The Economics of Relationships
In the short term, optimizing for metrics outpaces the monetary gain of the relationship-centered approach. Extending the time horizon, however, reveals a different story.
This is a core friction in existing product teams. When A/B tests becomes a primary decision making tool it's easy to see why, if they're lucky to be shipped at all, more user-centric variants are often rolled back.
The decision to roll back an intiative is often made on a per intiative basis and only after evaluating on a short time horizon. Loop this approach and you end up with a product optimized for short term gains, creating a disparate, disconnected experience. This ultimately leads to a less sticky product, more churn, and more pressure on paid aquisition.
In order to build a product that is optimized for long term value, it requires stringing together user-centric initiatives designed to build upon one another to better serve the user. When serving the user better than anyone else becomes the end goal, it makes a lot of sense to build initiatives that feel right or are qualitatively validated.
Breaking free from iniative-by-initiative validation allows teams to build the best thing for the user. When people interact with a genuinely good experience, they're more likely to share it with others. Done right, you only get better at serving this audience. As a products ability to serve an audience improves so does the liklihood that user will recommend the product to others. Not only is a recommender more likely to stick around (retention up), the recommended is more likely to stick around. This compounds naturally.
New product playbook users levearge this understanding. The only thing beteween the short term horizon comparison and overtaking the old playbook is time.
No matter the approach, fundamentally, we need to...
- make a thing (features)
- attract people to the thing (aquisition)
- get people to buy/use the thing (conversion)
- hopefully get them buy/use it again (retention)
How we choose to go about these ends reveals how they yield such different outcomes.
| Old playbook | |
|---|---|
| Make a thing | We often decide what to make by the crosss section of projected revenue and least time/cost to implement. |
| Attract people | We often rely on paid aquisition to get people to the thing. |
| Get people to buy/use the thing | We often choose conversion tactics over experience to get people to buy/use the thing or pad pockets. |
| Get people to buy/use it again | We often focus on incentivizing repeat purchase through monetary incentives, gamification or more features. |
| New playbook | |
|---|---|
| Make a thing | We make a thing that is useful, desirable and easy to use for a specific user. Who we serve is extremely clear. We prioritize through focus. |
| Attract people | We use value driven organic social to attract people that share our values. |
| Get people to buy/use the thing | We use leverage relationship captial we've built to make strategic asks. Our business model supports and incentivizes building well for this group. |
| Get people to buy/use it again | We use referrals a the main proxy for success, thus we can't incentivize it. We do however make it prominent. |
Through service of a specific user, we can make a product worth using. When we do this extremely well, we make an experience worth organically telling others about. When people refer others, we get a head start on a positive relationship for them to do the same.
The new product playbook is not only more effective at building resilient businesses, it's generally more economical. The only tradeoff is the new playbook requires a longer time horizon to see the results. Hence why spending time to try to convice you of it's merit is worthwhile.