Lenny's Podcast: Product | Career | Growth
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?
00:57:39 · Sean Ellis
[00:57:39] S1: One of my favorite quotes is a quote from a guy Kettering. It was early, like a hundred years ago at GM running innovation. And he says, A problem well stated is a problem half solved. And so I think a lot of it comes down to not the things you try, but how you deeply understand the problem that's preventing someone from using your product effectively. I'll just give you one example. We had one channel after we made a lot of these changes and had already driven a ton of improvement in the LogMeIn onboarding, we found a demand generation channel that was really cheap and the economics looked great. But at just the download step, had a 90% drop off rate. And so we AB tested a bunch of different things there to try to improve that conversion rate. And then finally, you know, we, 10 plus tests not able to improve it. Finally, someone said, well, these people are registering. Why don't we just ask them why they signed up and didn't download the software? And so we don't want to do it in too kind of a creepy way. So we just said, made it look like a note coming from customer service. Channel was sending 200,000 people a day. So 20,000 people were converting to registering. So we had essentially 20,000 people we could email and then 18,000 of them who didn't download. And so we just asked, Hey, notice you haven't had a chance to use the product yet. It looked like it was coming from customer support. What happened? And the answer we got back in not a formal survey was, Oh, this seemed too good to be true. I didn't believe this was free. I mentioned to you we were one of the first freemium SaaS products out there. And so people were skeptical when, especially in a demand gen channel where they hadn't sort of seen a radio or a TV advertisement from our competitor who was a premium only product. These are people who are discovering the category for the first time, they were getting there and so our next test, once we articulated what the problem was, our next test gave us a 300% improvement in the download rate, which was a... We gave them a choice, download a trial of the paid version or download the free version. Put the graphical check mark next to the free version. But when they saw we had a business model and a trial of a paid version, the free version was credible. And so that essentially made that channel work for us.