It doesn’t matter how good your product is, how many features and deliverables you pack into it, how many happy praises you get from delighted users, if the company behind the product isn’t growing, then you as the product manager, have work to do.
At InnerTrends, the team likes to deconstruct growth, pick at it and play with it, to help their users become masters of it. So, how can you, the product manager, deconstruct growth?
The answer: physics! (I know, I know, but bear with me) Physics teaches us how to play with theoretical simulations in a bid to prove real world concepts. One of my favourites is what is called an ideal system. It goes like this:
If we change x in an ideal system, one in which everything else remains the same, y happens.
Ideal never happens in real life of course but it helps us to understand and prove concepts.
In order for you to generate revenue, there are a number of steps a user must go through:
- Discover website (visit)
- Onboard app
- Use app (recurring visits)
- Finish payment process
Let’s say your app price is 40$. According to benchmark data:
out of 1000 people who visit your website:
150 decide to signup
70 manage to onboard
30 return to the app and use it regularly for the next month
12 decide to pay for it x $40 = $480
So, how can we double the number of people paying for an app? Let’s look at a few options:
1. Double the number of visitors
With everything remaining the same, doubling the number of visitors to your website we will also double the number of paying users. However, in order to keep all the other metrics and conversion rates the same, we would need to ensure the quality of traffic also remains the same.
To increase traffic we have two major options: increase paid traffic or organic traffic.
Simply increasing the budget for advertising when we have already covered all the keywords of interest will, in most cases, decrease the quality of traffic. That means that everything else will not remain the same. Doubling the traffic in this case won’t also double the number of paying users.
Instead, trying to position the website along the path of people that are similar to your existing audience will work out much better.
However, increasing organic traffic usually takes a long time and doubling it is only an option for those who are not already well positioned and for which there is not much competition.
2. Double the signup conversion rate
Doubling the number of people who create an account from the existing traffic, when everything else remains the same, will also double the number of paying users and, therefore, revenue.
However, doubling a conversion rate is in reality only available to websites that are already very badly optimized! Switching from a considered signup method to a fast signup method might have such an impact but doing so will also impact the quality of signups.
That in turn affects other metrics. The number of customers will not double.
3. Double the onboarding rate
Product marketers usually focus on getting as many people to signup to their app as possible and product managers focus on creating features that keep users inside the app. As a result, all too often no one takes responsibility for user onboarding.
Doubling the number of people who onboard your app out of the ones that created an account is probably one of the easiest ways to double the number of customers.
Onboarding can be a process that is finished in two or three steps but it can take more than ten, depending upon whether an app is B2B or B2C, and how much intervention from a user the setup needs.
The onboarding can take a few minutes, a few days or, as it happens for enterprise products, more than a month.
As we approach the end of the user cycle it’s often that there are no side effects of doubling the metric, though such a feat becomes much more difficult.
If your onboarding rate is already above 50%, doubling it, with everything else remaining the same, is not even an option.
4. Double the retention rate
People visited your website and were convinced by your offering. They decided to create an account and went through every step of the onboarding process, dedicating time and sometimes resources to get from your app what was promised to them.
Depending on the value that people are getting from your app, they will decide to come back and use it again and again.
Doubling the number of people that return to your app, with everything else remaining the same, will also double the number of people that decide to buy your app.
This metric is fully dependent upon the quality of service provided by your app and how well it helps meet your user’s need.
A first step before such a bold project as doubling the retention rate would be to find out your NPS score and see where you stand with your users.
It can be a lengthy process, definitely not something that happens overnight, but with a very high potential for impact on your bottom line.
5. Double the purchase conversion rate
Increasing the purchase conversion rate is probably the fastest method for increasing revenue. Doubling it will not be the easiest project and is probably not even possible with everything else remaining the same.
At this stage in the funnel, what your buying process looks like is not the only thing that will have an impact on whether people will buy or not.
Your pricing strategy, how your plans are built, how much cheaper your competition is or if your product is more of a vitamin than an aspirin, will all have an impact.
6. Double the price
Doubling the price will almost certainly have a very big impact on your other metrics so it’s purely fiction to believe that everything else could possibly remain the same and that by doubling the price you would double the revenue.
Unless you double the price from a few cents to the double of a few cents, the chances are that this is not really an option for you. There is even the danger that doubling the price will serve to only decrease revenue so implement this strategy with extreme caution!
Feeling depressed? Fear not, there is one more option to consider and this one hurts a lot less!
7. The rule of 72
In physics ideal world simulations only help us understand concepts. When working in the real world we need to take into consideration all variables that might impact the final result.
Reality shows us that doubling any of the above metrics is either not possible or would be accompanied by a less than positive impact on the other metrics.
Here is where the rule of 72 comes into play. The rule of 72 is used a lot in financial markets to help people calculate how quickly they can double their revenue.
Because we have six sequential steps in our funnel from visit to revenue we simply need to divide 72 by our 6 steps to give us the percentage by which we must increase each metric in order to double our revenue. In the case of this funnel, the magic number is 12%.
Here’s what a 12% increase looks like in our funnel from this example:
1120 people visit your website
189 decide to signup
99 manage to onboard
48 return to the app and use it regularly for the next month
22 manage to pay for it
x $45 = $990
A 12% increase in each of the above metrics feels much more achievable than trying to double just one. Increasing each by 20% will give you even more room to breathe but as long as the average is around 12% you will be doubling your revenue in no time at all.
Growth can be deconstructed
As a product manager, it pays off to focus on every single piece that builds up the growth mechanism of your business. Once you understand how the growth of your product works, you can begin to take control of every step.
Bio: Claudiu Murariu is the CEO of InnerTrends. He also authors The Experiment, a monthly digest for marketers who love to learn by experimentation. You can follow him on Twitter @cllaudiu.
Image source: Pablo (a Buffer service)