Lenny's Podcast: Product | Career | Growth
00:48:45 · Sean Ellis
[00:48:45] S1: Ultimately, it's it's about trying to get as many of the right people to that same state that we just talked about with the must have users. So trying to get as many people to experience the product in a way where they'd be very disappointed if they could no longer use the product. And so that's not just acquisition, which is how most companies think about. Initially it was awareness, then maybe the more developed way was like, oh, let's at least focus on profitable acquisition. But in my experience, hardest part really sits inside the product team. How do you shape that first user experience so they actually use it in the right way and it's not so difficult that they give up and that ultimately, like, we understand what makes it a must have product. And then and then what we're trying to do is is build a... Yeah, sounds kind of theoretical here, but I can go into the details on on how but build a flywheel around that must have value. So step one would be understand it. Step two for me is then figure out a metric that essentially captures units of that value being delivered. And so when I think about a North Star metric, that's what I'm thinking about is like something that reflects how many people are coming in and experiencing that product market fit experience, whatever that is. And it's not just me telling them, here's what your North Star metrics should be. Ultimately the team needs to decide that together. And then really just diagramming what are all of the different ways that we can grow that North Star metric? So that's where you start to actually build. I call it like a value delivery engine, but it's what does our onboarding look like? What's that moment, that activation? What what does the engagement loop look like? Is there any referral? Like, try to capture it as it is today. And then from there thinking about where are the biggest opportunities for improvement. So those high leverage opportunities, and then ultimately, you know, starting to run experiments against those opportunities. Generally, I think I touched on it a little bit earlier, generally the sequence that I like to do is start with activation because that's that one's just so critical and it's easy to get lost in between. Especially for an early product, the product team is so focused on the roadmap. We're two features away from not even needing marketing anymore.
00:51:20 · Sean Ellis
This thing's going to take off. And then the marketing team so focused on bringing new people in. But that how do you get those new people to a great first experience kind of falls through the cracks a lot of times. So a lot of focus on on activation, and then, engagement and referral and getting the revenue model right. And then once each of those pieces working well, then starting to really obsess on the channel side. One thing that I'll say when I go in and directly and involve with a company on the acquisition side, I am thinking about my hypotheses on the acquisition pretty early on. Because if I go into it and I have no idea how we'll acquire those customers, I'm not real confident I'll figure it out when I'm there. So I want to have like two or three things that seem pretty viable as ways to profitably acquire customers and knowing that once I get deep into it, I'll probably come up with one or two more and I've got like five, one of them is likely to work. But I don't want to like just be under the pressure of having to come up with that once I come in if I don't at least see an angle from, from from, before I get involved with the company.
00:52:36 · Lenny Rachitsky, Sean Ellis
[00:52:36] S0: What I'm hearing is when you come into a company and they're asking, Sean, how do we how do we figure out how to grow this thing? You actually focus first on activation onboarding, and we're gonna talk about all these things. Then after that... Like, basically, these are priority order for you. Yeah. Then it's flywheel engagement referral stuff to see if there's a way to drive that. Then revenue. How do we make money with this, and how do we make sure we're doing some of profitably? And then... Only then just do you start to go big on acquisition top of funnel growth. [00:53:05] S1: Yeah. I may need to do some acquisition stuff before just to bring enough flow through, but I'm not I'm not obsessing on, like, how scalable is this. It's just like, yeah, let's get enough people coming through that we can start to take the slack out. Of it comes down to that the acquisition side is so competitive now that if you're not really efficient at converting and retaining and monetizing customers, you you can't just find scalable profitable customer acquisition channels.
00:53:05 · Sean Ellis, Lenny Rachitsky
[00:53:05] S1: Yeah. I may need to do some acquisition stuff before just to bring enough flow through, but I'm not I'm not obsessing on, like, how scalable is this. It's just like, yeah, let's get enough people coming through that we can start to take the slack out. Of it comes down to that the acquisition side is so competitive now that if you're not really efficient at converting and retaining and monetizing customers, you you can't just find scalable profitable customer acquisition channels. [00:53:32] S0: This is fascinating because I think a lot of people are... Probably do the opposite. Start driving a bunch of growth to our product, then we'll fix onboarding, then we'll figure out how we're making money, and referrals comes along there. So I think this is really important for people to hear. So, again, the reason you invest first and focus a lot on onboarding slash getting people activated is because that is very correlated to retention, and this must have customer this like, I'll be very disappointed customer.
00:53:58 · Sean Ellis
[00:53:58] S1: Yeah. And that's... And they're... You're... They're at highest risk risk of losing them at that point. They they're probably a little skeptical about a promise that you put out there, but they're intrigued enough to wanna use it. But until you get them to that must have experience, kind until of get them to that moment, they're at high risk of being lost. So a lot of people focus on, Well, I better get their email address or their phone number, But then you're essentially having to reacquire them at that point. To me, it's just that if you can collapse that time to value, I can give you a couple of incredible examples of when we first... So at LogMeIn, when we initially tried to grow the business, I was stuck at being able to spend I couldn't spend more than $10,000 per month profitably trying to grow the business. And then I dug into the data and I saw that 95% of the people signing up for LogMeIn. So LogMeIn free, at the time free remote access for your computer. And so you install software and you can control it from any other computer. So 95% of the people signing up never once did a remote control session. And so not surprisingly then, I had to get my kind of monetization off the 5% who did. That was really limiting my ability to find channels that worked. So CEO with this, I shared the data with him and he basically told the product team, We are putting a complete freeze on the product development roadmap. So every single person from product, engineering, design, and then also said to me, stop trying to find new channels. The three of us on the marketing side are all going to focus on improving the sign up to usage rate. And so in three months, we improved the sign up to usage rate by 1000%. So we went from only 5% of people using the product to 50%. I went back, tried the exact same channels that previously only scaled to $10,000 a month. Now they scale to a million dollars a month with a three month payback on marketing dollars invested. 80% of new users were coming in through word-of-mouth. So there was this major inflection point by just focusing on activation.
00:56:19 · Lenny Rachitsky
[00:56:19] S0: This episode is brought to you by Merge. Product leaders, yes, like you, cringe when they hear the word integration. They're not fun for you to scope, build, launch, or maintain, and integrations probably aren't what led you to product work in the first place. Lucky for you, the folks at Merge are obsessed with integrations. Their single API helps SaaS companies launch over 200 product integrations in weeks, not quarters. Think of Merge like Plaid, but for everything B2B SaaS. Organizations like Ramp, Drata, and Electric use Merge to access their customers' accounting data to reconcile bill payments, file storage data to create searchable databases in their product, or HRIS data to auto provision and deprovision access for the customer's employees. And yes, if you need AI ready data for your SaaS product, then Merge is the fastest way to get it. So wanna solve your organization's integration dilemma once and for all? Book and attend a meeting at merge.dev/lenny and receive a $50 Amazon gift card. That's merge.dev/lenny. What do you find often works in helping increase activation? I know there's there's a million things that people do in, but I guess, what what are, like, three or four things that you think people should definitely try to help improve activation and their onboarding conversion?