A Guide to Growth For Startups
Startup companies have to be willing to experiment, try unusual tactics, and experiment outside of their comfort zone. Gustaf Alstromer is a product lead and expert in helping new businesses succeed by improving user experience, product market fit, growth channels, and measuring retention.
The first fact that Alstromer discusses is the fact that launching your product is not going to draw your client base to you. You have to go get them. He said, “startups take off because founders make them take off.”
Gustaf worked with travel accommodation giant Airbnb before it took off and became the home rental resource for travelers all over the world. He focuses on three primary tools for growing a startup business.
Product Market Fit and Retention
Product Growth/ Conversion Rate Optimization
Exploring and Limiting Growth Channels
Product Market Fit
Product market fit (PMF) is a term that measures how well your product is doing in its specific market. PMF allows startups to utilize collected information to determine whether or not the product they are selling is popular with customers. In other words, is it selling?
Gustaf points out that there are two primary ways to figure out how well a startup’s product is doing by finding a method to measure the worth clients receive from the product. The other option is to identify how often a client rebuys the product or uses the service repeatedly.
For example, a company like Instagram would measure the active users on their platform as a way to measure their value, and then they set a goal of having users return every day. If more and more users return on a daily basis to Instagram then it has an excellent product-market fit.
Startups have to be willing to do some heavy-lifting at first. The Airbnb founders first pretended to be photographers to interview hosts about how they used the website and discovered what problems could be solved and any improvements that could be made. This simple act created trust between the hosts and the company and paved the way for Airbnb’s amazing success.
This Does Not Scale: Get Used To It!
Being a startup requires some experimentation to ultimately succeed. The first thing to do is LAUNCH! Accept that you are going to learn as you go along and that as a new company you are going to need to do unconventional things.
One of the best ways to grow as a new startup is to do things that don’t scale. Get friends to buy your product, ask friends of friends to buy your product. Make contact lists that are targeted directly at clients who are in the market for your services or product. Legwork is key to any startup and it is normal for a startup to begin without anything.
The truth is it all comes down to the effort and focus founders put into their business and the promotion and honing of their product. Find out who your users are, ask yourself if your website accurately represents your product, how is the user’s experience with your website? Talk to your clients and find out what they think about your product, and more importantly observe how they use the product.
Measuring Retention
The best way to measure product market fit is to measure client retention. It is key to know how often a client returns to use your services or repurchase your product. Retention is a better indicator for success than what users state. Investors are going to want to see retention rates over a period of time and will ask for these activity measurements.
The Don’ts When It Comes To Measuring Product Market Fit
The Net Promoter Score does not tell investors anything real about the success of a product. It is considered a throw-away metric.
Surveys are filled with bias. While sometimes they are helpful, it is hard to judge what the responders’ motivation is when they answer a survey. Purchasing behavior is much more helpful than a client’s response to framed questions.
A more useful question to ask customers is “how would you respond if this product was no longer available for purchase?” This tells the startup how valued a product is, but again it is considered a soft measurement because it doesn’t translate into revenue.
Metrics Startups Should Ignore*
Visitors
Non-paying customers
Conversion rates
Registered users
*These measurements are meaningless and will not help you learn anything of value about the performance of your product or service. Growth must be measured by revenue and repeat usage. Ask yourself are clients willing to pay for your product?
Channels For Growth
Accepting that your startup will need to identify the best channels and tactics for organic growth is vital to long-term success. One important thing to remember is that exploring channel growth and tactics is something you do after some people care about your product.
Product evolution is a necessary step that involves conversion rate optimization, engineers, product designers, managers, and marketing experts making the product something highly-desirable to consumers. Startups should constantly be looking to improve their product, website, and the experience of the client.
Google, Facebook, Instagram, YouTube, and other social media outlets are the future of business. These platforms are where most people find new products to buy. The job of the startup is to create a funnel that optimizes the conversion rate of clicks to purchases.
The product is a cycle or funnel. This funnel is where content becomes key. Razor-sharp content that targets a specific audience along with the right platform and expertise means that eventually, the product will scale to a larger audience of buyers, not just clickers.
Finally, Gustaf tells startups to ask the question where does the client stop moving forward in the sales funnel? How do you keep them moving toward a purchase and how do you get them to return? Well, that is easier said than done. Do the uncomfortable, do the work, complete the metrics, adjust your product, and become an expert in one or two growth channels where your audience is most active!