Traversing the Traction Gap

by Bruce Cleveland

  But even if you don’t have the luxuries of a customer support group and customer experience teams, you still must assign specific customer support and customer experience objectives to members of your product team.

  In other words, you can’t ignore these duties just because you don’t have the people power. After all, this is critical information you will need to make a market-first, data-driven, and qualitative decision to declare Minimum Viable Product.

  I cannot stress enough that the market-first product process compels you to actively perform market research, and to capture market signals well beyond the customer support call center log. And, during the Beta program, you must actively engage, human to human, with your end-users to truly understand what is and what isn’t working with your product. This manual, hands-on exercise is time-intensive and requires the startup to commit significant amounts of its scarce human capital to the process.

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  NET PROMOTER SCORE (NPS)

  Recently, there has been some controversy over the accuracy of the Net Promoter Score (NPS) as a metric to gauge the loyalty of a customer’s relationship to a company. However, in spite of this current debate, for many companies the NPS remains the gold standard for measuring customer satisfaction.

  “NPS creates a view of customer loyalty. The absolute score is less important than the trend. We learn from both promoters and detractors. Most importantly, we have been able to associate NPS improvement with growth.”

  JEFF IMMELT, former CEO, General Electric

  NPS is measured on a scale of –100 to 100. Anything greater than 0 is considered acceptable. 0 to 50 = good; 50 to 70 = excellent; 70+ = outstanding, you couldn’t do anything better; and 100 is basically theoretical and not actually attainable.

  Net Promoter Score (NPS)

  FIGURE 22

  NPS tells you how your brand rates compared to those of a competitor, so you can use it only to determine if you are improving based on your own benchmark.

  NPS is one of the best metrics you can use during the IPR-to-MVP phase. Because of its focus on loyalty, it is a good alternative to measuring customer satisfaction: Will customers continue to use your product?

  NPS is also a component of customer experience management, but it is important to separate it out. NPS was developed by (and is a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix Systems.

  The fact that it is used by more than two thirds of Fortune 100 companies shows just how powerful NPS has proven to be in helping companies understand what is really happening with their customers.

  Some people object to such a focus on loyalty; but as Bruce Temkin from Temkin Group argues, that when NPS is used effectively “it has been enormously successful at catalyzing the attention of senior executives on the issue of customer experience; it’s made customer experience relevant to the executive suite. And one of the best things about NPS, which doesn’t get enough attention, is that it has introduced a common language around customer segments: Promoters, Passives, and Detractors.”

  When combined with DAU/MAU (Daily Active Users/Monthly Active Users) metrics, NPS can help you demonstrate to investors and your team that you have a product that is both sticky and beloved by companies and consumers. At this stage, even when you have little or no revenue, these metrics can be crucial in helping you show investors that you have continued to reduce risk and moved closer toward that elusive goal of Minimum Viable Traction.

  But how do you capture the NPS when users are reticent to fill out long surveys? That is the beauty of the NPS; you need to ask and have your users answer just two questions:

  How likely are you to recommend our product/service to a friend?

  What is the most important reason for your score?

  Since NPS relies upon only those two questions, the data is relatively easy to capture and the survey typically has a high response rate.

  You can capture NPS data from within your application or via email. If you are not familiar with how to capture and use NPS data and want more information about how to set up an NPS survey, how the scoring works, and how to process and analyze a survey, a simple web search reveals many websites with the information you need, and those websites walk you through the process.

  Some researchers recommend that companies ask the NPS questions immediately after some form of user engagement—for example, answering a support question—so that the experience is fresh. Other companies choose to use email to send out NPS surveys on a regular basis to all their customers.

  At this stage, as you work toward MVP, and you deliver new releases regularly to your Beta customers, each new release is the perfect time to email an NPS survey, specifically shortly after the release after your users have had the chance to work with the new version of the product.

  “NPS—always keep in mind that your customers always love you more at the beginning of your relationship. To maintain that engagement it is important to constantly refine your customer experience.”

  KATHRYN PETRALIA, Cofounder & President, Kabbage

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  CUSTOMER COMMUNITIES

  More and more customers are turning away from 1-800 numbers and toward online communities of other customers when they want to express an opinion on a product or feature. There are countless online communities dedicated both to reviewing products and features and to giving other consumers advice about how to proceed with their purchases.

  “Feedback from our developer and customer communities is essential to delivering compelling products. Adobe Labs fosters community involvement early in the product development cycle, enables access to emerging technologies, and ultimately helps to build better products.”

  KEVIN LYNCH, VP, Technology, Apple; former CTO, Adobe

  I recommend that you consider building a community earlier rather than later. Even though you will have relatively few users at this point, I would make the investment now. Community and customer advocacy software is relatively inexpensive and should be a key part of your website. This will be an invaluable resource for you over time as you move to the go-to-scale phase, and it can give you invaluable feedback during your Beta and future programs.

  I was an investor in Get Satisfaction, which was acquired by Sprinklr. Get Satisfaction enables companies to easily set up and create a community. So I know the power of communities and can’t recommend them enough.

  That said, a word of caution with communities. You may experience a strong temptation to take over and influence your community in the name of protecting your brand reputation. Resist the temptation.

  Based on my experience with Get Satisfaction, it is a big mistake for a company to try to influence its community. This behavior can result in a serious set of problems as employees end up wasting a significant amount of their time arguing with trolls. And, if your employees are discovered to be posing as a consumer or customer and making “fake” posts, you may have a PR disaster on your hands. At the very least, your customers will no longer trust your intentions.

  The key is to accept communities for what they are. Some of the posters on the site will complain about problems that are clearly user error; others will have insightful comments that could help you proceed with your next evolution of a product or feature. Thus, just like customer experience management, you must always keep in mind that, while useful, such online communities are also composed of self-selecting groups of people who are enthusiastic for one reason or another—a characteristic that once again introduces bias.

  The key is to try to create appropriate relationships with your community that enable you to give and take honest feedback without being so defensive that you try to control every post on every message board.

  You will find that the best feedback will come from the communities you cannot control, so you have to make yourself a partner rather than a moderator, meaning you have to be willing to admit mistakes and ask for help in generating new ideas and new product features. />
  While these newer venues are a great source of information, don’t assume that any post on any random discussion board represents the perspective of all your customers and noncustomers. Don’t panic at every post. Take a breath and acknowledge it for what it is—feedback.

  I would resist putting someone who is inexperienced in charge of building and managing your community. I believe it’s better to put an employee with product marketing or product management experience in charge. An engaging personality and a little life experience will be an asset in this role.

  Early in your startup’s journey, when you have scarce resources, you can rotate people through this role on a daily or weekly basis, though you risk some loss of continuity in your relationship with your users.

  Your community will quickly become one of your most important assets—and a very special insurance policy. For example, they will come to your defense if someone unfairly accuses your startup of nefarious behavior. Most importantly, your community can and will serve as a valuable reference source for noncustomers who are searching for users like themselves—and who are unwilling to invest and use your products until they find them.

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  CAPTURING AND OPERATING ON FEEDBACK

  “There is no failure. Only feedback.”

  ROBERT G. ALLEN, author, The One Minute Millionaire

  As you have probably experienced, once you have a product in the market, it is very easy to receive some initial customer feedback—and then turn to your team and ask: “Is it possible for us to do that?” That is understandable. We all want to satisfy our customers, especially early on.

  The problem, which many of you have also doubtless experienced, is that when a company—especially startups with few customers—gets this focused on a customer-driven approach, it ends up adding features without any data about whether or not the new feature or new product is something the broader market needs.

  “I think we over-invested in personalization before it had product/market fit. Looking back, what I wished I had done differently is have a small team of folks working on getting six reference customers who are using the product, paying for the product and are willing to be public spokespeople for the product as a way to really define the SLA between our product-engineering efforts and the go-to-market.”

  DAN SIROKER, Founder & CEO, Optimizely

  Furthermore, few companies think about usability. A new feature or product may be deemed valuable by a few customers, but could actually destroy value for many others by adding too much complexity. In other words, before asking “Can we do this?” you should ask “Should we do this?”

  For example, if you add a special feature that applies only to a few customers or prospective customers that results in a few extra clicks for everyone to reach a popular feature, that could be a poor tradeoff.

  By comparison, a market-first product approach uses data to determine whether it is worth the effort, time, and money to develop a new feature or product simply because a portion of the existing customer base would like it. Thus, a market-first approach disciplines your product development decision making.

  Anyone who has been involved in the product process has had to deal with the real risk of feature bloat due to one-off customer requests. How do you resolve it? I suspect you, like many others, asked the consumer or customer whether or not they really needed the additional feature or product. Or you attempted an indirect approach to gauge their true need, rather than their whim or a fad.

  So how does a product manager determine whether a feature or new product is worth pursuing? How does she prioritize features?

  In truth, some product managers do use opinions or anecdotes. Others use survey data from existing customers. And, honestly, many simply go with their gut, calling it “intuition.” This is a very risky way to do business. Sometimes you’ll get lucky and be called a genius; but the next time, your luck will run out and you’ll flop—and your startup could be left on the rocks of your mistake in judgment.

  By comparison, a market-first product approach encourages everyone involved in the product process to examine market signals from both customers and noncustomers. When the product team does this, it is likely to enhance product and feature success by:

  Avoiding costly R&D on features and products that won’t actually sell or be used by customers;

  Developing a method for managing customer satisfaction without becoming so customer-driven that the company loses its overall vision for the market.

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  NEW CAPABILITIES AND FEATURES

  Now that you are beyond Initial Product Release, at some point you will ask yourself: “What’s next?”

  The key to answering that question is understanding more than just the market for your existing product. You must also know how to refine and iterate that market over time. The great product managers are naturally drawn to the data to make such decisions.

  Imagine that you could easily, quickly, and cost-effectively go beyond simply surveying your existing customers, that you could access the entire market for input. Further imagine that you had fast, easy, and inexpensive access to:

  Discovery Interviews,

  Large-scale surveys,

  Smoke tests,

  Usability testing,

  A/B testing,

  Engagement analysis,

  Customer support data,

  NPS and customer experience data,

  Social media sentiment, and

  Community feedback data.

  How much better would your product decisions be with all that data?

  I know what you could—and would—do: you would innovate with confidence because your product team’s intuition could be quickly and statistically validated or refuted. In fact, new software applications from companies such as Obo and others already exist to do just that. They enable product teams and companies of any size to become market-first and data-driven.

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  FINALIZING YOUR CATEGORY

  I already wrote about category creation and its importance in Chapter 3—“The Road to Category King.” Since this is such a critical factor in your ultimate success, I now want to make a few additional comments. Market-engineering is an iterative process, as is product-engineering. If you want to maximize your probability of success to generate traction, you need to continuously test your assumptions. Category creation is a critical component of the market-engineering process and therefore deserves special attention.

  I bring up the topic of category creation again because this is a pivotal moment when you should assess your MVC and either validate or revise your category positioning. This is a crucial task to accomplish before you are completely engulfed in the treacherous go-to-market phase and launch your company and product offerings fully into the market.

  In the book Play Bigger, first referred to in chapter 3, Christopher Lochhead and his coauthors make the case that winning isn’t defined as beating the competition at the old game. Rather, their book suggests, you have to invent a whole new game, by defining, developing, and (over time) dominating a whole new market category.

  As simple as this premise may seem, creating real value through market creation rather than simply trying to win in existing markets is not so simple. The key is focusing on solving real market needs in a different way—and making sure that you position the market instead of being positioned by it.

  As I stated in Chapter 3, the data on the power of this approach is overwhelming. Consider research that suggests that the Category King consistently captures as much as 76 percent of all market profits.1

  How is that possible?

  The critical distinction is that the Category Kings sell the problem and not the “better” solution to an existing problem. Further, they are the thought leaders that define the problem, which means they become the default choice for customers looking to solve that problem.

  The reason category creation is so vital to a market-firs
t product approach is that category creation packages what has been learned from market signals and communicates those signals back to the market in a way that helps everyone recognize the importance of focusing on the problem space rather than the solution space.

  That’s one reason why a market-first product approach can be so vital to any business, whether it points to an immediate solution or not. If you can identify a true market problem and then use the market signals to communicate that problem, you can become a Category King whether or not you have the immediate or even best solution available.

  At this point, your company should have worked with many users/companies and you should be confident—from data and feedback—that you have the right value propositions, initial pricing and terms, and category positioning to begin marketing and selling your product in earnest.

  You are—or are rapidly becoming—a truly market-first team. You listen to market signals. And you have proven that you have the right market/product fit because companies have indicated that they are willing to pay—or have already paid—to use your product. Or, in the case of consumers, they are actively using your product, and downloads and DAUs are increasing due to word-of-mouth and other virality programs you’ve developed.

  Now, here is a very important point you must internalize:

  You have complete control over when you declare MVP, and the decision to do so is a vitally critical decision point for you and your startup. For example, few investors will fault you if you decide to take an extra six months to make that user experience really shine.

  Once you do formally declare MVP, investors will scrutinize and compare your growth (traction) with similar early-stage companies using a similar business model. Investors will measure how fast you are acquiring revenue, users, usage—or all three. If you fail to scale at the same or better pace as other startups in a comparable market using a similar business model, investors will lose interest and you may find that you become yet another failed startup statistic. For example, as I explained in Chapter 2, “Applying the Traction Gap Framework,” to equal the best B2B SaaS companies, you must reach $1M ARR within one year of reaching MVP, $3M ARR by the end of the second year, and at least $10M ARR by the end of year three.