Guest : Sean Ellis (author of “Hacking Growth”)
Host: Lenny
Key Takeaways:
- Focus on your most loyal users: understand what they value and optimize the product experience around them.
- Retention is the true indicator of product-market fit. Use the Sean Ellis test as an early indicator but focus on retention data to gauge long-term success.
- Onboarding is critical—streamline it to help users quickly realize the product's value and improve activation rates.
- Once product-market fit is achieved, focus on sustainable growth by building engagement loops, optimizing activation, and using referrals.
Podcast Notes:
1. The Sean Ellis Test (Product-Market Fit Test):
- Purpose:
- A simple but powerful tool to measure product-market fit by asking users, "How would you feel if you could no longer use this product?" with response options like “very disappointed,” “somewhat disappointed,” and “not disappointed.”
- Key Metric:
- The magic threshold is 40%. If at least 40% of users say they'd be "very disappointed" without the product, you likely have a product that fits the market.
- Usage in Early Stages:
- This test can be used even with an MVP (Minimum Viable Product) to get early signals.
- Improving Product-Market Fit:
- Focus on the users who would be "very disappointed."
- Dig into why they find the product valuable and cater to their needs through better onboarding, refining the product, and removing unnecessary features that don’t appeal to this group.
2. Retention vs. Leading Indicator:
- Leading Indicator:
- The test is a leading indicator of product-market fit, but retention data is the true, lagging indicator.
- Retention Focus:
- Use the test to gauge fit early on, but focus on building retention through onboarding and product refinement for those who find the product indispensable.
3. Real-Life Example:
- Lookout Case Study:
- A company with only 7% of users being "very disappointed." Through focused adjustments, including repositioning the product for its most valuable feature (antivirus), they increased this to 40% in just two weeks.
- Steps Taken:
- Repositioning: Highlighting the antivirus feature, which was the most valued by existing users.
- Streamlined Onboarding: Speeding up the experience to help users quickly set up the antivirus feature.
4. Understanding the Data:
- Once you hit the 40% threshold, it’s essential to dig deeper:
- Who are the users who love your product?
- Why do they love it?
- What problem are they solving with your product?
- Use qualitative surveys to get deeper insights into why users value certain features, leading to more targeted improvements.
5. Challenges in Interpreting the Test:
- False Positives:
- Sometimes, users may say they’d be "very disappointed" due to switching costs (e.g., high investment in learning the system), rather than the product itself being indispensable.
- Next Steps After Test:
- Continue iterating on features that matter most to users.
- Improve onboarding and enhance messaging for new users.
6. Final Thoughts on Growth:
- Sustainable Growth: Once product-market fit is achieved, the focus should be on building sustainable growth through.
- Activation: Onboarding users to quickly experience the product's value.
- Engagement Loops: Creating engagement that keeps users returning.
- Referrals: Encouraging users to spread the word about the product.
Courtesy: @LennysPodcast
