500 Startups Growth Handbook

Product iterations for growth

Role of product in growth

Pre PMF, if you have people believing in your promise, trying your product once or twice (or even a few times), but not sticking around, it means your product sucks - it’s not providing enough value - it’s not useful. If you can continue selling and growing bullshit, you don’t need this manual. (Also, please ping me, I want to learn from you.) All others, read further.

Post PMF, product iterations play a big role in not just removing friction for growth, but for also enabling growth.

How to do it?

Early Stage: You already have an MVP that people are trying, but you have a retention problem - there is no repeat usage, people are abandoning the product. Your first job is to figure out “why”. Talk to them. Especially in early stages, you can afford to talk to every customer who has ever used your product and understand why they stopped using. Some of the reasons could be because your product is an imperfect or inadequate solution, or because your product is hard to use (it’s useful once people can figure out how to use it), or because they have forgotten it - there was no cost to switch to a different solution… there could be any number of reasons.

Your goal here is to gather feedback and iterate on the product until the customer exhibits repeat usage.

Post PMF

The goal of product iteration is to (1) increase user retention (2) help with growth

Increasing Retention

You can increase user Retention either by reducing user friction or incorporating a network effect through a habit-forming loop.

To decrease user friction, use data to determine the “Whats” and “Hows” of the user, and communicate directly with customers to find the “Whys” behind their behaviour. Use this information to iterate on product features. Think about user behavior, relevant to the context of using your product, that will make the experience of your product easier or better. These are "need to do" product refinements to remove or reduce friction to experiencing product core value and create an indelible value experience that will bring the product to the top of their mind next time they are thinking about the problem area.

To incorporate habit-forming loops into your product, establish a cue, a reward, then a routine. This will get users to use your product more. Facebook does this well by prompting people to write their thoughts by having a “What’s on your mind, ___?” section towards the top of the homepage. After the user writes their thoughts, they will get likes or shares which serve as a reward. In order to get the same reward again, they’ll write another post in the future.

Help with Growth

Product can help with growth either by bringing in new users (acquisition) or by converting existing users into paid customers or upsells.

Growth Loops is a concept where usage of the product by current customers helps acquire new customers. In the case of a network effect business like the Facebook example above, because of the sharing habit, the user is more likely to invite friends to the network because they’ll theoretically get more likes or shares - the network becomes more useful. In the case of writing a review on Yelp, the core action by the user, i.e rating or reviewing a business, helps with customer acquisition via SEO. The increase of users results in more content being circulated which translates to stronger internet presence.

Product iterations can also be helpful with growth via conversions to paid accounts. By observing product usage & behaviour data of core or advanced users, and building special features for just this core or advanced user group and locking that behind a paywall, a startup may increase their conversions to paid accounts. Exemplified by Spotify in this example here.

Common Mistakes Founders Make

Not building an MVP. The core value of a product is important to have down before trying to add features. Every feature needs to build upon core value, and building an MVP first saves a lot potential time and effort spent on trying to add features in the future.
Adding too many features at a time. Treating product iteration like an experiment. If you try to add too many features at time, you won’t know which feature caused which changes in results.

Fictitious Example

A gamified edtech platform wants to incorporate a habit-loop into their product. They decide to add a feature that lets parents create a portfolio of their child’s accomplishments - since accomplishments and milestones are good incentives for repeat usage. The platform also makes it attractive & easy to share this portfolio on social media.
A social media platform wants to decrease the user friction when registering for an account. They decide to add a feature that allows users to sign up for an account by letting them log in via Facebook.

Real Life Examples

Slack is a good example of product-driven growth. Not everything in this article and this article are product related, but they both talk about a features (core and otherwise) that enabled slack’s impressive growth without much marketing.

Related Keywords

Agile, Lean, Scrum, Sprint, User Story, Design Thinking, Prototype, MVP, UI, UX, User Flow, Variant, A/B Testing, Data Analytics, Conversion Rate, Customer Development