31st March, 2017
A heck of a lot of startups are putting the cart before the horse and trying to figure out how to grow their product before they know if it’s any good.
Head of International Growth at Tinder, Sriram Krishnan, told the Myriad festival this morning that before enterprising startups got stars in their eyes and began thinking about a growth roadmap, they first needed to figure out whether their product was a good fit.
“A lot of startups invest in growth and marketing without having their product market fit,” he said.
“A lot die not because of starvation but because of indigestion – because they try to do too many things at once.
“Once you’ve figured that out [product market fit], then you can start pouring gasoline on the fire and blow s**t up.”
He said a key measure of figuring out whether the market wants your product and it solves a real-world problem is by setting up metrics around short-term and long-term retention – whether people want to sign up and then continue using the product.
Once startups had a good idea that their product can fly, then they can put the foot on the growth accelerator.
One of the key ways a young company can grow prospects in the funnel is by incentivising their early adopters to do some of the work for them.
For example, companies such as Uber and Airbnb offer users $20 in credit if they’re able to sign up another user.
Krishnan said that the most important part was incentivising the user, not the company.
“You need to consider the psychology on the service side and the recipient side,” he said.
“A very good viral mechanism makes it seamless to incentivise the senders but also incentivises the recipients of the message to react.”
A lot of young companies think ‘internationalisation’ is simply code for ‘translation’, but Krishnan said this thinking was short-sighted.
“You can’t expect to translate into 16 different languages and then see hockey stick growth. You need to actually take it a step further,” he said.
He said creating bespoke content for each market was key, giving the example of Spotify’s creation of localised playlists.
“This can single-handedly move the needle for you. If you do it right, it’s such a great investment. It’s easy to translate, but if you spend a little bit more on other aspects, the returns can be exponential over time” said Krishnan.
“Your first consumers are your product managers, sellers, and advocates – so you need to make sure you treat them right and hear their feedback,” said Krishnan.
“They’re in the best position to tell you what’s working and what doesn’t work – they’re basically an extension of your team.”
Tinder first tested its product and built its pipeline by testing in US college fraternities and sororities, because they knew that this particular demographic was interested in an app like Tinder.
The key is to think about the demographics that will be interested in your product, and then get it to them. These people will become your first brand advocates.
If you’re building a marketplace, then focus on generating supply.
During the first few years of operation Airbnb basically focused on scraping listings off Craigslist to build a platform – if the supply isn’t there then people aren’t going to use your app.
“Just have enough supply to cater to potential demand. It takes Uber two to three minutes to dispatch a taxi. If Uber took 15 to 20 minutes then you wouldn’t be using Uber” said Krishnan.
When thinking about marketing, figuring out the lifetime value of your customer is huge – the golden rule is to make the cost of acquisition is lower than your lifetime value. If you don’t know the lifetime value, then it’s pointless.
“The fundamental principle in channel marketing is focusing on channels where the cost of acquisition is lower than the lifetime value of the user,” said Krishnan.
“It’s important so you’re basically not throwing money at fire.”
Simply building a good product won’t cut the mustard anymore, according to Krishnan.
He said there are more startups then ever and so much more noise in people’s lives, the only option was to be bold.
“Steve Jobs once said that ‘If you build it, they will come’ – this is buills**t. It doesn’t work anymore, even if you have a very good product,” said Krishnan.
“It’s very hard to have a viral product. In this day and age especially, you have to stand out, and you have to ensure that you’re taking the right steps to stand out.”