Lecture 4 - Building Product, Talking to Users, and Growing (Adora Cheung)

How to Go from Zero Users to Many Users

In this section, the speaker talks about his experience going through YC and how he learned what not to do when starting a startup. He emphasizes the importance of dedicating compressed time to immerse oneself in the idea and develop solutions.

Compressed Time is Key

• When starting a startup, it's important to have a lot of time dedicated to working on the idea.

• It's better to have one or two days straight per week working on your idea than spending two hours here and there every day.

• Being able to really focus and immerse yourself is very important.

The Novice Approach

• One common mistake is having a great idea but not getting feedback before launching.

• This approach involves building without telling anyone about it, then launching on TechCrunch or somewhere similar.

• Without initial user feedback, people may visit your site but not stick around.

Identifying the Problem

• It's important to think about what problem your idea is solving and describe it in one sentence.

• Verify that other people have this problem by talking to them.

Passion for the Problem

• Make sure you're passionate about the problem you're trying to solve.

• Don't make assumptions about who makes people happy; verify with research.

Starting a Business: Tips for Success

In this section, the speaker shares tips on how to start a business successfully.

Immersing Yourself in the Industry

• Immerse yourself in the industry you want to enter.

• Become a cog in that industry for a little bit.

• Spend time understanding all the little bits and pieces of the industry.

• Learn about inefficiencies and things that can be exploited.

Learning from Experience

• Learn by doing. Don't just read or watch videos about it.

• If there is a service element, do that service yourself.

• Get in the shoes of your customers from all angles of what you're trying to build.

Levels of Obsessiveness

• Be obsessed with knowing what everybody in the space is doing.

• Run a list of all potential competitors or similar types of companies.

• Google search and click on every single link and read every single article from search result 1 to 1,000.

• Read S1's, quarterly financials, sit on earnings calls.

Conclusion

To start a business successfully, immerse yourself in the industry you want to enter. Learn by doing and get in the shoes of your customers. Be obsessed with knowing what everybody in the space is doing.

Identifying Customer Segments

In this section, the speaker discusses the importance of identifying customer segments and optimizing for them.

Key Points:

• Building a product or business that everyone in the world uses is ideal, but realistically, it's better to corner off a certain part of the customer base to optimize for them.

• Focus on catering towards specific customer segments such as teenage girls or soccer moms.

• Storyboard out the ideal user experience before creating the product. This includes how customers find out about you, what they see when they come to your site, and what they get after using your product or service.

• Before building your product, talk to potential users and see what exists out there already.

Building a Minimum Viable Product (MVP)

In this section, the speaker talks about building an MVP and why it's important.

Key Points:

• Build a minimum viable product (MVP), which is the smallest feature set that solves the problem you're trying to solve.

• Don't skip building an MVP because many people just go out with a feature without considering user experience in the beginning.

• Go through the whole storyboard experience to figure out what features should be included in your MVP quickly.

Simple Product Positioning

In this section, the speaker discusses simple product positioning and how it can help attract new users.

Key Points:

• Have simple product positioning down before putting things in front of users. You should be able to describe what your product does within one sentence.

• Use a one-liner to describe the functional benefit of what you do. For example, at Homejoy, they changed their positioning to "Get your place clean for $20 an hour" and were able to attract more users.

• When building a brand in the future, be able to describe emotional benefits. But when starting with new users, tell them what they're going to get out of it.

Getting Your First Few Users

In this section, the speaker talks about how to get your first few users.

Key Points:

• Start with obvious people such as friends and family who you are connected with.

• Use user feedback to improve your product and attract more users.

• Consider offering incentives or discounts for early adopters.

Building a User Base

In this section, the speaker discusses how to build a user base for your product. They suggest targeting local communities and attending events where potential users are present.

Targeting Local Communities

• To build a user base for your consumer product, target influential local community mailing lists, especially those for parents.

• If you don't have many friends or coworkers who can use your product, attend local events and try to convince people to book a cleaning.

Attending Events

• Attend street fairs or other events where potential users are present.

• Offer free bottles of water on hot days to attract people and guilt trip them into booking cleanings.

Customer Feedback

In this section, the speaker discusses the importance of customer feedback and suggests ways to gather it effectively.

Providing Contact Information

• Make sure there is a way for customers to contact you, such as an email address or phone number with voicemail.

Gathering Feedback

• Go out and talk with your users in person to get the best feedback on what features need improvement or development.

• Sending out surveys is okay but may only attract extreme responses. Meeting users in person allows for more nuanced feedback.

• When meeting with users, make it into a conversation rather than an interrogation. Get them comfortable enough to share their thoughts openly.

Tracking Customer Retention

In this section, the speaker talks about tracking customer retention as a way to measure how well your product is doing. He explains that collecting reviews and ratings can be a good leading indicator of customer retention.

Collecting Reviews and Ratings

• Monthly retention takes too long to collect data.

• Collecting reviews and ratings is a good leading indicator of customer retention.

• Net Promoter Score (NPS) is a good way to ask for feedback from customers.

The Honesty Curve

• Some people will lie when giving feedback.

• Feedback from friends and family may not be honest.

• Random people are more likely to give honest feedback if they paid for the product.

Before Launching Your Product

In this section, the speaker talks about what you should do before launching your product. He emphasizes building fast and optimizing for the stage of growth you're in.

Optimizing for Growth

• Optimize for the next stage of growth, not for when you have millions of users.

• Process is important over time as you scale.

Manual Before Automation

• Emphasizes manual processes before automation when building a marketplace.

Building a Product: Lessons Learned

In this transcript, the speaker shares lessons learned from building a product. The speaker discusses the importance of taking time to onboard new users, avoiding automation too early in the process, and not waiting for perfection before launching a product.

Onboarding New Users

• When onboarding new users, it is important to ask questions and conduct test cleans to ensure they are good performers.

• Over time, certain questions were identified as indicators of whether someone would be a good or bad performer on the platform.

• Automating things too quickly can lead to problems with iterating and improving processes.

Temporary Brokenness is Better Than Permanent Paralysis

• It is better to launch a product that may have temporary issues than to wait for perfection.

• Focus on building for your core user and worry about edge cases later.

Beware of the Frankenstein Approach

• Listen to user feedback but don't immediately build every feature suggested.

• Get to the bottom of why users are asking for certain features before adding them.

Launching Your Product

• Don't wait around to launch your product; assume that someone will always try to fast follow you.

• Once you have something ready for lots of users, focus on growth strategies.

Strategies for Sustainable Growth

In this section, the speaker discusses strategies for sustainable growth and emphasizes the importance of focusing on one channel at a time and iterating on successful strategies.

Learn One Channel at a Time

• Focus on one channel and execute it for an entire week.

• If it works, continue executing until it caps out. If not, move on.

• By doing this, you will feel more certain that the initial hypothesis is wrong.

Always Iterate on Successful Strategies

• When you find channels or strategies that work, always be iterating on them.

• Create a playbook and give it to somebody else to iterate on it.

• The distribution channels change all the time, so optimize for that.

Revisit Failed Channels Over Time

• When you see a channel that fails, get rid of it and move on to other things to try.

• Over time, go back to those channels and look at them again.

Three Types of Growth

In this section, the speaker introduces three types of growth - sticky growth, viral growth, and paid growth - and emphasizes the importance of sustainability in each type.

Sticky Growth

• Getting existing users to keep buying or using your product/service.

• Delivering a good or addictive experience is key.

• Measure success with CLV's (customer lifetime value) and retention cohort analysis.

Viral Growth

• When people talk about your product/service and recommend it to others.

• Word-of-mouth marketing is key.

Paid Growth

• Using money from the bank to buy growth through advertising or other means.

• Sustainability is still important - make sure money put in has a good return on investment.

Cohort and Viral Growth

In this section, the speaker discusses two types of growth: cohort and viral. Cohort growth is about customer retention over time, while viral growth is about creating a good experience that encourages customers to refer others.

Cohort Growth

• A cohort is a group of customers who share similar characteristics.

• Cohorts can be segmented by gender, location, or time (e.g., month).

• Customer retention over time can be graphed as a curve.

• The goal is to have the curve flatten out over time, indicating less attrition and more core customers.

Viral Growth

• Viral growth requires delivering an exceptional customer experience that encourages referrals.

• Three main parts of a referral program are customer touchpoints, mechanics for sharing (e.g., links), and incentives for both referrers and referees.

• Customer touchpoints can include right after sign-up or after using the product for some time.

Referral Programs and Paid Growth

In this section, the speaker discusses referral programs and paid growth as two ways to acquire users for a business. The speaker explains how to optimize referral programs by experimenting with different program mechanics and conversion flows. They also discuss paid growth and how to determine if it is sustainable.

Referral Programs

• Program mechanics are important in referral programs.

• Experiment with different types of mechanics such as 10 for 10 or 25 for 25.

• Optimize the conversion flow when a friend clicks on the referral link.

Paid Growth

• Paid growth involves spending money to acquire users.

• Calculate customer lifetime value (CLV) and customer acquisition cost (CAC).

• Break down CLV and CAC by customer segments to determine which ads are most effective.

Sustainability

• Spending beyond your means can lead to unsustainable growth.

• Determine if paying for a customer upfront is worth it based on their CLV over time.

Payback Time and Pivoting

In this section, the speaker talks about payback time and pivoting in a startup.

Payback Time

• A safe payback time is 3 months for high-risk startups.

• If you are risk-loving, 12 months is better.

• Beyond 12 months is an unsafe territory.

The Art of Pivoting

• Look at these three criteria to decide when to move on from an idea:

• Once you realize you can't grow

• None of your users stick

• The economics of the business don't make sense

• Have a growth plan when starting out.

• You should always be growing in the early stage of a startup.

• Wait two to three weeks if there's no growth before considering a pivot.

Q&A: Getting Users to Switch Over

In this section, the speaker answers a question about how to get users to switch over to your product.

• Find moments where your product or offering is much better or very much differentiated from the existing solution they have.

• Example: Someone who had a regular cleaner and needed next-day availability used Homejoy because their regular cleaner wasn't available.

Importance of Clear Product Differentiation

In this section, the speaker discusses the importance of clear product differentiation and how it can be challenging to communicate multiple benefits to users.

Communicating Multiple Benefits

• It's difficult to communicate multiple benefits to users when building a product.

• Even if the benefits outweigh the switch-over costs, it's hard to get users to aggregate all those benefits over many little things.

• It's better to have one or two things that clearly differentiate yourself from the product.

Feedback

• The audience member expresses appreciation for the speaker's insights.

• The speaker responds positively.