Last updated: 13 March 2023
Published on: 07 March 2016
5 MINS READ
As a startup, what your first 1000 users tell you about your product might shock you.
Question: Who buys milkshakes, and when?
“For products like milkshakes, from a demographic standpoint you usually think about kids or students. Working professionals in the suburbs are usually not a target audience,” said Mr Bernard Chan, Founder and Chief Executive Officer of startup school Alpha Camp.
But when you start thinking in terms of personas, the perspective changes. These are the people who pick up a milkshake because they want something to drink as they drive to work early in the morning.
Recounting the milkshake story in a presentation cum workshop on “Getting your first 1,000 users” at the start-up facility BASH, Mr Chan shared the insight from Harvard Business School professor Clayton M. Christensen that “people buy a product because they need to get a job done”.
(Editor: This talk was among the educational activities held on BASH's first birthday.)
So the first batch of 1,000 users can help startups understand what job needs to be done.
This is critical: Up to 42 per cent of startups fail because there is “no market need” – no job that their product can help with.
The number itself is insignificant.
“1,000 does not mean that the product has any value at all. It does not mean it has gained traction. In fact, 1,000 users is not a significant indicator, unless they are big corporate clients,” said Mr Chan.
But what the first 1,000 users do is provide some answers to the questions that the startup is asking. The starting point: identify the target audience, and how a product can help them solve a problem.
A lot of people tend to start with demographics such as age or gender, noted Mr Chan, but he feels that this is “too wide”.
Instead, they should be starting with a small group, creating a persona to represent the group, thinking through his life – his interests, the paper he reads, whether he commutes or drives to work - and trying to understand where a product touches him.
And then “go after the group that has the highest propensity to use your product and highest propensity to pay”.
The next step: Zoom in on the core product value, and communicate it to the target audience.
Give 'Em the Feels
“Make sure you communicate it not in terms of what the product can do, but what your user can do with the product.”
The message may be different for the same product, if the startup is pitching a different value proposition.
Mr Chan cited the example of Uber with its tagline “Everyone’s private driver” and a similar service Lyft with the tagline, “Your friend with a car.”
“No one remembers what you tell them. They remember what you make them feel,” he said. “It could be the same product, but how they feel will depend on how you frame the value proposition.”
Next, build a landing page to communicate this value.
Mr Chan reminded the audience that the landing page is a small construction that should be selling one thing and one thing only. “Instead of giving people 10 things they could do, just give them one link.”
Fewer choices means less friction; “more is not better”.
“Choice is a common cause of friction that prevents users from signing up,” said Mr Chan. He cited a study which found that with 24 flavours of jam displayed on a shelf, only 3 per cent of it was sold, whereas with six flavours on display, 30 per cent was sold.
“Choices which need users to read, to make decisions, are bad.”
The other things that startups need to think about when they are looking for their first 1,000 users are distribution, and measurement and optimisation.
Distribution refers to how they can get the product out to their customer.
This involves various channels such as paid advertisements, search, content marketing, communities and events, partnerships and public relations.
As for measurement and optimisation, the most important metric for startups is retention – getting people to come back and remain active. The retention period may vary depending on the nature of the product.
For a gaming app, for example, “if users don’t come back the next day, it is over.”
But for an e-commerce product, however, the critical retention period may depend on the product cycle.
“Every channel brings you different users, different ways of engagement, and the value varies.”
Quoting Chamath Palihapitiya, a venture capitalist who was formerly Facebook’s Vice President of Growth, Mr Chan said it was about “getting people in the front door, understanding the “Aha!” moment, and delivering value as frequently as possible.”
Now pass the milkshake please!