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An Early-Stage Founder’s Quick & Dirty Guide To Growth

Posted by Dharmesh Shah on August 5, 2015 in marketing 8 Comments

The following is a guest post by William Griggs.  William is the Founder of Startup Slingshot, the resource for battle-tested startup strategies. Access the audio interviews of today’s featured growth practitioners, the full 43 page guide, and tons of resources here (free for now).

 

A startup is a company designed to grow fast.” 

 

Growth is what founders and investors alike are constantly searching for. Growth enables startups to quickly create tremendous value in the market. Without growth you’re dead in the water. But accordingly to Paul Graham, there’s a silver lining: “...if you get growth, everything else tends to fall into place.”

For a company to grow really big, it must
(a) make something lots of people want, and
(b) reach and serve all those people.”

Unfortunately for most founders, viewing their startup from this altitude isn’t extremely actionable. In this post, we’ll uncover the methodologies and tactics you will need in order to validate your business and systematically reach and serve your target market.

 

How do you ensure you are making something lots of people want?

Making stuff is the easy part. The key, however, is making something a lot of people want. Market selection and product/market fit are critical here.

This is where a lot of startups end up spinning their wheels. As you build product early on, how do you determine if you’re on the right track or heading towards a dead end? While every business is unique in terms of exactly what it needs to do to achieve product/market fit, the process for quantifying it is consistent.

Assuming you can’t use sales as an indicator of product/market fit, below you will find several ways Brian Balfour, VP Growth at Hubspot suggests quantifying product/market fit for your startup. The further down you go on the list, the more customers are required to receive meaningful insight.

  1. Indicator Surveys -- What do people say about your product?
    1. Created by Sean Ellis, Survey.io is the perfect tool for indicator surveys. To learn how to use Survey.io, read this.
  2. Leading Indicator Data On Engagement -- How are people using your product?
    1. What are you seeing inside the product? How active are your customers?’
  3. Retention Cohort Curve -- Does your retention curve flatten off?
    1. If people consistently use your product over a certain period of time, you’ve reached product/market fit for at least a subset of the market.
    2. Unsure how to get started with cohort analysis? Read this.


Don’t have enough data to do any of these steps? Focus on executing “trickle marketing campaigns.” Sean Ellis, CEO at Qualaroo was right to say that in order to understand what your target market thinks of your solution you have to expose it to them. The trick here is to not spend money and time on a big launch, instead focus on highly targeted marketing campaign that puts your product in the hands of the target market.

Before moving on to the second piece of Paul Graham’s growth equation, it’s important to emphasize that you have to get this right.Without product/market fit you’re wasting time even thinking about growth. As a founder, your startup is like a ticking time bomb says Andy Johns, Director of Growth at Wealthfront. You have a certain amount of time before everything will explode. To extend the time allotted, you need to show growth and the first step is establishing product/market fit.

 

How do you ensure you reach and serve all those people?

You’ve built something that solves a problem, for at least a part of the market, and now it’s time to get it into their hands.

Three Principles For Driving Quantifiable Growth

Learning how to reach and serve your target marketing isn’t rocket science but it isn’t obvious either. Those that drive quantifiable results do so by following these three principles:

  • Triage: They work on the highest return on investment activities, suggests Ivan Kirigin, CEO of YesGraph.
  • Test: They don’t assume they know what’s going to work. Instead, they focus on generating and testing hypotheses, Ivan adds. If you don’t take the time to get your analytics straight, so you can validate assumptions you’re flying blind.
  • Set Goals: They have a target metric they focus on. Doing so will help you focus your efforts.

Now let’s dig into the specifics.

 

How To Ensure You Reach Your Target Market

When starting to think about how you are going to really invest in reaching your target market, it’s important to revisit your business model. To start, you will need to formulate your target customer acquisition cost (CAC). Doing so will help guide you in determining which channels to test. To calculate your target CAC, you must estimate the average lifetime value (LTV) of your customer (learn how to calculate LTV) and subtract your profit margin. Hitting this CAC will allow you to profitably acquire customers. While most bootstrapped companies target a CAC that is 30% of their LTV, many VC backed companies that are trying to own their market typically spend to 100% of their LTV.

With this in mind, the next step is selecting what customer acquisition channels to test first. Below, I’ve briefly summarized Brian Balfour’s blog post titled, “5 Steps To Choose Your Customer Acquisition Channel.”

 

channel matrix 3.jpg

Source: 5 Steps To Choose Your Customer Acquisition Channel by Brian Balfour

 

In this matrix, you will have a list of potential marketing channels on the left and a set of channel attributes at the top. Keep your business model, competition, and target market in mind, and begin to fill out the matrix by rating each channel using the words “low,” “medium,” and “high.”

Review your current constraints (time, money, target audience, legal, etc.) and select the top one or two channels to test for viability. The viability of a channel is determined by its ability to drive predictable returns on the time/money invested. Once you find a channel or two that works, it’s time to double down and to continue to invest in optimizing the channel.

Not sure where to start with each of these channels? Check out these videos from 500 Startups’ WMD conference.

 

How To Ensure You Serve Your Target Market

In addition to reaching your target market, you must also focus on optimizing the process with which you use to serve them. In this case, serving them means getting them to your product’s “wow moment.” To get more of your target market to your product’s “wow moment,” Sean Ellis suggests that you focus on increasing desire and decreasing demand.

  • Increasing Desire: To increase desire you are continually working to test and optimize your messaging and positioning. The thought is, “with enough desire, people will overcome a lot of friction” says Sean Ellis. To execute on this and track your progress, you will need a combination of qualitative and quantitative data. Sean emphasizes that it’s paramount to keep the ultimate product experience in mind, so that you don’t increase desire for a product promise that your product is not designed to deliver on.
  • Decrease Friction: This step in the process is all about conversion rate optimization. It’s about seeking out and fixing all that’s preventing people from converting, whether that’s a macroconversion, like signing up for your product, or any of the microconversions that lead up to it. To dig in further on this topic, I suggest you read Qualaroo’s, “The Beginner’s Guide to Conversion Rate Optimization.”

 

Conclusion

In this post, we’ve covered the essential elements to designing a startup for fast growth. If you’re farther along or you just want to dive deeper into growth for early-stage startups, you can access the audio interviews of today’s featured growth practitioners, the full 43 page guide, and tons of resources here (free for now).




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How Emotion Helped Grow Our Startup to 2.8M Users in 20 Months

Posted by Dharmesh Shah on June 1, 2015 in marketing growth 33 Comments

This is a guest post by Melanie Perkins, co-founder and CEO of Canva. We are launching Canva For Work that will help you and your team create original stunning visuals faster than ever. Register your interest to win free accounts.

I want to start with a question. A question which I think plagues a lot of startups. Should you listen to your users or not?

Most people would answer with a simple yes or no. On one side of the argument are people who believe you should test everything. They say you should trial Google AdWords and see if people click on your ad. If they don’t, you might not have a viable business. On the other side of the argument people point to Henry Ford’s great quote - "If I had asked people what they wanted, they would have said faster horses."

To grow Canva to 2.8 million users in 20 months, we did both. I’m going to share my experience about whether or not you should listen to your users. Above all, the timing for each is incredibly important.

#1 We didn’t ask our users what to build

When I was studying at university I was also teaching design programs. Students from many different faculties came to learn to design as part of their Professional Communications units. However, it took a very long time for them to the learn  the basics of the programs and by the end of the semester they could hardly operate the tools let alone actually ‘communicate’ through their design.

I don’t believe you can ask your users what you should build. If I had asked these students (or professional designers) what they wanted, they would have asked for incremental improvements to the design software they were using and people who had no design experience certainly wouldn’t have even known that they would have the ability to design.

However, it was the particular insight I gained from watching people who knew nothing about design, trying to use the design tools that became the foundation for Canva. It became apparent that they were complex and tedious and beyond the scope of most people’s expertise. But being able to use the tools myself I knew the capabilities of using design tools to communicate and it became apparent that in the future that everyone would have these same capabilities and they would be a lot easier to use.

So, when finding the initial problem we wanted to solve - it was important to have a deep understanding of the problem, even though user surveys would have given little support to our mission. Paul Graham wrote an excellent article on a similar subject, explaining “The very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing.”

#2:  We delayed our product launch by more than a year

After about a year of development we had the basic building blocks of our design platform built. So we decided it was time to do some usertesting and see how people actually used it.

It was extremely insightful. Users were scared to click much and when they did they wandered around aimlessly, struggled with a few things, created something that looked pretty average and then left feeling dejected. Not quite the fun journey we were hoping for users to experience.

It became quickly apparent that it was not just the tools themselves that were preventing people from creating great designs, but also people’s own belief that they can’t design.

We didn’t just need to create an easy-to-use graphic design program, we needed to empower people who weren't graphic designers to believe they could design. During our initial user tests, the feedback was synonymous. “I’m not creative enough, it’s too hard.”

Furthermore, people using Canva for the first time inevitably didn’t have a ‘design need’, meaning that they had no reason to actually use Canva, so clicking around aimlessly was going to be a pretty uninspiring experience.

In order for Canva to take off - we had to get every person who came into our product to have a great experience in a couple of minutes. We needed to change their own self belief about their design abilities, we needed to give them design needs and we needed to make them feel happy and confident clicking around. We needed to get them to explore and play in Canva. No short order! So we spent months perfecting the onboarding experience paying particular attention to users’ emotional journey.

#3: We Optimised Our Onboarding Experience For Our User’s Emotional Journey

The goal behind our onboarding process was to debunk two key thoughts.

1. People thought it took too long to learn a new skill

Regardless of how simple and intuitive we made our design program, people had preconceived ideas (not wrongly so) that design programs were difficult to learn and use. Again, not a great time to listen to your users.

To address this concern, we created a short introductory animation – 23 seconds – to visualize the simple functionality of Canva. The animation actually uses Canva itself to point out where the tools are and how to use them in three simple steps.

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2. People didn’t believe they had the talent or skills to design

Most people think they’re either “creative” or “non-creative”. I disagree. I believe there’s creativity in all of us, and with the right tools it can be unleashed.

In an ambitious bid to prove this belief wrong, we created a series of interactive challenge tasks. Our objective was to give people very simple challenges that would get increasingly complex, and for them to build their confidence with each step of the process. It was imperative users could experience small wins.

Our first challenge seemed simple enough – to change the color of a circle to your favorite color. We watched a user tester struggle for almost a full minute, he said “Can someone tell me how, cos I really don’t know, ummm… How am I going to change that? Am I missing something?” Eventually he figured out how to change the color of the circle and gave us a really interesting insight in the process.

It was difficult to spot the color picker when it was the color grey, when we changed it to red it was very obvious. This tiny tweak has saved hundreds of thousands of people from struggling with this step and boosted our user’s self-confidence in the process. Watch the two videos below and see the huge difference in the emotional reaction.

Video 1:

Caption: The first user test

Video 2:

Caption: The simple change that moulded our onboarding process

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To give you another example, we added another ‘challenge’ which prompted users to place a hat on a monkey. Does this make for great design? Not necessarily. But it did convince people that Canva was easy to learn and that Canva was easy enough to explore.

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We spent a considerable period of time trialling different variations of ‘challenges’ - three challenges, ten challenges, double barrelled challenges, simpler challenges, more difficult challenges. Each of the variations gave our users a different emotional experience.

The ending result was great, within a few minutes of using Canva people feel confident with their abilities, understand how Canva works and then spread the word.

#3: Established World Class Customer Service To Empower Our Users

Understanding your users’ emotional needs when you’re getting your startup off the ground is only the first step. If you abandon them after you launch, your efforts will have been wasted.

Canva’s customer support is an integral part of our platform. Our amazing team don’t just answer technical queries, they pick up where we left off: they empower our users to believe they can design.

What does this process look like? Our customer service team operates on the following pillars:

  1. A 24-hour roster. Our users’ questions are a huge priority for Canva. A 24 hour roster ensures we can speak to our global community of users anywhere, at any time. By being online when our users are, we’re able to help during their working day. Obviously, when we were starting out 24-hour support would have been a stretch, however, responding in a timely manner when our users are most active has always been essential.

  1. An average response rate of less than two hours. That brings us to speed. Getting back to people quickly is one of the best ways to provide great support. Our users know that they can contact us when they’re having an issue and we’ll do our best to help them out. This also means we can keep on top of the impact of any new features and keep a finger on the pulse of our community.

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  1. A daily customer happiness report. To ensure full transparency, each day a report is sent to our entire team with a summary of the day’s tickets. This ensures that our users are always front of mind at Canva, and the relevant team knows when there are particular issues that they should be aware of.

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  1. Regular workshops. Recently we flew our team based in Manila to our HQ in Sydney. We conducted intensive workshops with our team where everyone had to opportunity to see what kind of tickets our users were submitting. All new team members also complete the same exercise during their first week at Canva. Why? There’s no better way to inspire your team to build an amazing product than to put yourself in the shoes of the people using it.

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After you launch, the conversations you have with your users should be as important as when you build your product.

This is the time to listen. In any case, the conversations your customer happiness team have with your users are critical to your success. Collate their feedback, listen to their suggestions, act quickly on any bugs or challenges they experience - quickly responding to your users and customer support team’s feedback is essential.

#4: Give Goodwill: Word of Mouth Trumps Any Marketing Tactic

I often get asked which tactics we used to propel Canva’s early stages of growth. My answer is always the same. We didn’t focus on engineering virality, SEO, SEM, content marketing or any other marketing.

We relied on the powerful momentum of word of mouth that was spurred by having a product that solved significant pain points for our users. Spending a year in development gave us the luxury of being able to deeply understand our user’s emotional needs, and build a product and solution that would cater for them.

Creating a product people would love wasn’t the only way we exerted our goodwill. When we launched our product, we created a series of free interactive design tutorials people could use to learn basic design skills. Despite strong advice to the contrary, we decided not to watermark user’s designs with our logo, we wanted our users to get so much value from Canva that they spread the word about it. Anything we believed would benefit our users, we did.

And it’s been one of the best decisions we made. Our community of 2.8 million users is proof of that.

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I’m not saying go out and make decisions based on your gut – but always be willing to invest in projects or resources that might not immediately return direct revenue. If they create goodwill amongst your users, they’ll yield an incredible amount of value.

At the end of the day, your users are your most valuable asset.

Why Your User’s Emotions Are The Key To Exponential Product Growth

When you’re launching a startup it can often feel like you’re walking in pitch black guided only by flickers of light.

That’s how I felt while receiving advice on whether or not to listen to users that thought they would never be able to design. But what I learned while growing Canva to 2.8 million users is that exercising the discretion to do both is what good business is all about. My advice – do both, but remember timing is everything.

Henry Ford also said: If everyone is moving forward together, then success takes care of itself.” Include your users in your product journey – they’re the only other people who will care about your vision as much as you do.

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