What Comes First, User Engagement Or Growth?
Engagement and growth are two very different things for a startup. Engagement, according to Nir Eyal, who writes about products that move people, is about creating an experience designed to connect a solution to the user’s problems with enough frequency to form a habit. Growth on the other hand is about getting people to discover your product through ripples that have been caused by your product.
Engagement is not growth and vice versa. However, there is an intrinsic link between the two that needs to be nurtured to achieve success in your startup. The starting point for any entrepreneur is in understanding what comes first, engagement or growth, and in focusing efforts on the right priority at the right time.
Move Away From What Feels Like The Right Thing To Do
For any startup, seeing the needle move on growth is more satisfying than searching for how you are engaging users. This is because you feel you are moving in the right direction and seeing tangible results to verify that. Tangible results in the early stage of a startup is something we all yearn, which is why we spend so much time refreshing our analytics screens when starting up!
However, prioritizing growth right out of the blocks at your startup is rife with dangers. Principally, any efforts expended to achieve growth, say of users through acquisition, is not likely to be sustainable. Unless you can ensure users will stay around and refer their friends to your product, any money you spend on scaling will lead to a commensurate increase in churn.
Conversely, engagement actually leads to growth and is a precursor for it. The goal is to keep new clients, not have to replace them month-on-month, and assessing engagement can shed light on how your strategy and decision-making needs to change. Engagement with users affords you the valuable opportunity to refine your product until users love it. Engagement is a tool that should be used by entrepreneurs to get to the “aha” moment. Once this Holy Grail is achieved, you can start focusing on your K factor.
When you’ve got users to love what you do, investing in user acquisition and other growth strategies makes more sense. This approach will ensure that new users coming on board also love what you have developed and act as ambassadors for your product to facilitate growth. High quality engagement leads to high quality growth. The opposite also holds true.
But engaging users as opposed to pushing for growth will seem counter-intuitive to many entrepreneurs despite it being the right approach. In order to carry it out successfully, entrepreneurs need to show a combination of discipline and patience.
Examples Of User Engagement Trumping Growth
You don’t have to look too hard to see that the startup superstar fraternity is littered with examples that prescribe to the view (in practice) of securing engagement before focusing efforts on growth.
Hadley Harris, founding general partner at ENIAC Ventures has previously written about how he believes one of the key differences between Silicon Valley and Silicon Alley (the New York tech scene) is the focus on growth in the Valley as opposed to on engagement in New York. Harris, who invests on the east and west coasts, comments that Silicon Valley startups are more concerned with quickly scaling huge user bases rather than building a real business. Examples he gives include Socialcam, Zynga and Google with Google+.
A good example of a startup that has got engagement credentials to share is Tumblr (acquired by Yahoo!). In a study that was done in collaboration with Millward Brown Digital and Added Value, survey respondents identified Tumblr as the most immersive and satisfying platform.
Another obvious example of engagement is Snapchat. Around the time it received its early funding in 2012, there was already a lot of buzz around how engaged its user base was. Since then, Snapchat has gone on to raise $1.2Bn in funding at a $15Bn pre-money valuation.
Other startups such as Twitter, Pinterest, Houzz and Nextdoor all focused on building their user base rather than on pure ‘growth’ that would later lead to monetization.
How To Engage Users For Growth
Accepting that engagement is the right characteristic to focus on in your startup, how can you go about getting this right? The key is learning what your users want and then giving them exactly that.
Massdrop is marketplace startup and an excellent case study on working with core users to shape and deliver your product or service. From very early on the team had direct contact with users on its site to determine what works and what doesn’t. In order to get the best deals for their users, they implemented bold initiatives with vendors and user, which led to short-term pain but longer-term gain with even more engagement.
In addition, product development at the company delivers excellent user response as users are heavily involved in developing new features. This example should be studied across your team to understand and appreciate how a patient and considered approach that places the user at the centre can work to deliver sustainable and real growth.
There are many other ways that can be adopted to extract the right value from your product or service in order to foster engagement such as allowing users to enjoy the experience for example. However it is important to stick true to the values of your own startup when trying initiatives to engage users. Sticking to your core demographic is good advice when trying to increase engagement. This is exactly what The Hunt did, intentionally appealing to young females and shunning what is not its core demographic.
Growth and the pursuit of growth in a startup is extremely seductive. However, unless that growth is a by-product of user engagement, you can expect that the growth will cost you more in the long-term than it delivers in the short-term and will put your business at huge risk. Building your startup from the bottom up and focusing on learning about your users to increase engagement will result in a company that delivers real value, and gives you the satisfaction of real movement on the growth needle.