Customer Traction

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How to use product loops to supercharge your startup

Dharmesh Raithatha

Product Partner @ Forward Partners

When building out the product for your startup it can really help to think about your customers not just interacting with your product in a single moment or interaction. In fact, your product offers a set of interactions that loop together. Every product has a loop, some products like Facebook have you go through their loop a few times a day and other products might have you go through your loop yearly (like tax return software). Regardless of the frequency there is always a loop.

This article gives some examples thinking of the “loop” can improve your decisions on what to build first and how to improve your product.

Key takeaways

  • Getting your core loop right is critical to everything else

  • All loops must give your customer a delightful reward to keep them engaged

  • Keep the loop going by enticing them back in through notifications

  • Add growth loops to get that hockey stick growth.

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Really understand your products core loop

Your users will use your product multiple times a day, week or year. Each time they come they want to achieve something and, more often than not, each product focuses on one thing and does it really well. Especially in the beginning.

When you first start out building your startup you will have a lot of ideas of what your product needs to be, what features it could have and the big vision. But where do you start and what do you focus on first? The answer is your core product loop. As soon as you are confident that you have hit upon a great startup idea you should then prioritise your product development on building out your core product loop. Every other nice idea and feature can wait. Just build the main core loop to see if users will go through it even once.

Here are a few examples of product loops for a few different businesses:

AirBnB (traveller):  I want to find somewhere to stay for a short period -> Find Airbnb -> Search for a property -> Confirm availability -> Book property -> Go on trip -> Repeat

AirBnB (host) : Set available dates and prices -> Confirm availability -> Get paid -> Repeat

Patch : I want to make my home nicer with some plants -> Go to Patch -> Find a plant -> Choose delivery slot -> Pay for plant -> Enjoy your plant -> Repeat

Facebook: Want to stay in touch with friends, Come to site, Add friends, View Feed, Read something new -> Repeat

Mailchimp : Want to send emails to my customers -> Build email > Choose customer segments -> Send emails -> Get site traffic -> Repeat

As you can see the loops above are pretty simple to describe and cover the core of what those products are about. Over time as they have grown they have built more features, even different loops but the spine of those products have never really changed.

What you can also see in the examples above is that within each loop the customer is getting something of real value to them. If you want to get more sophisticated, Nir Eyal in the book Hooked talks about how using variable rewards can actually increase user engagement  

Make sure your core loop delights

As customers go around the product loop you must make sure that they frequently receive something that delights them. The best way is to make sure that some real need is being met (i.e when they find a nice place to stay or complete their tax returns easily). It is not necessary that each time the need to is satisfied to the same extent. In fact, variable rewards have been shown to increase habit forming behaviours (taken from Hooked).

Bringing them back into the loop

When your customer leaves your product loop they may never come back. Sometimes this is because they don’t like what you have to offer but other times it is because their particular need is infrequent or their attention has just been diverted elsewhere. For example, you don’t buy plants every week. Once your customer is out of the loop your product will start to fade from their memory. This means when they do have that need again they might not go direct to your product or they might go to a competitor.

Notifications and emails are a great way to bring your customers back into the product loop. In order to send a notification, you need to persuade a user to allow you to send them updates or notifications outside of your product (through email or phone).

Facebook reminds you when you have a new message, Patch sends you emails letting you know how you should look after your plants, and AirBnB hosts get notifications that someone would like to book a holiday.

Once your core product loop is working, you should be constantly testing out different ways to build in this behaviour into your product as it can have a huge impact on your customer lifetime value (LTV).

The more value you can offer in these external messages the more successful they will be in driving users back into the loop. That is why it is crucial that you store enough data about your customers so that you can personalise the messages and make them relevant as you scale.

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Speeding up your core loop

Once you have customers going through their loop you should also think about how you can increase the speed they go through that loop by removing friction at every step. Utilise a combination of identifying where people are struggling through user testing, look at your funnels and segment data to find opportunities to improve how your users are getting through the loop.

By relentlessly focussing on improving the core loop you will improve your business metrics and customer advocacy.

Instagram is a great example of a product that achieved great success by really honing their products core loop before adding additional features.

Instagrams core loop:  Capture a moment -> Apply some filters -> Share the image with their friends.

As they wanted Instagram to live up to its promise to be instant regardless of network speed, the app uploads the initial photo while you are applying the filters and then once you are ready just sends the filter changes to the server. This made the app feel much more responsive on slower networks and increased the delight of customers and their willingness to go through the loop again.

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Supercharging your core loop

In order to achieve exponential growth for your start up you can start to turn your product loop into a product and growth loop. Growth loops are where one cohort of customers going round the product loop will let you bring in additional new customers in the loop. It turns out that there are not that many growth loops, although there are many growth tactics.

Here are some examples of growth loops (taken from a great Andrew Chen post)

  1. The paid loop - You pay to acquire a customer that generates some profit and you use that profit to acquire more customers.

  2. The user-generated content (UGC) / Search (SEO) loop - customer creates content which is then indexed by Google that brings new customers to the site, some of whom will create new content.

  3. The virality loop - This is where your customers encourage other customers to use the product. This might be through word of mouth, as well as through incentives like referral schemes.

Some of these growth loops are built in naturally into your product loop. For example, social platforms require you to add contacts in order to get the delight and hence they tend to grow very, very fast if they are successful.

Paid growth loops are normally much slower and include constantly experimenting and improving the product and optimising marketing strategies until your lifetime value of a customer (LTV) is higher than your cost per acquisition (CPA). Once those metrics flip over you can really accelerate your growth trajectory.

As you develop the product you might incorporate a number of these growth loops into your product to improve your business metrics. Referral programs are a good example of this in many e-commerce businesses.

Adding more loops

Finally, once your core loop starts to really hum, you can layer on more and more loops. You will find more ways to offer value to your customers and bring them back into the core loop or adjacent loops in the same product. My last piece of advice though would be to never forget your core loop, It is critical to your business.

Dharmesh Raithatha

Product Partner @ Forward Partners

Dharmesh is Product Partner at Forward Partners and helps founders the've backed go from ideas to a great products and businesses. He has a passion for User Research, Lean UX and using data to inform decision making. Dharmesh has a background in artificial intelligence and has been doing product for over 12 years in his own or other high profile startups.

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