Product Management 101: Understanding Customer Needs

Product Management 101
for Startups
Dan Olsen
CEO, YourVersion
June 12, 2010 Copyright © 2010 YourVersion

What I’m Covering
What is product management?
Understanding customer needs
Prioritization and maximizing ROI on
engineering resources
Ease of Use
Using metrics to optimize your product

Will post slides to slideshare.net/dan_o
Copyright © 2010 YourVersion

My Background
Education
BS, Electrical Engineering, Northwestern
MS, Industrial Engineering, Virginia Tech
MBA, Stanford
Web development and UI design
19 years of Product Management Experience
Managed submarine design for 5 years
5 years at Intuit, led Quicken Product Management
Led Product Management at Friendster
PM consultant to startups: Box.net, YouSendIt, Epocrates
CEO & Cofounder of YourVersion, startup building
“Pandora for your real‐time web content”


Quick Poll of Audience
Work at:
Startup
Established company
Entrepreneurs
Actively working on a startup idea
Product live?
Funding?
Thinking of pursuing a startup idea
Consumer vs. B2B

What is Product Management?

6 Copyright © 2010 YourVersion

Product Management is
Critical Link in Value Creation

Market Product Development
• Current Management Team
customers
• Prospective
customers
• Competitors


A Product Manager by any Other
Name Would Smell as Sweet
Product managers are sometimes called
Product marketing manager
Program manager
Project manager
Label and definition of role can vary
Based on industry or company
Based on B2C (consumer) vs. B2B (enterprise)
Based on stage of company
Can be area of responsibility vs. actual position


A Process View of Product Management
“Inbound”
Product “Outbound”
Management Product
Long Business Product Management
Term Strategy Strategy
Market/
Sell
Short Business Product Product
Term Objectives Objectives Development
Service/
Support


Overlap in PM and UI Design Roles
Prospective Existing
Customers Customers
External
Marketing
Listening to customers

Product UI
Interface Management Design Support

Engineering QA

Internal

Product Management’s Job:
A Successful Product
Be the expert on the market and the customer
Translate business objectives and customer
needs into product requirements
Be the clearinghouse for all product ideas
Work with team to design & build great product
Define and track key metrics
Identify, plan & prioritize product ideas to
maximize ROI on engineering resources


Lean Product Management for
Web 2.0 Products
Dan Olsen, CEO, YourVersion
O’Reilly Web 2.0 Expo SF
May 6, 2010

What’s So Great about “Lean”?
What’s wrong with Startups are at risk until
being not‐so‐lean? they’re profitable
Funding cocoon only lasts
so long
Limited resources
Tech markets move fast
Time is the real enemy
“Time is the scarcest
resource and unless it is
managed nothing else can
be managed.”
‐ Peter Drucker


What’s the Formula
for Product‐Market Fit?
A product that:
Meets customers’ needs
Is better than other alternatives
Is easy to use
Has a good value/price
Simple, right?
It’s easy to understand conceptually
what we want to achieve
HOW to achieve it is the hard part

Understanding Customer Needs


Problem Space vs. Solution Space
Problem Space Solution Space
A customer problem, A specific
need, or benefit that the implementation to
product should address address the need or
A product requirement product requirement
Example:
Ability to write in space NASA: space pen
(zero gravity) ($1 M R&D cost)
Russians: pencil


Product Level
(user benefit) (product)

Pen and
Prepare paper
my taxes

TurboTax
File my
taxes
TaxCut

Feature Level
(user benefit) (feature)
Gmail
Make it easy importer
to share a
link with my
friends
Design Design Design
#1 #2 #3

Preview with User can edit
Allow me to Design checkboxes before import
reuse my
email #1 No No
contacts #2 Yes No
#3 Yes Yes

How Do You Prioritize User Benefits
and Product Features?
Need a framework for prioritization
Which user benefits should you address?
Which product features to build (or improve)?
Importance vs. Satisfaction
Importance of user need (problem space)
Satisfaction with how well a product meets the
user’s need (solution space)
Opportunity =
High Importance need with low Satisfaction


High Importance + Low Satisfaction =
Importance of User Need
Opportunity
High
Competitive
Opportunity
Market

Not Worth Going After

Low
Low High
User Satisfaction with Current Alternatives

Importance vs. Satisfaction
Ask Users to Rate for Each Feature
100 98
Great
95
84 87
90
Bad 86
85 79 84
55 70
80
Importance

80

75 72
80
70
75
65

60

55
41
50
40 50 60 70 80 90 100
Satisfaction

Recommended reading: “What
Customers Want” by Anthony Ulwick Copyright © 2010 YourVersion

Kano Model: User Needs & Satisfaction
User Satisfaction
Delighter (wow)

Performance
(more is better)

Need Need
not met fully met
Must Have

Needs & features
migrate over time

User Dissatisfaction Copyright © 2010 YourVersion

Olsen’s Hierarchy of Web User Needs
(adapted from Maslow)
Customer’s Perspective What does it mean to us?

How easy to use is it? Usability & Design

Satisfaction
Increasing
Does the functionality
Feature Set
meet my needs?

Does the functionality work?
Absence of Bugs

Dissatisfaction
Decreasing
Is the site fast enough?
Page Load Time

Is the site up when I want to use it?
Uptime


What is Your Value Proposition?
Which user benefits are you providing?
How are you better than competitors?
Competitor A Competitor B You
Must Have Benefit 1 Y Y Y

Performance Benefit 1 High Low Med

Performance Benefit 2 Low High Low

Performance Benefit 3 Med Med High

Delighter Benefit 1 Y ‐ ‐

Delighter Benefit 2 ‐ ‐ Y

Prioritization and Scope
Customer value is only half the equation
How much engineering effort will it take?
Need to consider value and effort (ROI)
Ruthlessly prioritize: rank order
Be deliberate about scope & keep it small
It’s easy to try to do too much
Strategy = deciding what you’re NOT doing
Break features down into smaller chunks
Smaller scope → faster iterations → better

Prioritizing Product Ideas by ROI

?
Return (Value Created)

4
Idea D
3
Idea A Idea B
2
Idea C
1
Idea F

1 2 3 4
Investment (developer‐weeks)

Have to Prioritize Across Multiple
Dimensions At The Same Time

Ease of Use
Customer Value

Quality

Functionality

Customer
Understanding
Time

Ease of Use


User Benefits vs. Ease of Use
Q: If two products equally deliver the exact
same user benefits, which product is better?
A: The product that’s easier to use
“Ease of use” provides benefits
Saves time
Reduces cognitive load
Reduces frustration
UI Design can be differentiator
Olsen’s Law: “The less user effort required, the
higher the percentage of users who will do it”

The Design Gap at Many Startups
Level Define Design Code

1 Engineering

2 Product Mgmt Engineering

3 Product Mgmt Engineering

Product Mgmt Engineering

4 PM Eng

UI
5 PM Eng


The UI Design Iceberg
What most
people see
and react to Visual
Design What good
product
people
Interaction think about
Design

Information
Architecture

Conceptual
Design

Recommended reading: Jesse James Garrett’s
“Elements of User Experience” chart, free at www.jjg.net Copyright © 2010 YourVersion

Learning from Customer Feedback


Iterating Your Product Vector Based on
User Feedback in Solution Space
(your mental model) (what users can react to)
Help user Help user
book travel plan travel

Mockups / Code

Customer Feedback

Persevere or Pivot?

Increasing
Product-Market Product-Market Fit =
Fit Getting enough data to
validate that you’re
climbing up the
Pivot right mountain

Pivot


What Are You Getting Feedback &
Learnings About?
(your mental model) (what users can react to)

Feature Set
Customer
Understanding
(needs &
preferences)
UI Design Messaging


Getting Quantitative:
Optimization Using Metrics


Approaching Your Business as an
Optimization Exercise

Given reality as it exists today,
optimize our business results
subject to our resource constraints.


Define the Equation of your Business
“Peeling the Onion”
Advertising Business Model:
Profit = Revenue ‐ Cost

Unique Visitors x  Ad Revenue per Visitor

Impressions/Visitor x  Effective CPM / 1000

Visits/Visitor  x  Pageviews/Visit  x  Impressions/PV

New Visitors + Returning Visitors

Invited Visitors + Uninvited Visitors

# of Users Sending Invites  x  Invites Sent/User  x  Invite Conversion Rate


Equation of your Business
Subscription Business Model
Profit = Revenue ‐ Cost

Paying Users x  Revenue per Paying User

New Paying Users +  Repeat Paying Users

Trial Users x  Conv Rate Previous Paying Users  x  ( 1 – Cancellation Rate )

( SEO Visitors + SEM Visitors + Viral Visitors )  x  Trial Conversion Rate


How to Track Your Metrics
Track each metric as daily time series
Unique Page Ad New User
…
Date Visitors views Revenue Sign‐ups
4/24/08 10,100 29,600 25 490
4/25/08 10,500 27,100 24 480
…

Create ratios from primary metrics: X / Y
Example: How good is your registration page?
Okay: # of registered users per day
Better: registration conversion rate =
# registered users / # uniques to reg page

Sample Signup Page Yield Data
Daily Signup Page Yield vs. Time
New Registered Users divided by Unique Visitors to Signup Page

100%

90%

80%
Daily Signup Page Yield

70%

60%

50%

40%

30% Started requiring
registration

20%
Changed Added questions
messaging to signup page
10%

0%
1/31 2/14 2/28 3/14 3/28 4/11 4/25 5/9 5/23 6/6 6/20 7/4 7/18 8/1 8/15 8/29 9/12 9/26 10/1
0


Identifying the “Critical Few” Metrics
What are the metrics for your business?
Where is current value for each metric?
How many resources to “move” each metric?
Developer‐hours, time, money
Which metrics have highest ROI opportunities?

Metric A Metric B Metric C
Good ROI Bad ROI Great ROI

Return
Return
Return

Investment Investment Investment


Google Analytics
•Unique
visitors
•New vs.
returning
•Pageviews
•Time on site
•Top referrers
•Top geos


Measuring Key Conversions:
Conversion Funnel
•Tie user actions to
business goals
•Instrument key steps in
user flow
•See where users are
dropping off
•Quantify improvement
from changes


Approaching UI Design Analytically
Typical UI design question:
“When using web pages, do users scroll down?”
‐ Yes
‐ No

UI questions are never yes/no! (not binary)
Should ask: “What percentage of users …?”
UI changes impact your metrics
Impact can be positive, negative, small, large
Seek high‐ROI UI changes

Metrics to Validate Product‐Market Fit
Survey results
Importance & Satisfaction
Net Promoter Score

Survey.io
“How would you feel if you could no longer use Product X?”
Very disappointed, Somewhat disappointed, Not disappointed
User behavior
Prospects sign up (high conversion rate)
They keep using it (high retention rate)
They use it often (high frequency of use)

Continuous
Improvement


Adding Metrics and Optimization to
your Product Process
Site Level
Business Product Prioritized
Plan Objectives Objectives Feature List

Scoping Feature
Level

Requirements
Design & Design

Code Test Launch
Develop

Metrics & User
Optimize Feedback

Optimization through Iteration:
Continuous Improvement
Measure
the metric

Analyze
Learning the metric
Gaining knowledge:
• Market Identify top
• Customer opportunities
to improve
• Domain
• Usability Design & develop
the enhancement

Launch the
enhancement

Product Management 101
Cheat Sheet
Clarify problem space by iterating in the
solution space & getting user feedback
Revise feature set, UI design, and
messaging to improve product‐market fit
Ruthlessly prioritize based on ROI
Define equation of your business
Identify and track key metrics
Launch, learn, and iterate

Great way to stay on top of your interests
Real‐time discovery engine
Discovers new, relevant content tailored to your
specific interests
News, Blogs, Tweets, Webpages, Videos
Bookmark and share via email, Twitter, Facebook
Weekly personalized email digest
Free iPhone app
Firefox toolbar, Chrome extension, bookmarklet
Launched at TechCrunch50, won People’s Choice
Check it out at www.yourversion.com

My Workshop Topics
Hands On Mini‐talks
Clarifying your product Case study on product
vision validation
Identifying customer Case study: in‐depth
benefits feature analysis
Prioritizing features Case study: using
Evaluating your metrics to optimize
product’s UI design UI Design 101 for PMs
Optimizing your new Working with developers
user flow Creative bootstrapping
Google Analytics Myers ‐ Briggs


Questions?
@danolsen
www.yourversion.com

Product Management 101: Understanding Customer Needs

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