Wednesday, January 23, 2013

The Only Honest Customer

If the truth were known...



A couple of posts congealed in my head recently around 'customer honesty' during customer development, and apparently, both were sourced from mental distillery of Jason Fried. One was authored by Dan Shipper, which was centered on the idea that customers will only effectively communicate reality with you during signup and during cancellation. The second post was by Jason, wherein he briefly addressed the idea that customers won't be honest with you about pricing when you're pitching them. Its only when they are in the act of making a real purchasing decision that their lizard brain uses the right thought-cycles to evaluate your value proposition.

Before I launched my SaaS product Appointron, I had posted a query at BlogApps.org to see if anyone would be interested in buying an appointment app plugin for their blog. I had around 200 potential customers signup. You often hear this advice: first acquire a list of people who say they are willing to buy your product, and then and only then should you build it. Its a good idea in principle, but I would say this assumption needs some first-pass filters to make sure that the people saying yes have a real intent to purchase. Out of those 200 potential customers, literally zero signed up for a paid account when we launched.

So, I totally agree with Jason's conclusion here. And, truthfully, I must have agreed with this concept of customer honesty in days long past, because long ago I setup a cancellation quiz on Appointron. Users have to complete the cancellation quiz in order to cancel. From the hundreds of cancellations (any thousands of dollars in monthly lost opportunity), I have learned what people hate about my product. I had also setup an entry quiz, to gather basic info about what people plan to do with the product, but its gathering dust as I didn't want to interrupt the first-run experience. Thus, I had only employed half of what I'll call a passive customer development strategy. That was a bad mistake.

See, the fact that customers are only ever honest when they spend money and when they cancel means that you have to make the best of those moments. I think I've honestly screwed that up in my businesses. It finally struck me how bad I whiffed this when I read the exchange between Amy Hoy and Nathan Barry.


And the Truth Shall Set You Free: Baby-Steps Edition


After reading these articles, I've gotten motivated to rethink my (passive) customer development strategy; specifically at signup time, which is leading me, first, down the path of creating a better customer engagement at signup... to wit, the beleaguered welcome email.

See, we've been sending out a "Founder's Welcome" email along with our generic email for around a year. Its a trick I learned from +Kent Johnson back when it was a growth secret that founders kept close to their vests, and I've used it a lot over time. The response rate has always been fairly poor on that founder's welcome email, probably due to the length, the poor wording choice and the overall feel of the email. I would occasionally think about it, but then shrug it off, not thinking it would make much of a difference, this despite the last year of harping on others how important customer development is. But, while reading the , my eyes began to widen as I realized just how bad I had borked the opportunity to reach out to hundreds of customers. I realized that I was missing an important ingredient... an open-ended opportunity for the user to talk about their vision of using our product in their business.


Here's the old message:

"""

Hi Susan, 

I'm Barry Welch, the founder of Appointron. I saw that you just signed up and I just wanted to let you know that I'm here to answer any questions you may have. 

Have a great day!
Best,
Barry @ Appointron

"""


I want the email to encourage the customer to open up on their hopes and dreams (with regards to my app) ... hmm, that's an easy fix... here's the new way I reach out to customers in the "Founder's Welcome":

"""
Hi Susan,

I saw you just signed up for our Appointron service. I'm curious how you envisioned using Appointron in your business?

Anyway, just wanted to say hi and tell you that you can reach out to me personally if you need anything.

Best,
Barry @ Appointron

Sent from my iPhone
"""

(Aside; a Quick Analysis:
So,  this is very short just as before, and its just a tad warmer and more informal. It asks the user how they see themselves using the app, giving them a chance to tell me their vision. And invites them to bypass the support blackhole. Finally, it purports to be sent from the iPhone, which I think is a nice touch.)

The early results are already in.. and for the first time, customers are telling me the real problems that they wanted solved all along... just because I asked them at the right time. Now, better than just listening to them complain about stuff missing (very valuable, don't get me wrong), they can glowingly tell me about their forward-looking business vision and where I fit in it. This is truly great.

That's all for now. If you have any suggestions on improving this email template further, I'd love to hear them.

Wednesday, January 16, 2013

Engagement Matters: A Simple Analysis

Engagement, as a metric of startup growth, seems to be of great importance to VCs and early-stage investors, thus it should be very important to you as a founder, even in your earliest prototypes, even if you never expect to take a round of financing. But, what is engagement? Well, its how much time people spend in your application, and partly, how often they revisit it. But, why does it matter? Does it always matter? And, how can you sprinkle the right kind of startup fairy dust on your app to get more of it?

I'll be brief.

The most fundamental reason that engagement matters is tied up tightly with very-cliche-but-true "time = money" equation. Lets review: if time = money and money = value, then time == value. Therefore, your users are spending something of value, their time, to engage with your app. It then follows that: if users are spending time in your app, then your app is worth something in real dollar terms to your users.  Ie. if users spend their time in your app, your app must be worth something.

If users signup for your app and they don't spend ANY time there, then its a signal of a potential problem. Some apps aren't a natural fit for engagement metrics, so its not always as important as I am suggesting, but it is probably a matter of degree of importance, as opposed to not important at all.

When analyzing free apps in particular, engagement carries especially significant weight, because you can't measure success in dollars, so the value has to be determined by extrapolating the time users spend into dollar terms. There is an difficult-to-calculate exchange of value taking place, after all. You must consider that there is a cost in using your app, even if your users aren't paying an upfront price for it. For example, it costs time to enter the product into the user's workflow, which has high opportunity cost. Nothing is truly free if it takes time to consume.

How do you get more engagement? Well, first decide if it matters to your overall success. Some products fair better if people signup but never use the service, and thus forget that they are spending money on it. By the way, thats why Unfuddle doesn't send me a monthly invoice to remind me that I am paying them for hosting my SVN repositories (or automatically send emails when I push changes). I bet it works well for them. They are transparent to me and I forget that I pay them, and I am as happy as a lark.

But, if engagement matters at all in a particular product category, then it probably matters a great deal than you imagine. So, how to get more of it? Well, have you tried...

1) Asking your users to engage with your app

Seriously, when was the last time you asked users to engage with your app. They gave you their email, didn't they? Facebook isn't afraid if reminding people to come back and use the app. They act as agent in a communication exchange, and that's effective. Yours may not be a good fit for fostering communication, but at least you can ask users to come back and get more value from your app. Sometimes just asking works.

2) Reducing the time it takes to do the most simple parts of your app

Reducing clicks, reducing typing, reducing text, reducing reading, reducing time investment. Faster use doesn't mean less use. If completing the workflow of your app is satisfying at all in some small way, a faster app means they will do more with it.

* Shortening the distance from installation to value-creation

How fast can you help the user create value? The faster the better. Why? Because if they can push more value through your app in less time, it means there is a consumer surplus that can be tapped into (as in charging them something for it)

When you're building out your app, consider ways of continuously driving app engagement. It may mean an order of magnitude (or two) of value that you can prove to potential investors.