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💎 Growth Gems #85 - Monetization and Onboarding
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This week I’m sharing gems on:
These insights come from Tobias Boerner and Madhavan Ramanujam.
🥇 TOP GEM OF THE WEEK
Onboarding: messaging, personalization
Fastic’s onboarding has been mentioned as a great implementation example of a “long onboarding” several times (including by me).
In his talk How to Increase Revenue with ASO & Product Onboarding at App Promotion Summit Berlin, Tobias Boerner (Co-founder at Appic) shared the thinking and explanations behind most of the steps.
Keep in mind that each app is different, but his insights might give you some good experiment ideas!
💎 On the first screen of your onboarding, communicate about the end goal: why are customers using your product? Example at Fastic: Feel better quickly vs. lose weight in X weeks.
💎 The best time to display the legal stuff is at the very beginning of onboarding, so you don’t add that friction later, especially if your onboarding is long.
💎 If personalization is important for your app, ask for the user’s name early on and keep using the name in the following screens.
💎 Before you ask questions in your onboarding, explain why you’re asking them. Give users a clear “reason why” and the feeling that sharing that information with you is ok.
⛏️ Going Deeper: Fastic does this at the beginning of each main section of the onboarding.
💎 Always have a progress bar on top of your onboarding so people see where they are in the process. People like to complete things, so there is a gamification aspect. Don’t start the progress bar at 0.
🤔 My 2 cents: I’d nuance this “always”, but do test a progress bar.
💎 Explaining your app’s method, mentioning studies/science, and introducing the experts behind your app educates your users and builds trust.
💎 People do scroll down and read long paywalls.
⛏️ Going Deeper: Tobias shared the tool they used to conclude this: smartlook (Tobias mentioned it was Android only, but I had confirmation it works for iOS as well). It’s a sort of HotJar for apps to understand what users are reading and where/why they drop off. I imagine you could run it for only a small percentage of users.
Pricing: product-market-pricing fit, willingness to pay, segmentation
In Growth Gems #82, I shared insights on pricing from and episode of Lenny’s podcast.
Did I really want to share more on the pricing topic?
This 98 minutes episode was 100% worth it, even though I now have several new books to read.
It took 3x this time to properly “mine” the episode, so if you like it, please hit that Substack ❤️ button 🙏
💎 Pricing is a cross-functional discipline but should sit on the product side because you must design the product based on the value and what users are willing to pay for.
💎 It’s not just about product-market fit. It’s about achieving a product-market-pricing fit. Willingness to pay is a proxy for “do people actually value your product?”
💎 Entrepreneurs and companies need to look into the willingness to pay much earlier, so they can understand if they are on the right track. If you have a price conversation with a potential customer, knowing if they’re willing to pay or not (and why) helps you build a better product. Why would you postpone this?
⛏️ Going Deeper: pitch the product that you’re about to launch, have the exact same conversation you would have if the product was launched, then ask, “what do you think is an acceptable price?”, “what do you think is an expensive price?”, and “what do you think is a prohibitively expensive price?”. You’ll figure out some “cliffs” and thresholds.
💎 You can not prioritize a product roadmap without having the willingness-to-pay conversation.
💎 You should ask about willingness to pay relatively. Example: comparing with the value another product brings, like “if Salesforce was indexed at 100 in pricing, where do you think we should be?”.
💎 Willingness to pay method: purchase-probability questions where you ask someone to rank on a scale of 1 to 5 if they would buy the product: 1. Not at all interested / 5. I would buy it for certain / 3. I’m neutral / 4. I would most likely like it. Even a 5 means people are about 30% sure they’d buy it.
💎 Willingness to pay method: most and least questions. If you give a list of 10 features and ask people to rank them, many people will find that painful (because the middle part is hard). So you first select a list of 6 features out of 10 and give them “must-have, I will pay for it” and “I don’t need it, I won’t pay for it”. Then, select another set of 6 features and ask them the same thing. Do this a few times with different combinations to prioritize your feature set.
💎 Willingness to pay method: “trade-offs” exercises. You put people through an actual buying scenario and ask them “if you had this packaging/features and pricing, what would you do?”. Then change the set of features and pricing, and ask them, “what if we change them like this?”. This is pretty realistic and akin to real life and helps you reveal the mental models and rules people use to make decisions.
💎 Willingness-to-pay methods are different for various products and stages of a company.
If you’re very early stage (e.g., just an idea), ask, “would you pay for it?”.
If they say yes, ask why (they will articulate the value they understood)
If they say no, ask why
If you’re at the series A or seed stage, the purchase-probability questions can be a quick and dirty way to get an answer and point of view.
If you’re late stage and need to be more precise, use methods like the trade-offs exercises.
💎 If you’re a B2C company, it might be easier to run a more quantitative analysis so you can get 1k-2k responses.
💎 Pause and think about revisiting your pricing every 6 months. Between 12 and 18 months is probably a good time to revisit pricing. There are also some pivot points when it makes particular sense to change pricing: new plan, new feature, etc.
🤔 My 2 cents: remember “Think about your pricing just like you do your roadmap”? That’s already two experts that have the same opinion.
💎 Most people think of segmentation as a demographic or persona exercise, but they get it horribly wrong. Segmentation needs to be based on what customers need, what they value, and what they’re willing to pay for.
💎 You need to be able to productize to segments. If you’re trying to build a product and then trying to position it to segments, you’ve already lost the battle. Example: the water we drink can be free at the fountain, $2 at a gas station, $5 in the hotel minibar, and $8 for liquid death.
⛏️ Going Deeper: Madhavan later said, “one size fits none,” and shared that the key is to understand if there’s a significant market size where the needs are similar and where users are willing to pay. Same example: water at the gas station, or water at the hotel minibar, etc. When you understand these segments, define what you build for each segment. Focus on targeting one segment and having messaging for that one segment.
💎 Doing the willingness to pay and segmentation exercise early will tell you how many segments there are, their size, how to prioritize them, which one to pick first, and which product to build for that segment. You then productize to the other segments later.
💎 People switch segments and can belong to different segments, so you don’t want to have a static segmentation: you need to understand dynamic segmentation. For example, depending on the day, someone might want Uber pool or Uber black.
💎 There are only three types of pricing strategies:
Skimming strategy, typically for premium products. Example: iPhone, where they launch at a higher price, then when a new one comes out, they decrease the price.
Penetration strategy, operating with much thinner margins and playing the volume game. Example: Amazon.
Maximization strategy, where you’re not in either of the two extremes above, and you look at what you can maximize in the next couple of years. Example: Microsoft
💎 Framework to think about packaging and bundling:
Leaders: the leading product (e.g., Big Mac)
Fillers: something that customers might not have bought if it wasn’t in a bundle (e.g., french fries or coke)
Killers: products that can kill the bundle for everyone (e.g., adding coffee to a menu) and decrease the bundle's value, yet can be great candidates to have as add-ons.
⛏️ Going Deeper: check out Insights from 100 SaaS Companies: Why It’s Time to Rethink Your Packaging Strategy for more on this. It says SaaS, but don’t be scared.
One quick tip: the rule of thumb is that if 10-20% of customers want something badly, that’s usually an add-on (unless you have an advanced package just for them). If over 50% of people want something, that’s a leader product.
💎 How you charge is the most important question, not how much you charge.
⛏️ Going Deeper: Michelin developed new, long-lasting tires but couldn’t ask for a 20% premium. So they charged based on the number of miles people can use the tire for. Truckers loved this “pay as you go” model because it was based on usage and became a variable cost they could pass off to customers.
💎 You need to pitch benefits and what people get from the product. If you’re pitching features, you’re not talking value. If you’re not talking value, no one will get it.
💎 There’s always an irrational side of our brain that makes decisions. Understanding this as a product person will help you build products and position them in a way that appeals to both sides of the brain. Example for pricing: decoy product.
💎 Showing a suite of products as a puzzle to be completed instead of a list of products will increase the number of people buying more products. This “panini effect” can work for both B2C and B2B. Example: Starbucks bingo card
💎 You need to test price thresholds for your own products and categories because the anchors are also referenced based on other alternates and what the perception of value is. Example: $99 -> $101.
💎 Instead of reducing prices (e.g., during a recession), think about non-pricing alternates:
Give more product for a period of time at the same price they’re paying
Change contract terms (e.g., longer contract)
Change payment terms (e.g., 15 days -> 30 days)
Change business model (e.g., change to usage-based)
💎 Most people don’t understand the interaction effects between acquisition, monetization, and retention of customers or, worst, treat them in silos.
🤔 My 2 cents: this is VERY true. Madhavan has a book coming out on this exact topic.
And before I leave, here is a quote on the importance of a consistent customer journey:
“Imagine you go to the store to buy a pan, and what you pull out of the box is very different from what’s on the box. We do that all the time with mobile advertising” - Tom Hammond (CEO at UserWise)
See you next time. Stay savvy!
How to Increase Revenue with ASO & Product Onboarding at App Promotion Summit Berlin
The art and science of pricing on Lenny’s podcast