Scaling Customer Engagement: Lessons from Silicon Valley
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Scaling Customer Engagement Technology Trending Paper Silicon Valley, CA Q1 2015 Scaling Customer Engagement: Lessons From Silicon Valley It’s well-known that the rise of Silicon Valley startups like Twitter, Dropbox, Airbnb, and LinkedIn has been meteoric. Lifting the curtain on the stories of these mega-successes reveals the Valley’s engineering genius and business smarts, the ability to turn fledgling companies into international superstars by combining limitless data collection, sophisticated analytics and advanced testing. But the real key, as the founders of these companies discovered, is an obsessive focus on customer engagement. Modern consumers want and expect more of engagement they would like with their from service providers and companies banks. More than half, 51%, want their across industries. A recent survey by bank to proactively recommend products Accenture of over 4,000 retail banking and services for their financial needs, while customers revealed that customers 48% are willing to pay a fee for forward- believe they are not receiving the level looking spending analyses. DROPBOX: THE EARLY YEARS The story behind San Francisco, CA-based cloud storage company Dropbox illustrates how engaging with customers, if done right, can lead to stratospheric growth. In the eight years since its founding, the company has grown its user base to over 300 million worldwide, is currently valued at $10B, and is expected to go public this year. Even though the founders were confident that once they tried it, customers would no one’s looking for what you’re making,” recognize its value, Dropbox had initial says Co-Founder Drew Houston. Instead, difficulties. After a failed attempt at what worked for Dropbox was “making traditional marketing our users really really through public Customers believe happy, and then giving relations and them good tools to Google AdWords, they are not spread the word.” the company knew it would need to receiving the level After a great deal of scale through other of engagement experimenting, the means. company hit on a they would like landing page design “All the AdWords in with their banks. that was and continues the world are not to this day to be a going to save you if Source: Accenture model of simplicity An Opportunity for Customer Engagement Consider banking to be transactional rather 71% than relationship driven. Want their bank to proactively recommend 51% products and services for their financial needs. Are interested in real-time and forward- 48% looking spending analysis. 27% Would consider a branchless digital bank. Source: Accenture Scaling Customer Engagement 2 and fast customer onboarding. First-time boxes for email, Facebook friends, or a link users are presented with a two minute they can share. video that explains what the product Successful online is and how it “What worked for companies make works, along with Dropbox was making users feel excited a sign-up button enough to share that downloads our users really really the products with the product. Each happy, and then giving their networks. step of the way, Referrals from friends the process is them good tools to are still the most streamlined and powerful way to gain made easy for spread the word.” customers, whether users. Drew Houston, Co-Founder for a tiny startup Dropbox or a multinational Dropbox’s corporation. The greatest discovery Dropbox story came in 2010, when Houston, inspired by shows that just building a great product a rewards program he’d seen on PayPal, does not necessarily guarantee success realized that the product itself could be in today’s complex online ecosystem. used as a reward Testing audience to entice users to engagement, spread the word During the period optimizing among friends. The between 2009 and customer company decided onboarding, to offer users 2011, Dropbox fine-tuning user 500MB of extra customer numbers experience, storage simply for and creating referring a friend. skyrocketed from 3 viral messaging During the period that can be between 2009 and million to 45 million. disseminated 2011, Dropbox through customer numbers appropriate skyrocketed from 3 million to 45 million. channels is coming to be seen as having The referral process is intuitive: there are equal or greater impact. THE RISE OF “GROWTH HACKING” “Growth hacking” is a buzz phrase that has go back to 1996, when Hotmail failed to taken off in recent years. It is infused with take off using traditional TV and billboard the notion that there is a secret formula advertising. Hotmail investor Tim Draper that can make a product or company go suggested adding a line to the signature of viral. every email that read: “PS: I love you. Get your free email at Hotmail.” The result was The legendary roots of growth hacking 3,000 new signups every day and within Scaling Customer Engagement 3 a year and a half, a hockey stick growth pattern that took the company to 12 million users. Testing audience engagement, fine-tuning user experience, and Growth Hacking: creating viral messaging AIRBNB’S SHADY BEGINNINGS are all of great impact. The term “growth hacking” has fallen out of favor in some circles because it has The reality is complex—while it is true that become synonymous with tactics that can some of Silicon Valley’s greatest success border on spam. Even those who favor stories involve specific techniques to the term admit that there can be a gray encourage viral growth, they invariably area in which growth hackers operate. involve a number of factors that are not as For example, popular San Francisco, repeatable as they might seem. CA-based vacation rental service Airbnb got its start by making ample use of an “Growth hacking existing site, Craigslist. describes a new One intrepid blogger set a trap and found that for every vacation listing he put up, process for acquiring he received an email from a supposed fan and engaging users, of Airbnb (really a salesperson in disguise) suggesting that he list his home on combining traditional Airbnb. The company acknowledged that marketing and analytical this tactic was used, and took steps to stop what they claimed were the actions skills with product of rogue salespeople. However, Airbnb continued to make use of Craigslist in development skills.” other ways, which helped bootstrap its Josh Elman, former Growth Hacker success. Twitter Former Twitter Product Lead for Growth and Relevance Josh Elman says: “Growth hacking isn’t the best term, but it describes a new process for acquiring and engaging users combining traditional marketing and analytical skills with product development skills.” Scaling Customer Engagement 4 As the term suggests, it also involves but it can mean that companies augment speeding up the process of acquiring and it with out-of-the-box, data-driven engaging customers. Growth hacking is not approaches. a replacement for marketing, as some claim, TWITTER: SMALL CHANGES CAN MEAN A LOT Global social network Twitter, based in San Francisco, CA is a publicly traded company with a market capitalization of $25B and 284 million monthly active users. Founded in 2006, it might well have dropped off the map if it weren’t for some small but significant changes to its onboarding process. As Elman explains, from the start, plenty of users were signing up for Twitter because they heard about it in the press or from friends, however few were sticking around to actually use the service. Rather than the signup process needed to be much going the traditional marketing route of faster than they originally realized. Instead reaching out to the customers through of giving users a tour of the product, they newsletters or advertising, the team offered them a set of actions that got them decided to focus on using Twitter right discovering what away. would keep them Growth hacking is engaged. It was several years— not a replacement an eon in the tech “We dug in and tried for marketing, as startup world—before to learn what the ‘aha’ the company hit on moment was for a some claim, but it can the tagline “find out new user and then what’s happening rebuilt our entire new mean that companies in your world.” This user experience to augment it with message spoke to engineer that more users in the right quickly,” says Elman. out-of-the-box, data- terms because they driven approaches. were using Twitter to After many keep up on news. experiments, the team found that retention rose significantly when a person manually selected 5 to 10 Twitter accounts to follow on their first day. This indicated that they had found areas of interest. They also discovered that Scaling Customer Engagement 5 THE IMPORTANCE OF BEING OPTIMIZED While Dropbox and Twitter eventually hit on the right formulas on their own, Silicon Valley startups are lining up to provide companies of all sizes with a range of services that facilitate customer engagement. Optimizely, a San Francisco, CA-based startup founded by Google alums Dan Siroker and Pete Koomen offers a pre-built methodology for testing and measuring user response to design changes on websites and mobile applications. The company has attracted such customers as Sony, American Apparel, Microsoft, conversions, signups, or any other definable and NBC Universal. Optimizely’s rigorous actions. The tracking software itself is an testing procedures played an important API that requires only a single line of code role in the Obama campaign’s fundraising to connect a site to a rich layer of resources success in the last election. on the back end. Optimizely provides a complete testing “Some people might be stunned that a environment, utilizing a simple technique company doing something seemingly as known as A/B simple as A/B user testing that’s proven testing could have to be effective.