It’s the time of the year you shop for the next one year. Yes, Diwali is just around the corner!
With Flipkart, Amazon and Snapdeal leading the online scene, it’s raining festival offers all around!
(Side note: Look beyond these e-commerce giants you might find what you are looking for at a cheaper price!)
The background story
(Skip it if you already know)
If you call the e-commerce game in India as a battle between David and Goliath, Amazon would be the Goliath and Flipkart the David. They have been at each other for quite a long time. When Flipkart started Big Billion Sale in 2014, Amazon came up with Great Indian Festival. And every (not only, but especially) Diwali season, they have been eating off each other’s plate. It all started because, they wanted to get people online to shop. In 2015, Flipkart even tried to get people on mobile to shop. And this time around they wanted people to make big purchases online* by promoting home electronics.
Let’s get to Now.
Despite their efforts to get people to shop online,
Right now just 1% of Indian retail is online, compared with 10% in China. (Source: Live Mint).
So, yes there is a room for a lot more players and many such sales.
Fundamentally what e-commerce companies are trying to do is change customer behavior and all of us know it is not an easy thing to do (if you don’t try changing your own habits!). By offering deep discounts, the e-commerce sites are triggering(discounts) a behavior(buy online) but if the trigger is needed every time to observe the behavior are the efforts even worth? And this bring us to,
Elephant in the room
So, who is paying for it?
As a consumer you are not. The sellers may be, but not much. The reason I say not much is because, some sellers might markdown if the volumes are high. Then who has to?
E-Commerce Companies (Duh!)
Surely, they cannot do that with the Venture Capital. I mean how long before VCs realize that their cash is burning their own pockets?
So how do they do it?
Building the ecosystem
Throwing such a big discount party takes quite a lot of effort. As a consumer you might be aware of ads popping up everywhere. Surely, there are invisible anchors that support the great purchase tsunami . I mean, we are looking at a temporary surge(quite huge) in volumes of traffic, transactions, deliveries and customer support calls. So, each of these big giants have to ensure that they have the proper ecosystem to support such huge numbers.
Data centers – to support the traffic and the applications
Supply Chain – to make the products available on time to the customers at the lowest cost ie. have partnership with the sellers, warehousing and delivery
Payment System – to ensure trust and easy of transaction
People – to support systems for whole 24 hrs for 5 days
Both Flipkart and Amazon learned their lessons about having data centers (the website crash in 2014), partnership with sellers and false pricing. But more importantly, getting people online doesn’t mean getting people to their website. (Hence, the eating off each other’s plate analogy.) So the real story?
Let’s get to numbers.
(But not the ones you hear in the news.)
Over 70% Discounts. Over 1.5 million units sold. Rs. 1400 Cr in one day.
Such fleeting numbers indicate very less about the value of the business. I mean with the big marketing budget you might expect a big number such as these. But it really doesn’t talk about the impact. Impact in terms of new customers, revenue (or loss) per customer and many more.
In order to understand the value we need to try and look at it from different perspectives:
Consumer – I care about discounts and sub-consciously care about units sold (behaviorist calls it confirmation bias – everyone’s buying it).
E-commerce – Never seen such huge numbers in my life! I am doing awesome! (That’s what I will tell the media, but secretly how far are we down on our cash flow?)
Venture Capitalist – I worry about discounts but give me more data!!
That’s right. No VC would take any of these numbers to the face value because they do not give the whole picture.
Every campaign has a goal:
“What we want to do during Big Billion Days is provide incredible NPS (net promoter score) experience—one of the things we’re trying to do without increasing costs dramatically is how to keep the NPS incredibly high during the event. I primarily view this event not for revenue, but for customer experience,” said Ananth Narayanan, CEO of Myntra. (Source: Live Mint)
NPS is a very good measure. But that is not all. Especially if you were to look at campaigns at this scale. Here are a few metrics that will help us understand the impact of such sales better:
Customer Interest – # of searches
Customer Experience – NPS
Customer Engagement – Time taken for purchase decision
Customer Adoption – # of New Users, Average Value of Purchases (are they buying costlier products online)
You see novel ideas everywhere and there are a plenty of inspiration for new ideas around us. You often make a mental note of several such ideas. But when you sit down to write ideas in detail, the ideas become a little murky. Coming up with an idea that your sparks your interest and passion is not easy. Therefore the first step to great product design is to generate a lot of ideas.
The course introduces you to different types of ideas. There is a good chance that you might have come across them while reading books or articles. For you reference, here are the types of ideas:
Simplify — Layout by Instagram — It simplifies combining photos.
Me too — Flipkart — It is an e-commerce platform just like Amazon but in a different market — India.
Remix — Slack — It combines chat, email, messaging in to one team communication tool.
Virtualize — Lyft — Cab services virtualized.
Mission Impossible — Project Loon by Google — Aims to provide connectivity to the world by sending baloons to remote areas.
To do: Idea Gym: Using the above types of ideas evaluate the existing ideas and then create some more. This makes up for a very good warming up for the next task.
Look at Problems
A good way to start thinking about ideas is to look at problems.
List the problems in your life/work
List out possible ideas to address the problems. (You are allowed to go crazy here)
The reason to start with the problems in your life is that you become an user to the product and it becomes a lot easier to understand the user needs. This is very well explained by Paul Graham from Y-Combinator.
I made it myself. In 1995 I started a company to put art galleries online. But galleries didn’t want to be online. It’s not how the art business works. So why did I spend 6 months working on this stupid idea? Because I didn’t pay attention to users. I invented a model of the world that didn’t correspond to reality, and worked from that. I didn’t notice my model was wrong until I tried to convince users to pay for what we’d built. Even then I took embarrassingly long to catch on. I was attached to my model of the world, and I’d spent a lot of time on the software. They had to want it!
The danger of an idea like this (pet social network) is that when you run it by your friends with pets, they don’t say “I would never use this.” They say “Yeah, maybe I could see using something like that.” Even when the startup launches, it will sound plausible to a lot of people. They don’t want to use it themselves, at least not right now, but they could imagine other people wanting it. Sum that reaction across the entire population, and you have zero users.
When you have an idea for a startup, ask yourself: who wants this right now? Who wants this so much that they’ll use it even when it’s a crappy version one made by a two-person startup they’ve never heard of? If you can’t answer that, the idea is probably bad
When you find the right sort of problem, you should probably be able to describe it as obvious, at least to you. When we started Viaweb, all the online stores were built by hand, by web designers making individual HTML pages. It was obvious to us as programmers that these sites would have to be generated by software.
Another way to start looking at problems is to think about big problems in the world. Y-Combinator has put out a great list of big problems which is available here. Use them, if you are finding it hard to list out the problems you have.
Big ideas generally
Solve a Novel Problem — Google Search
Extend an current solution — Coursera, Udacity (similar to idea types)
Disrupt an Industry — Uber
Questioning the Problem-solution the Idea:
Do startups only solve problems? Facebook doesn’t solve any problem, neither does twitter, then how are they successful?
Facebook didn’t not start out solve a problem. As Nir Eyal puts it, Facebook started out as a Vitamin – nice to haves. But then again, can you do without with?
How often do you feel the need to update your Instagram? How long do you look at Facebooks news feed?
In Nir Eyal’s words,
Pleasure Seeking (vitamins) over time becomes Pain Relieving (pain killers) by creating habits.
So yes, you still can go ahead create the next social network for pets, but make sure you are able to form habit around the product that would prompt users to keep coming back to your network.
Step 2: Evaluate idea or Research
Once you have a couple of ideas on your list, you should start researching on:
Similar product ideas
You can use Similarweb, whois.net to find out similar ideas and details about existing players.
A good place to look for the market demand online is to use Google tools such as Google Trends, Keyword Planner, AdWords.
Step 3: Validate an idea.
You can talk to people, but the best way is to put out the minimum viable product (use deadlinks if need be) and let users interact with it.
Step 4: Value proposition
Value propositions serve to inform a customer what problem are being addressed and how the product is a solution to that problem.
It is quite common for value propositions to specifically define a pain point present in the customer’s life. Essentially, the Value propsition could look like this.
For (target customers)
Who are dissatisfied with (the current alternative)
Our product is a (new product)
That provides (key problem-solving capability)
Unlike (the product alternative)
Example provided in the course:
Grocery shopping is often a time consuming and frustrating chore. With the Super Duper Shopping App on your phone you can find a store near you, pick out your groceries, and have them ready for pickup or delivery to your door.
To know more about value proposition, you can refer this deck.
UX and UI
I am going to be honest here. This portion of the course was a lot about user experience design and of course it had a lot to do with “UX design”. This is probably the first time I am learning about the topic. So, I do not feel comfortable about putting out the notes. However, I will leave a list of topics that was covered so that you could just google them. (If you are a UX designer, you may skip this part)
Interaction Design – Basically talks about all the tasks that the user would perform on your application or product. Then you dive in and describe the sequence of tasks the user performs.
Design Flow – From interaction design you know what tasks that user is going to perform, so how do you make it easier? That is, begin with the sketch board and start creating connections between the tasks.
Material Design – About continuity of usage across devices and bringing the element of motion to provide a intuitive direction to the user (read: after effects).
Accessibility Design – How to make your product accessible to say users who are color blind or users who prefer high contrast screens? I would’ve never thought about this before. But given the google’s customer base, such issues become quite important to solve.
Apart from this it had pointers to:
Home Page Design
Payment Forms Design
Design sprint was developed and popularized by Google Ventures (now GV) to provide a quick idea to launch cycle. According to the website:
The sprint is a five-day process for answering critical business questions through design, prototyping, and testing ideas with customers. Developed at GV, it’s a “greatest hits” of business strategy, innovation, behavior science, design thinking, and more—packaged into a battle-tested process that any team can use.
The sprint gives you a superpower: You can fast-forward into the future to see your finished product and customer reactions, before making any expensive commitments.
Essentially, Design Sprint Consist of 6 stages:
The best introduction to design sprint is available in the deck below. (Wait for the slideshare to load..)
I found the material in Google Ventures library very comprehensive. In a series of 6 posts, the author Jake Knapp, Design partner at GV, describes design sprint along with various methods for every stage. I highly recommend you to read them.
Metrics is one thing that is so easy to overlook. But in fact this is probably the single most important thing that has the potential to jet-pack or bomb a start up.
This reminds me of Silicon Valley episode in which Jared buys signups from India for their video compression application in order to keep the investors interest. Sure, the investors were delighted by the numbers (and then Richard of course breaks it to them that the sign ups were bought) but the real problem they faced was user retention. The app was simply too complicated for people to use it.
Therefore having the right metric is quite important. Otherwise you may end up solving unnecessary issues and wasting the little resources you have as a startup.
Said that, a metric to a start up is as unique as the idea itself. So you are at your liberty to choose the metric that reflects your success. Here are some of the metrics that you can use:
Net Promoters Score (NPS)
According to Wikipedia, NPS is a management tool that can be used to gauge the loyalty of a firm’s customer relationships. NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of +50 is excellent.
The Net Promoter Score, itself, is calculated based on responses to a single question:How likely is it that you would recommend our company/product/service to a friend or colleague?The scoring for this answer is most often based on a 0 to 10 scale.
Every day, in every Apple retail store across the world, all the employees gather to talk about the net promoter scores (NPS) collected the day before. If someone gets a high NPS, the manager calls it out: “Hey everyone, Jenny got a great NPS yesterday.” The staff members clap. The manager then wants everyone to know how this was achieved: “Jenny, can you share with us what happened with that guy who came in with the iPad mini?” So, Jenny tells the story of the great service this guy received.
Because Apple’s employees are regaled every day with stories of great customer service, they all know what it looks like. They are not forced to remember so-called inspirational posters with corny customer service acronyms. Instead, they get praise from their managers—and they get the chance to tell their colleagues the details of what happened.
As the name suggests, it is a measure of number of customers who continue to use your product or service. This is also known as churnor attrition rate. A simple way of calculating retention rate is:
However, Abhay Vardhan takes a different route of not only calculating the retention rate, but measuring it as a function of habit by using cohort analysis i.e. study users as a group. He provides an interesting argument as to why this should be used. It’s a little statistical (read: graphs) and therefore I haven’t included it here. Hey, if you right brain itches to know more, head over to the blog.
This one comes in handy when you are particular about UX.
Kerry Rodden, UX Reasercher at Google explains the HEART Frame work as follows:
Happiness: measures of user attitudes, often collected via survey. For example: satisfaction, perceived ease of use, and net-promoter score.
Engagement: level of user involvement, typically measured via behavioral proxies such as frequency, intensity, or depth of interaction over some time period. Examples might include the number of visits per user per week or the number of photos uploaded per user per day.
Retention: the rate at which existing users are returning. For example: how many of the active users from a given time period are still present in some later time period? You may be more interested in failure to retain, commonly known as “churn.”
Task success: this includes traditional behavioral metrics of user experience, such as efficiency (e.g. time to complete a task), effectiveness (e.g. percent of tasks completed), and error rate. This category is most applicable to areas of your product that are very task-focused, such as search or an upload flow.
These can be applied at a number of levels — from the whole product to a specific feature. For example, in Gmail we might be interested in adoption of the product in general, but also in adoption of key features like labels or archiving.
Of course, there are many other metrics that you can use. It could be as simple as Click Through Rates, Average Daily User (ADU), Average Weekly User(AWU), Daily Active Users (DAU), Monthly Active Users (MAU), Installations, Sessions Per User, Session Duration, etc. Based on the type of product you build, choose the metric that measures your progress.
According to Josh Elman, the only metric that really matters is
How many people are really using the product?
He goes on to explain that,
You need a metric that specifically answers this. It can be “x people did 3 searches in the past week”. Or “y people visited my site 9 times in the past month”. Or “z people made at least one purchase in the last 90 days.” But whatever it is, it should be a signal that they are using their product in the way you expected and that they use it enough so that you believe they will come back to use it more and more.
Well, I cannot agree more! The ultimate test for a product is do customers use it?
Once you have chosen the metrics, you need to choose your goal because no matter what you think as a CEO, ’cause numbers don’t lie.
Hope you found this post useful. My intention to write this blog post was to share what I learnt with like-minded people. Help spread the word! Tweet about this post!
Many of the things I shared here are those that requires time to assimilate. So, I welcome you to come again and share your thoughts on the course, or the methods shared. I have already started thinking about a couple of products. I made a list of tools that could be used at various stages of process, hope that helps you get started with your dream startup!