By Harry Williams
As “customer-centricity” (aka. “human-centred design”) rose to cult status over the past several years, a simple formula for digital product design emerged. Define your target audience, understand their needs and desires, design a product that solves them better than competitors, and voila. You have yourself a successful digital product. A select group of design agencies and individuals enjoyed riding that wave for a while. But it’s becoming apparent that that wave is all wash and no break. We’re going to take a look at why this isn’t the optimal formula for creating successful products and present an alternative we think can help — growth-led product.
Why customer-centricity is not enough
Firstly, a slick product that does the best job of meeting the needs of its audience does not make it a commercially viable product. If the cost to create and operate that product outweighs how much you can charge for it, it’s not going to last long in the market. Within the tech industry, it has been a well-trodden path to focus on user growth, regardless of revenue generation. But with the macroeconomic environment changing its tune post-pandemic, even risk-happy VCs want to see more proof of revenue before parting cash. Let alone more risk-averse corporate boards and investors. But this is probably the most obvious and understood reason why a pure customer-needs-driven approach to product design doesn’t make sense, and with the likes of service design/common sense, most people are already thinking about how a product will make money during its inception.
The second reason why focusing solely on solving customer needs isn’t the best approach is that humans are not rational. Economic theory over the years is based on the assumption that when consumers are presented with all relevant information about a given decision, they’ll pragmatically analyse all variables and make a rational decision. This simply isn’t the case. This is the argument that the field of behavioural economics convincingly makes, stating that humans are subject to a range of cognitive biases and heuristics which impact their decision-making. We’ve evolved into the species we are today by being irrational decision-makers. Although this decision-making approach has been fine-tuned over thousands of years, the results are very much applicable to how we decide on the products we use today. Take Apple as an example. The biggest technology brand, with the iPhone being used by 1.2 billion people across the world. But when you look under the brushed aluminium and gorilla glass, do they provide the best mobile phone? The impartial and un-brainwashed will tell you not. So why do the majority of people in the US — and across many other markets — choose the iPhone when they don’t solve needs and desires better than their competitors? For many it’s the social proof — you don’t want to be the odd one out when most of your friends are flaunting their iPhones, often via the visible billboard of pearlescent white AirPods. For others, it’s the desire to associate their personal identity with the brand values of simplicity, elegance, and innovation that Apple behold. The list goes on. But hopefully, you get the point — Apple’s products aren’t successful purely because they meet the functional needs of their audience better than their competitors.
Thirdly, getting your product into the hands of your audience, in a cost-effective way, is becoming more difficult than ever. ‘Build it and they will come’ is no longer a wise approach (was it ever?) as low-cost hosting, access to cheaper talent, no-code solutions, and AI are pulling down the barriers to launching digital products. Many of the players launching new products turned to the relatively easy and cheap Facebook and Google advertising networks to market their products, but as markets became more saturated, those advertising channels were no longer feasible for many. It simply costs more to acquire a user via those platforms when compared to the money they’d make from the same user over their lifetime. As a result, organisations are being forced to explore more creative and novel marketing tactics to support a feasible business model. This often involves the product itself having to work harder. Growth has become the responsibility of the product, not just the marketing team.
The role of growth-led product
We believe that an effective antidote to an over-reliance on customer-centricity is a growth-led product approach — this can be broken down into three areas:
- Building growth mechanisms into your product
- Acknowledging and designing for cognitive biases and heuristics
- Further differentiating your product through your revenue model
The most important element of growth-led product thinking is actively integrating growth levers into the product, with the aim of triggering viral growth. One type of lever is social utility — whereby users get more value out of a product when they invite friends and family to use the product with them. Social networks offer the best example of social utility at play, but there’s an endless list of products that have thrived as a result of facilitating social interaction, engagement and value exchange — Etsy, TripAdvisor, and Slack, to name a few.
Now many of these examples are products with social and community at their core, but there are plenty of other examples where a social element has been strategically bolted onto their product with the aim of triggering organic viral growth. Often in those cases, users are initially attracted to a product as they seek out the core functional value that the product provides, but their engaged and retained as a result of interacting with the social utility element of the product. To put it another way, users ‘come for the tool, stay for the network’. Strava provides a great example of this. Where cyclists, runners, and other sporty folks, start using the app to track their activities, but their engagement grows as they follow fellow athletes and join groups within the app. Before they know it, they’re tracking their kudos (likes) and competing on virtual segments and they can’t imagine a world without Strava.
Another type of social utility is where a specific product feature delivers value to the user, whilst exposing the product to a new audience. Monzo introduced Monzo.me in the early days so users could request money from friends and family who didn’t bank with them. New prospective users could pay their friend without signing up for Monzo, gaining exposure to a core element of their value proposition — the speed and simplicity of sending money. DocuSign operates with a similar tactic, making it easy for users to share documents to be signed.
Word-of-mouth and customer referral programmes are the more established examples of in-built growth levers. Referral programmes — offering users monetary discounts as an incentive for inviting others to try a product — haven’t evolved much over the years, but they continue to be effective for many, so long as the numbers stack up. When it comes to word-of-mouth, a quality experience and excellent customer service prove to be effective for most. And although it can be difficult to quantify their impact, in this day and age, they’re very much hygiene factors if you’re to stand out in a demanding tech-savvy society.
When it comes to acknowledging and designing for cognitive biases and heuristics, we all have a responsibility to never mislead or misinform our audience. But it doesn’t make sense to put up unnecessary barriers that prevent people from trying out our products. Take decision paralysis as an example, a concept that many people will be familiar with. When we’re faced with too many choices to consider, we go into a state of overanalysis and may often end up not making any decision at all. In a study published in the Journal of Personality and Social Psychology in 2000, researchers compared the impact of presenting shoppers with 24 different flavours of jam and just 6 flavours. They found that more people stopped to try the jams when there were fewer flavours available and that a higher proportion of those people made a purchase. However, when there were more flavours available, fewer people stopped to try the jams, and a lower proportion of those people ended up making a purchase. The takeaway? Offering your customers more choices isn’t always the most effective strategy. That’s just one example of how we should be paying greater attention to behavioural biases and heuristics.
Coming up with a feasible revenue model for a digital product can be relatively straightforward in theory, with many relying on some sort of subscriptions or pay-per-use. But you could reap benefits in exploring more creative ways of monetising your product, whilst avoiding putting up barriers that prevent people from using your product. This can be particularly important if you’re investing in in-built growth levers that are more effective the more people are exposed to your product. This could include transaction fees, licensing models or sponsorship models. In some cases, players could thrive in a market primarily due to a more creative method of charging users. Take ClassPass as an example — they understood that customers don’t always want or need a fixed membership, and instead might choose access to specific classes of interest. The proposition and revenue model are intrinsically linked, which means that product usage and monetisation are too.
The practicalities of shipping growth-led products
Integrating growth-focused thinking into your product design process starts with organisational solutions.
If the product/design and marketing/sales teams work independently, there will inevitably be a lack of cohesion between how a product is being designed and how it’s being sold. Eliminating those silos and urging collaboration earlier on in the process is one way to avoid this. Or you could even take a leaf out of Spotify’s book, and many other thriving tech players, by organising the business into multi-disciplinary teams — consisting of individuals with expertise in design, development, marketing and sales — removing traditional departments altogether.
Another consideration is when it comes to choosing which partners to work with. If a design agency lacks growth and marketing capability or an advertising agency doesn’t have people who design products, then that should be a red flag. More agencies are cropping up that integrate design, development and growth capabilities in one place, offering a single partner to transition from idea to delivery. And yes, Class35 does so happen to be one of those.
……………….
Harry Williams is a Strategy Lead at Class35. Before joining C35, he spent 4 years founding and building a digital travel startup, Pluto. Along with his co-founder, they launched two award-winning products with 10k+ customers, became a certified B Corp and raised £900k in private investment. Prior to Pluto, Harry spent time working at Bow & Arrow and Fjord.
Drop him a line to chat about growth-led product thinking, endurance running or the best spots in the Cotswolds: harry.williams@classthirtyfive.com
