Customer Activation

Building Your Product's Engagement Ladder

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Most products lose 2/3rds of their customers at the point of first contact and struggle to create advocates from the other third. This short talk walks you step by step through creating your product's engagement ladder so you can better activate, convert and retain customers for rapid growth.

Sandhya Hegde:
Hi everybody. The session of the product-led let summit as hosted by Amplitude. Thank you so much for joining me for this growth workshop. The main topic is going to be all about building up your engagement ladder within your product, so that you can drive more growth for your business. All right, before we get started a short introduction to myself. I'm the Executive VP of Marketing at Amplitude, but I've had a lot of different roles and jobs before that. So I started my career as an engineer, started my own company, joined venture capital, and then actually spent some time being a product leader before I switched to a marketing role within Amplitude, which in itself is a huge testament to this new movement that we are all a part of, which is how do you grow your business using your product, as opposed to having marketing and product be extremely distinct and different functions within company?

Sandhya Hegde:
All right. So in case you guys haven't heard of Amplitude, we are the leading product intelligence company in the world. And what that means is that we have product and digital growth teams use customer data to continue the improved conversion and retention within their product. We've already absorbed and analyzed over 7.5 trillion different user actions within our product, worked with over 30,000 teams all around the world, and we are using all the knowledge that we have gained by working with these amazing customers and want to share some of that with you all today.

Sandhya Hegde:
All right. So let's take a quick look at our workshop agenda. We are going to go through three quick sections. First, we need to go over how to define your product North Star in a way that you are set up to build your engagement strategy. Next, we will go into the engagement ladder itself. And third, instead of keeping this all theoretical, we'll actually go through how Amplitude uses this engagement ladder framework in our day-to-day to drive product led growth within our own platform, which I think would be the most useful for everyone looking for really actionable takeaways from this session.

Sandhya Hegde:
All right. And let's keep going. So question, you have to ask yourself before you can come up with your customer engagement strategy is really what engagement game are you playing? The answer to this question helps you define the right North Star for your product. So the good news is that they're only really three games of product engagement. There is the first one, and probably my favorite one, which is attention. The next is transaction. And last but not the least is productivity. So let me pause here. If you think about kind of what are all the different products you use and how you use them, where do you think some of your favorite products will land? Just take a minute to think about that, think about where they will land, and what's the game that they are playing with you, and which of these would be the primary objective for them to optimize when it comes to your engagement with that product?

Sandhya Hegde:
So for example, if you think about companies like Facebook and Netflix, they're all playing the attention game. They're all trying to maximize the amount of time that you spend with them as a platform. If you think about Amazon or eBay, they are playing the transaction game. They don't really care about how much time you spend on the platform. They care more about how many transactions and the value of the transactions that you do with the platform are. And this is really important because it defines what you are optimizing for when it comes to your product metrics and your own North Star.

Sandhya Hegde:
And last but not the least, a lot of B2B companies fall in this category, is the productivity game, where you're not trying to increase the number of transactions. There may not be any revenue-oriented transactions within a B2B platform at all. You might not be trying to maximize the time spent. In fact, the more time they're spending for some products might mean the more frustrated your customer is and the less excited they are about the product that they're using. What you're really trying to do is help make their work easy and make them really, really productive. So we'll look into kind of what could be examples of metrics that would support that.

Sandhya Hegde:
So for example, with the attention game, typical North Stars could be time spent engaging with content, the number of stories or number of pieces of content viewed, number of users who are spending at least a minimum amount of time every day of watching some content or reading something or whatever your format is. It could be the number of subscribers who are specifically streaming these many hours a month. So depending on your business model, you can have very, very different takes on the attention game. Facebook, for example, would probably want to maximize the time spent engaging, while Netflix wouldn't want to do that because they are on a fixed subscription business. They don't monetize using ads. The more time you spend actually, the cost of the business goes up. They want you to spend just enough time that you're going to come back and renew your subscription next month.

Sandhya Hegde:
So you can have very different takes based on business models for this attention game. Similarly, companies like Walmart, eBay, Amazon, some of them might be trying to maximize the number of buyers who buy from different channels. Some of them may be trying to maximize the number of subscribers they have if they have a product like Prime, or maybe they are focused on value added transactions, like seat upgrades on United. But the core metric will be something that drives more and more purchases on the platform, because that's what this business model is all about. It's about the volume and value of transactions.

Sandhya Hegde:
Similarly, with products like B2B products like Salesforce or Slack or Asana, they're trying to come up with a measure of productivity for you, which is if you're able to get this job done, you were productive. You got value out of the platform. So it's not about time spent. It's not about how many times you use the platform. It's about how effectively you could get a job done, which is how many messages could you send to somebody? How many customer records could you create? Or for Amplitude, how many questions were you able to ask might be one. So these are all different examples of product North Stars that are based on a good understanding of exactly what game you're playing.

Sandhya Hegde:
All right. So to summarize this, there are actually three attributes of a great North Star, not just one. So first it has to reply the value that customers are getting from your product. Otherwise, Facebook's North Star would just be ad revenue. It's not because then that would force the platform in a direction that customers don't get value out of. Two, it has to represent your unique strategy to win. So, which is why metrics like daily active users are a really bad North Star because they don't really represent your unique strategy in any way. Ideally, a metric represents something that you are doing that is special to your platform. And of course, last but not the least, it has to be a leading indicator of revenue, which means that if this metric goes up, you know that that is highly correlated to your business doing really well. That is really the essence of a product-led business.

Sandhya Hegde:
So to give you guys some idea of what this means for Amplitude, our product North Star right now is weekly learning users, where learning is specifically defined within our productivity game, as you not only are able to answer a question that matter to you, you also share the answer with more than two people in your company. So there were at least two other people who also looked at the answer that you got and together as a group, you came to a learning. So believe that learning only happens through collaboration. That's also, in fact, a part of our unique strategy in terms of how we approach analytics. It reflects the value that customers get from us, which is that their ability to learn. And of course, as our number of weekly learning users grows, our customer accounts and the value that these customers get from us grows and over revenue also grows. So this has been probably the third phase of evolution for us as a company in terms of our product, North Star.

Sandhya Hegde:
All right. So now, how does that actually break down? This is just one metric. You can't operate your whole product team on one metric. So we actually use what we call the product formula to break this down into four dimensions. So overall, our North Star is weekly learning users, we break it down into breadth, depth, frequency, and efficiency. Breadth is our ability to get more weekly learning users into the platform. So that's just how many activated organizations or customers are using Amplitude. Depth would be the number of users sharing learnings with each other. Frequency would be how often are they sharing learnings. And efficiency would be how quickly are these organizations and users getting activated?

Sandhya Hegde:
So a lot of different projects, a lot of different investments that we make in our product actually align to one of these dimensions that then effectively grows of a product North Star. All right. So now we have this baseline of how to measure success and how to set the right goal for your product organization. So we can move on to the real need of a workshop, which is how do you build your engagement ladder so that more and more people actually contribute to your product North Star, really. So how do you get everybody contributing to this North Star that now you have defined so well with the help of our engagement game framework?

Sandhya Hegde:
All right. So a lot of people think about customer engagement in the form of funnels, but the loop is really the ideal way to define it since it's this now pretty much the modern industry standard to define our customer life cycle as a loop. So this is how we at Amplitude think about engagement cycles. We think about it as starting with curiosity. So everybody starts at a point of curiosity. What is this product? What does it do? Let's find out. And from there, you need to take them to the a-ha moment of like, "Oh, this is how this product is going to make my life better." And from there you need a constant exchange of triggers and value where you remind them, or you create a product that automatically pulls people back in and they constantly create more value for your business because you are creating more value for them as a customer.

Sandhya Hegde:
So this loop needs to be extremely strong for people to then become advocates. Once they go through this loop a few times, they are now providing social proof to the rest of the world about why your product is amazing, which drives more and more curiosity from new users who can now join the platform and enjoy your product. So what we are saying, it's really that the right half of this cycle represents the retention loop. And the left top of the cycle represents pretty much the hardest digital problem in the world, which is how do you get a curious customer to their a-ha moment really effectively? So that's what we're going to focus on for the rest of this workshop. And I'm not joking when I call it the hardest digital problem in the world, because most businesses lose at least two-thirds of their customers between that step one and step two.

Sandhya Hegde:
And for your typical mobile app, it's almost as bad as like 95%. You lose most of your customers. Within weeks, 95% of your customers basically never come back. So being in this extremely noisy world, to be able to get people from curiosity to a-ha really, really easily, easily one of the highest opportunity problems to solve for anybody and you never stop solving it. So let's dig into that a little bit more. Again, while a lot of people think of this as an activation funnel or an onboarding funnel, my favorite representation of it is as follows. It's as a ladder. And the ladder really reminds you that you have to fight the force of gravity to get a customer from curious to a-ha. You don't just kind of flow through a funnel. You have to fight every step of the way. You are going to lose them unless you create that activation energy that pulls them up the ladder.

Sandhya Hegde:
And often, the big mistake people make is not giving customers enough rungs in this ladder. So right now, a ladder, the bottom is curiosity. You have the customer kind of looking up wondering what is going to be their a-ha moment. Why are they going to care about you? But the rungs might not be visible to them. Forget figuring out why they are ever going to become a loyal advocate of your platform, which is the very top of our goal, our destination around retention. So the question we we'll try to answer is how do we create the desire for our customers to climb this ladder? And to give you the answer, instead of going into theory again, I'll walk you through how we did it at Amplitude for our own product.

Sandhya Hegde:
So the way we thought about our aha moment was definitely creating your first analytics chart. Being able to realize that you can do it so easily. And you found the answer to the question you are looking for and you found it yourself. That is the big a-ha moment for Amplitude, just the ease of being able to ask and answer. But when we started growing our business, we realized that a lot of people who are not familiar with Amplitude are simply not getting from curiosity to the ah-ha moment. We had really high new user retention rates when we were only working with analytics power users. But as soon as we started growing and got a very big user base of people who were not that familiar with analytics, our new user retention rates dropped dramatically. So we needed to answer this question for ourselves, which is how do we create the desire for our new users who are not analytics power users to climb this ladder of engagement?

Sandhya Hegde:
And first I'll tell you what was not the answer. Reminder emails, push notifications were not the answer. They did not really help. All we did was make people curious again. It wasn't a rung in the ladder just reminded them that we still existed, which was not good enough to really dramatically improve our new user activation. The other thing that was happening was that we had all these amazing analysis frameworks books that were our secret sauce. We had these analysis frameworks that got you answers right out of the box that were really easy to use, but our customers weren't even discovering that. They weren't even getting to the point where they could really discover the paths to our a-ha moment. It was far away on the left, not visible to the customers at the bottom. That was a problem.

Sandhya Hegde:
So we did two things, which is add two rungs to our ladder of engagement and make it much more easier for customers to climate. The first one was finding an analysis that was already relevant to them. That was really important because as soon as they came into the platform and start saying, "Oh, there's so much happening." We wanted them to say, "Oh, here's a question that I actually think, I just heard somebody ask. This was actually relevant to me and my team. And this is the first thing I saw when I entered the platform." The second one was being able to tweak the existing analysis and instead having to start from scratch and do your own thing. Just be able to tweak it and say, "Oh, what if? What if I changed the question a tiny bit? Could I do this on my own?" So those were the two big interactions that we added to our ladder of engagement to make it easier for the customer to take baby steps needed to get to their a-ha moment.

Sandhya Hegde:
So the functionality was one, finding the relevant analysis was all about collaboration. So we created this team space where you could actually be invited by the team that you are on, not the whole company, but the specific team of three people working on a problem, so that everything that was being asked and answered that was already relevant to you. So this obviously dramatically helped us help new users find a relevant analysis. And the next one was a feature that we actually already had that was not very obvious that we started making more and more obvious. Which is if you see a chart you like, you can edit it without asking for permission, without worrying about what happens to the chart. You can just edit it because it's just your copy of the chart. You don't have to worry about anything. You can just start playing around with it and then walk away from it and nothing goes wrong.

Sandhya Hegde:
So just making it way more obvious to people that they can tweak whatever they see, no consequences, was the second really important rung in the ladder. And we ran a lot of different little experiments, did a lot of research to arrive at the fact that these were the two correct rungs for our engagement ladder. And they were the most highly correlated to the North Star metric dimension we were trying to improve, which is get more new users activated faster. And once all of this happened, then our secret sauce of out-of-the-box analysis frameworks actually started becoming really, really obvious to these customers and our new user retention, almost doubled over the period that we shipped all of these improvements to the product.

Sandhya Hegde:
And now finally, we were able to actually get more and more people to go through our retention loop, which consisted of a lot of automated alerts and monitoring and release analysis that brings them back into the product. And overall, this is really our product led growth strategy laid out for you. And what you'll notice as it's not about emails and in-app notifications, it's not about any of that. It's just crafting and designing your product for better organic growth.

Sandhya Hegde:
All right. So just to give you guys a picture of like how we were able to get new users to the a-ha moment in less than a minute. So imagine you land in an analytics works place. So this is kind of the new landing experience. If you're invited into Amplitude, you're invited by a specific team. So I'm new to Amplitude, just joined this team, and this product has got AmpliTunes, and it's now growth team that has invited me. And I can actually look around and say, "Oh, I think I'm kind of curious about some of this stuff." Like, "I would love to understand what my product's onboarding rate looks like right now." Okay. There's a welcome, there's a sign up floor. And then there is someone searching for a song, I guess that's the critical activation event. Let's see how many people actually do all this. Okay. Interesting.

Sandhya Hegde:
So see that only 22.5% of users in my product are actually activating. I'm curious if I did this only for the US, would it be different? Let's see. Only for the US. Yeah, US is much higher. It's like 38.8%. That's interesting. So suddenly, I've gone into the product for the first time, looked around having able to like tweak this on my own. So it's really confidence inspiring that I can do all this with very, very little context. And so really close to my a-ha moment because now I can save this as my own separate chart and say, "Oh, this onboarding analysis for USA customers only," and suddenly I have my own chart. I have my own chart that I've tweaked and made off of someone else's, which is very confidence inspiring.

Sandhya Hegde:
Now I can go start playing around with this new button to see "Hmm what else could I do with this?" And so you've gone through this whole journey in less than a minute, which is really the gold standard for if you want product-led growth, like how do you take people from like, "Hmm, what is this?" To, "Oh, this is what I could do with it in less than a minute." If you found all of this interesting, please check out our true product playbooks, User Engagement and Mastering Retention. You can search for them online or use these links. They are massive 175 page books that will take you step-by-step through lots of tactics and case studies from all of our customer base around how to better engage your users and how to better retain them over time. That's it from me. Thank you so much. And hope you found this helpful and best of luck improving your product-led growth strategy.

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Gretchen Duhaime
Sandhya Hegde
Executive Vice President of Marketing at Amplitude
Sandhya Hegde is the Executive VP of Marketing at Amplitude, driving our strategy to help companies around the world build better products and win. A graduate from IIT Bombay and Stanford GSB, she is passionate about all things technology and business. Having been a startup founder, VC investor at Sequoia Capital and Khosla Ventures, as well as a product leader - Sandhya Hegde is a leading expert on how companies can craft product led strategies for innovative disruption.