compounding in design
Sarah Tavel of Greylock Partners has a growth framework that lies at the heart of compounding: thinking in virtuous loops instead of marketing funnels.
A marketing funnel doesn’t compound if it doesn’t loop back in some way and make getting the next customer easier for the company. If you need to put in the same effort to get every new customer, your growth is not compounding.
Here’s how Sarah proposes you think about growth: in terms of virtuous loops.
At the core, building an enduring company comes down to understanding how to maximize engagement.
Level 1 – Growing Engaged Users: Focus on growing number of users who are completing the core action. The core action is the action that forms the foundation of your product.
Examples of core action for different companies:
Facebook: Making friends Pinterest: Pinning photographs Snapchat: Sharing snaps YouTube: Subscribing to channels Twitter: Tweeting and following others for their tweets
The core action is most correlated with retention. In the case of Facebook, they realized that if they got a user to connect to 7 friends in 10 days, there were high chances that they’d be retained for life.
In the case of Pinterest, the company realized that if a user pinned something, s/he was likely to come back to the platform next week.
Level 2 – Retaining Users: The product should be designed so as to get better the more it’s used. This way, you build stickiness — users have more to lose by leaving the product.
How do you build your product to retain users? Create compounding benefits as a user engages, so that leaving the platform becomes harder for them with every engagement.
Put simply, “The more I use the product, the better it gets.” and, “The more I use the product, the more I’d have to lose if I left the product.”
The more notes you add to Evernote, the more value you get and the harder it is to leave. Same goes for pinning items and creating boards on Pinterest.
On Twitter, an increasing number of followers creates stickiness to the platform by getting you invested in your identity and social reputation built on it. The more I tweet, the more followers I gain, the more I’m likely to tweet and recommend Twitter to others.
Level 3 – Virtuous Loops: As users engage, they create virtuous loops in the product.
Virtuous loops are the flywheels that convert your users’ engagement into fuel to power your company forward. A Pinterest user might share a pinned item with a friend who is now incentivized to jump onto the platform and start creating her own pins and inviting her own friends. Each new friend added will add two of her own friends. With every added user, it gets easier for Pinterest to get more users. The growth compounds on itself.
Loops are what lead to sustainable, compounding, growth. Building a funnel without a loop means you have to keep pushing and putting in the same effort to get the same output, every single time. And, at some point, that becomes unsustainable.