, DAU to MAU, time to activate, might be the best metrics to track.

[00:16:47] In this particular scenario you're also burning a lot of cash at unprecedented levels, because you're investing in growing your team, and you might be investing into marketing as well at this point in time. For example, let's say Quibi[?], WeWork, or a whole lot of other companies that have done that in the past. So your burn rate and your runway, how much cash you have until you basically run out of your runway, become some important yardsticks to consider in this process. As I said, Quibi, WeWork and a whole lot of other startups lost out due to a high burn rate and they ran out of runway before they could start generating profits or before they could start growing significantly, and then they couldn't sustain themselves any further. But I'm digressing. The first, introduction phase, is where you might be tracking user or acquisition kind of metrics.

The growth phase

[00:17:53] The second phase is the growth phase. You want to grow your product, you might want to monetize your product, but you also want to engage your existing users. So whether you're focusing on generating revenue for your product or not after the first acquisition phase, you will want to pivot your energies into engaging those existing users that you've acquired from the previous phase, by hooking them into the product and by creating a flywheel into the product ecosystem.

[00:18:17] You can do this by creating more value in the product based on user behavior, user actions, user feedback, and then generating a cycle where users feel delighted to frequent your product and thus driving this repeat product usage. In this case MAU is literally the basic metric that you can track. Frequency of usage, net promoter score, CSAT or net satisfaction, session time, number of sessions per unique user, feature adoption rate, et cetera, and many more metrics can be tracked to measure user engagement in this particular phase.

The maturity phase

[00:18:52] The next one is the maturity phase, which is when your product has amassed a significant audience and you're in a less vulnerable position. You have done some amount of monetization, maybe you're generating enough revenue, or maybe you have broken even, or you are even on your path to profitability. So you're in a comfortable position, you're in a less vulnerable position. There is some amount of competition on the horizon, but in this case you are going to start focusing very aggressively on monetizing your product value, and it can be done through subscriptions, freemium models, time-based contracts, transactional costing, advertising revenue, and obviously a whole lot of other business models.

[00:19:36] In this case, when you're trying to monetize your product, or you want to create a path to profitability, a sustainable MRR, which is monthly recurring revenue, ARPU, which is average revenue per user, conversion rate, customer acquisition cost, revenue versus cost of customer acquisition, and other revenue specific metrics or revenue operational metrics can be tracked, depending again on your business objectives, business priorities, and also market and investor pressure.

The saturation phase and retention

[00:20:06] And then you have the saturation phase. It's basically when your product is mature enough, your competitors are closing in on you, and in a way your market is shrinking because of increased competition. You eventually want to focus on user retention. You must have heard about this multiple times: acquiring a new customer is costly, at least five times more costly than retaining an existing customer.

[00:20:34] So in this case you would want to start optimizing your sales, acquisition, engagement and conversion funnels, to patch up and streamline any gaps that can lead to customer churn. Basically you want to patch up any gaps that can lead customers to churn or drop out of your product. You want to identify friction points in the product that are leading users to drop off, or leading users to purchase less, or creating a decrease in their repeat purchases, or reducing their usage frequency. Or solve for any specific needs of a certain user segment or user persona that is highly valuable to your product growth.

[00:21:24] There are various ways to track user retention, and again this slide is a consolidated version. There are obviously so many things to talk about which can lead us to another talk altogether. But you can measure user churn, or user retention, in two ways. One is retention and one is how do you reduce churn. When you want to increase retention you can measure it by retention rate or repeat purchase ratio. When you want to reduce churn you can measure it by customer attrition[?] or time between purchases, et cetera. But one metric that usually people love is the customer lifetime value: how much value is your customer generating for your business over their lifetime? If that period is long, if that value is long enough as compared to the cost of customer acquisition, I think you are on the right track in your product.

Product-led growth in more detail

[00:22:21] So now let's talk about product-led growth. I know we are running out of time, but I'll go through this very quickly. Product-led growth is, again as I said, your product is driving the growth. You're building a product that sells itself, so it's a product that can walk the talk. Your product is driving user value and user trust and loyalty, through a frictionless, delightful customer experience.

[00:22:53] In this case you are prioritizing user success or customer success over monetization, to help drive that product growth. Your product becomes the key broker for acquisition, activation, engagement, monetization and retention. Also, product-led growth usually relies on word of mouth and virality rather than run-of-the-mill promotional sales and marketing strategies.

[00:23:20] I'm going to skip this because I covered it in one of the earlier slides. You can achieve product-led growth using big rocks, or investing in big product initiatives or new product initiatives, or new enhancements to your existing features, or reducing technical debt, or basically improving performance, scalability and stability.

The benefits of product-led growth

[00:23:41] But what are the benefits of product-led growth? This took me some time to put together, because it was interesting to really dive into, hey, obviously if I don't invest in marketing and sales I'm reducing my costs, but in what capacity am I really helping the business or the product grow? Is it just the marketing and sales cost which is decreasing, or is there something else which is benefiting me?

[00:24:06] One is obviously the decreased customer acquisition cost. Product growth does not rely on any external mechanisms. It relies on organically growing or extending the product's core value to create exponential value for its users and customers, and hence the cost of acquiring users and customers is relatively low. You gain users mostly through word of mouth and referrals. There are organic channels of customer acquisition, and they lead to minimal user acquisition and activation costs.

[00:24:38] The second one is decreased overall product costs. When you invest into your product, when you're sprucing it up and you're renovating it, when you're cleaning it as you go, by becoming very customer obsessed, you reduce your overall development costs. It can be, let's say, customer support: there might be reduced customer queries or reduced calls, account handling and relationship building, there might be less hand holding, there might be less product downtime or crashes, because you've already started cleaning up your tech debt or already upgraded to the latest tech stack. So there would be other operational costs as well which can highly reduce themselves if you invest into your product and if it's product-led growth you're going after.

[00:25:21] And last but not the least, it's all about user experience. If you're investing into the success of your users through the betterment of your product, you're creating an amazing frictionless user experience and workflows for your users, for those use cases or those personas which have the highest ROI, and you're optimizing your product slowly and surely.

[00:25:42] I know we have just a couple of minutes left and I had a couple more slides to get through, but we can take questions if we have any, otherwise I can talk through one of the slides.

Q&A

[00:25:53] Rory: Hi, thank you very much, I found that really interesting, so I hope everybody out there did as well, because that's the buzzword at the moment particularly in product: let's be product-led. But it's not the only way, and there are situations where it does make sense, as you were explaining, where sales-led might be best, or marketing-led. So thank you very much for sharing. If anybody has any questions, please feel free to write them in on whichever platform you're watching this on. I think unfortunately we don't have time to ask questions, but I am going to ask two or three questions that I've jotted down in the UXDX Slack group, so I'll invite you to that and hopefully you can answer the questions there.

[00:26:40] Swapna: Sounds good, that sounds sweet. I hope it was insightful in some capacity, and thank you for having me.

[00:26:46] Rory: It definitely was, and thank you for joining us. Thank you very much.