How Conversion Rates Can Kill Innovation

pre-revenue product Feb 28, 2019

Imagine that hundreds of prospects are visiting your landing page. If you could just turn them into loyal customers, you’ve got a business. My first instinct was to measure a series of conversion rates, but it didn’t work out as expected.

The problem with product funnels

After launching our mobile called 3 Kinds of Ice, we wanted to measure our product’s performance. So we split our onboarding process into discrete steps and put event tracking in place. Now, if we could just optimise each step, we’d be done, right?

In practice, it didn’t work out that way. Creating an onboarding funnel raised questions that we couldn’t answer as an early-stage startup. Questions like:

  • Which step should we optimise first?
  • What conversion rate is ‘good enough’?
  • Are these the right steps?
  • Will users stick around at the end of the funnel?
  • Are we even building the right product?

The more conversion rates we measured, the less focused we became. It became too easy to justify building whatever we wanted.

Good products help users achieve their goals

Facebook is one of the most successful companies in the world when it comes to activating users. Alex Schultz, their VP of Growth, reveals their secret — they think of activation as helping users to achieve a goal, not optimising a conversion rate. For Facebook, that goal is to ‘connect to 10 friends in 14 days.’

 

Firstly, they realised that a user needs to see a friend’s picture in their feed before they really feel the value of Facebook. Alex calls this the ‘aha moment’.

Next, they figured out the critical actions that new users must take to achieve an ‘aha moment’. If users don’t connect with friends, it’s impossible for them to get to ‘aha’.

Finally, they created a goal for their users: connect to 10 friends in 14 days. This goal clarifies what must happen for users to get value from the product without prescribing how to do it. It also sets up a success metric that’s easy to measure.

How to create a smart user activation goal

Creating a user activation goal isn’t rocket science. Here are the four steps:

1) Figure out your ‘aha moment’.

Can you pinpoint exactly when users start getting real value from your product? Not just understanding what the product does — but actually receiving value?

2) Identify the critical user action(s).

Which user actions are essential for the ‘aha moment’ to occur? Ask yourself, ‘If I took this away, would an “aha moment” be physically impossible?’ For example, if you don’t connect with friends on Facebook, you won’t see pictures of them in your feed.

3) Craft a SMART goal for your users.

To be smart, the goal needs to be:

  • Specific: make the goal crystal clear with no room for interpretation. Connecting on Facebook requires an invite to be both sent and accepted.
  • Measurable: it’s better to have a sensible, arbitrary number than ‘enough’ or ‘a few’. Facebook aims for 10 friends.
  • Action-oriented: it focuses on the core action that drives value to users. In Facebook’s case, this is connecting to friends.
  • Results-oriented: it focuses on what users have to do and not how they should do it. The outcome is binary: activation is either successful or unsuccessful.
  • Time-boxed: putting a time limit on the goal allows you to create user cohorts and measure improvements over time.

4) Communicate this goal to your team.

The goal isn’t a secret mission. It’s the mission. If you have a weekly team meeting, remind people of this activation goal, and the current percentage of new users who have achieved it.

A more helpful measure of progress

To give you a practical example, I’ll share how we used it at my startup. 3 Kinds of Ice is like ‘Tinder for experiences’ where each card is an interactive story about a unique experience in London.

We defined our user activation goal as ‘adding 7 places to your wishlist in 7 days’. Users get an ‘aha moment’ when they see somewhere they want to visit. The critical action is ‘swiping right’ to save the venue. Focusing on this use goal helped us activate 70% of sign-ups. Here are a few of our most effective tactics for increasing activation:

  • We allow users to add places before creating an account.
  • We make swiping right the primary interaction, Tinder-style.
  • We spell out why it’s useful to add places.
  • We give users a target of adding 7 places with a progress bar.
  • We email users that don’t reach this target.
  • We reward adding 7 places by unlocking features and discounts.

Focusing on a user activation goal increased our ability to convert and retain users. Our daily to monthly active user ratio is 30% and our D1 retention is 50%. I believe the way to improve these metrics further is to keep focusing on better activation.

Activation is critical for early-stage startups

Defining your activation goal helps you design, build and communicate better products. It has a huge impact on the effectiveness of your lead generation and your retention efforts.

You still need to prove out acquisition and retention to establish product-market fit, but your user activation goal is often the glue that holds these metrics together.

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