if I own a company making fuzzy, footie pajamas, I can predict that my sales will increase dramatically from November to December. I cannot, however, take credit for that increase, since even I hesitate to take credit for Christmas. However, if I create a special marketing campaign that I release to a certain percentage of random users, and those users spend more than others who didn’t see the special marketing campaign, then I can measure the exact impact of my marketing campaign on sales.
Unless we measure what effect our changes have on our product or company, we can never truly know that what we are doing is making things better.
Why Achievable?
You could measure whether your company, in general, makes more money. In fact, many people’s bonuses depend on whether the company as a whole hits a target. But unless you work in a very small startup with only one product, the chance that a single team can move the needle on company revenue is vanishingly small.
This doesn’t mean your efforts aren’t important! It’s just that even the best product decisions can be offset by a bad decision in another department. We’ll address how to minimize the danger of that a little later on, but the important thing to remember is that we’re picking targets that we can not only measure but also that we can reasonably expect our teams to hit.
If your team works on features exclusively for power users, it’s probably a bad goal to increase the number of new user conversions. Select something that directly relates to the work your team does on a daily basis.
Unless a need is achievable by your team, you’re setting yourself up for failure and disappointment by tackling something that is out of your control.
Quantifying the Business Need
Now that you know your measurable and achievable business need, you’re going to determine how to change it.
To do this, you need to understand the stages through which a visitor to your product goes while transforming into a serious, long-term, retained user. Or rather, you need to understand the stages through which you would like that user to go. This is the ideal path a person could take from potential customer to die-hard, long-term fan.
PRO TIP
If you were having difficulty picking a business goal in the previous exercise, making a User Lifecycle Funnel can make things clearer by showing where users are abandoning your product. This may help you spot some of the biggest opportunities for improvement.
To visualize this process, you need to make a User Lifecycle Funnel. Here’s an example in Figure 1.2.
The User Lifecycle Funnel for your product will not look exactly like this. We’ll get to how you create yours in just a minute. But I want you to imagine the process and the person who would go through it.
There is a person out there in the world who would benefit from using your product. This person is a potential user. What do you have to do to take a potential user and turn that person into a retained, revenue-generating customer who is a big fan of your product?
Well, first, they have to become aware of your product. Then they need to understand enough about it to know that it might solve a problem for them and decide it’s something they want to try. They might try it out or engage with it in some way and realize that it’s for them. They might then convert into a real user by giving you some information about themself. They might even generate some revenue by paying you. That would be nice. And finally, if you’re lucky, or you’re very good at your job, they might keep coming back year after year so that your product becomes a part of their life.
FIGURE 1.2 Behold the User Lifecycle Funnel.
What’s great about having a User Lifecycle Funnel for your own product is that it can help you track where people are falling off this path. You do this by adding the real metrics for your product at each stage of the funnel (see Figure 1.3).
In this example, 1,000 people are becoming aware of the product, maybe through seeing an ad or sharing from a friend or through some other channel. But only 5% of those people get beyond that stage. Then, of the people who do learn a bit about the product, the product is losing another 20%. And so on, losing more people at each step.
FIGURE 1.3 People fall out of the User Lifecycle Funnel at every step.
At the end of it, this product has nine real, retained customers. Now, sure those are going to be your best customers ever, but you’re still paying to get your message in front of 1,000 people and only ending up with nine of them, so unless you’re selling something really expensive, you’re going to want to increase the number of people who make it through the funnel.
Some of you who are paying attention are probably saying to yourself, “But I have different types of users! And they interact with my product very differently.” It’s an excellent point, and I’m glad you brought it up.
If you have more than one type of user, your product will have more than one User Lifecycle Funnel. We’ll discuss how to determine exactly who your users are in later chapters, but many of you will have products that have, for example, a customer who buys the product and users who use it. Those may not be the same person.
Enterprise products almost always have this issue—the customers are company CIOs or VPs who write checks while the users might be individual contributors or managers. Marketplaces have both buyers and sellers, each of whom interacts with the product very differently and has a different User Lifecycle Funnel.
When you create a Facebook account to stay in touch with your friends, you have a different User Lifecycle Funnel than you would if you were a business using Facebook to run ads. You’ll eventually want to identify all the different types of users of your product and create measurable User Lifecycle Funnels for each of them. That can come later.
The reason that you need to create at least one of them is to understand where your biggest business problems exist. You see, I call this model a User Lifecycle Funnel, but in reality it’s more of a sieve. With funnels, everything you pour in the top comes out the bottom. That’s what funnels do. It’s their job. This is a terrible funnel. Your job is to visualize your funnel so that you can make it less sieve-like.
EXERCISE
Defining Your User Lifecycle Funnel
Every product has a User Lifecycle Funnel whether it’s being measured or not. There are stages that people have to go through. You just need to understand what they are so that you can measure them effectively.
This is a short exercise, and running it with everybody on the team—designers, product managers, engineers, marketers, finance, whoever is a stakeholder—can help you make sure that everybody understands where your product is losing users.
