As a fractional Chief Product Officer, my primary task is to help implement best-in-class mechanisms that help determine the right thing to build. Often, I provide links to various blogs or other articles that define a specific framework for thinking about each mechanism. This post is my attempt to gather all of these frameworks and help explain which framework to use when considering product development. This approach does not go deep into any of the frameworks, instead think of this as the guidance on which play to use depending on what’s happening on the field.

Before we get started, this approach focuses on product teams aligned with Marty Cagan’s product-first product managers and not feature product managers. You can learn more about this approach here. This also assumes your product managers are capable of performing the product management function.

Where to start?

The most important part is to assess where your product is in the adoption curve. The stalwart approach to evaluating that is the technology adoption lifecycle and its adaptation by Geoffrey More in Crossing the Chasm. I would primarily assess where your product (not feature) is on the curve in this model. The best way to determine that is by using the pirate framework to understand where the leaks are in your adoption funnel. Note, that the same product can be at multiple places on the adoption lifecycle, different segments or personas may be at different stages of the lifecycle. A product’s adoption must be focused on where a segment is on the lifecycle. The general guidance to evaluate which segment is where can be used below:

• Innovators → Early Adopters. You are still stuck with your first set of customers if you haven’t nailed product retention. If you don’t have 20% of your customers coming back to use the product (a common metric to measure this is daily active user / monthly active user (DAU/MAU)), then you are still trying to land your innovators. If you haven’t solved retention, go here.
• Early Adopters → Early Majority. This is the crux of the Crossing the Chasm. Often, getting the set of features that your early adopters are willing to accept is 80% of what the whole product/solution is. Identifying what the last 20% of the product is here. The best proxy to determine if you have enough product is to evaluate activation: does your target persona actually understand and want to use your product. The ideal activation rate is ~25%, but this can vary by industry. If you’re still attempting to improve activation, go here.
• Early Majority→Late Majority. At this stage the primary focus is growth and go-to-market optimization. This is what many term achieving escape velocity, where (1) you need to identify how to make certain go-to-market channels efficient, and (2) determining which go-to-market channel or market segments to pursue next. If you are attempting to achieve escape velocity, go here.

Often bigger companies evaluate new products like they are at a point on the technology adoption lifecycle to meet the same KPIs as their widely used products. This is unfair and leads to the Innovator’s Dilemma. Startup founders, or sales-led product organizations also often don’t use these objective metrics to understand where they are and may push to build certain features at a time that is not appropriate.

How to address retention (i.e. how to get to product-market fit)

If you haven’t solved your retention problem, it’s because of 1 of 2 issues (maybe both): the problem you’re attempting to solve does not happen often enough for a customer to want to come back to your product, (2) customers are not satisfied with your product. In either case, you have a leaky bucket problem, and the holes must be fixed. Until you’ve solved this retention problem, you haven’t gotten anywhere close to product-market fit (PMFit) [source].

The first step in nailing retention is to focus on the right customer persona, and ensure that at least 40% of the target persona who uses your product cannot live without your product [source and how to find out if you’re hitting 40%] – follow up questions: Why 40%? Why focus on only one persona? Why focus on dissatisfaction if the product didn’t exist?

If you’re hitting the 40% mark, you have product market fit, and your retention issues are likely caused by acquiring the wrong persona at the top of your funnel. If this is the case, go here.

More than likely, you’re not hitting the 40%, at which case you need to figure out which features are missing that are not delivering the love of the product that you desire. To prioritize these features, break down your feedback from customers into 4 segments:

• Always build: customer and target person and would be very disappointed if the product did not exist – they are telling you the main benefits of the product
• Consider building: customer and target persona and would be slightly disappointed if the product did not exist – build features that they ask for that are related to the main benefits of the very disappointed group.
• Backlog these requests: non-customer and target persona
• Don’t build: feedback on features a customer and non-target persona

To ensure you’re building the right solution or set of features based on this feedback, I recommend leveraging the double-diamond framework for innovation. This approach ensures you’re building the right thing. Keep in mind, that this is not a waterfall-based building approach, instead a single Product Manager should deliver 4 solutions in parallel where 1 solution is in the discover stage, another is in the define stage, and so on. Ideally, the effort to build these solutions takes an MVP/rapid prototyping approach, where tracer bullets are built to test and validate hypotheses and mitigate risks (aka The Lean Startup). 

To help prioritize which features to pursue, we recommend using a prioritization framework – make sure to use the right one based on your situation. A great tool to help with prioritization is ProductBoard. And beware of the “dangerous animals” that may want you to break the best practices in feature prioritization.

If you’ve run out of ideas on how to reach 40%, you may be focusing on the wrong persona or problem.

How to address activation (i.e. Growth hacking)

Once you’ve solved your retention problem, you need to figure out how to build a product that acts as the “ultimate catcher’s mitt” for your target persona. In other words, if your sales and/or marketing teams bring someone to the product who is your target persona, the product should catch them – all – the -time. Now that you solved retention (people don’t leak), you now need to figure out how to get them started. This is activation.

Personally, I break activation into two parts:

1. Are they really an active user? At then end of the day, activating someone onto the product is to get them into the “habit” of using the product. This is where the term “active user” comes from. Ideally, it should be at a point where they understand your product’s value and are ready to take action. But more often than not, customers stop after one or two uses. I would extend metrics to look a 1-3 months out, using a cohort analysis to see if they continue to be a retained user. For the best companies, 66.6% of users are retained in month 1, 60.8% are retained in month 2, and 56.6% are retained in month 3. This widening gap underscores the compounding benefits of strong initial user engagement and satisfaction. If <50% of your customers are retained after initially onboarding, you either need to go back to the retention issue, or realize that your activation in not proving the value of the product to the target persona.
2. How fast are they reaching the “Aha” moment? To become an active user who sees value in the product, customers need to achieve an “Aha” moment, where they truly understand the value of the product and have the desire to say, “Where has this been all my life?” Determining the “Aha” moment takes user research and understanding to know what activity in the product gets them to that point. Using products like Sprig, FullStory, or Chameleon, can help you get to that understanding through data, but it may take trial and error. The next piece is getting customers to that “Aha” moment as fast as possible in a manner that helps them understand how to use the product effectively. This is a combination of user experience design, where tasks performed are both intuitive and familiar, and at the same time the customer journey taken to get there is straightforward and not cumbersome. Products like Amplitude can help you understand where drop-offs in efficiency might be taking place, but at the same time mapping out the customer journey is vital as it helps identify what steps are unnecessary, what steps can be consolidated. You want to ensure that your overall activation rate no. of users who reached the “activation milestone”Aha: moment ÷ no. of users who signed up) x 100) is >25%

Why focus on retention and activation before customer acquisition?

Acquiring a customer is expensive. In fact, the two fundamental variables in any SaaS business are Customer Acquisition Cost (CAC) and Lifetime Value (LTV). A healthy LTV / CAC ratio is 3:1. Lifetime value is primarily driven by your average revenue per user (ARPU) or, in other businesses, your average contract value (ACV) and churn rate. However, once a customer churns, it costs 1.5x your initial CAC to re-acquire them because you have to convince them things have changed.

Too many founders and executives want to focus on acquisition before retention and activation, expecting immediate success of a product at the time of development complete. Doing this creates a doom-spiral for any product in development for two reasons: (1) focusing on customer acquisition likely leads to a product that is likely not focused on an ICP, as your product has either focused on a general audience, you haven’t validated that the product is truly meeting the needs of a target persona; (2) the executive is likely trying to hit a some metric (revenue, number of users, etc) that they got from some benchmark, and if the product doesn’t hit the metric it’ll succumb to the innovator’s dilemma. The executive will then determine that the product requires a pivot. Its this benchmarking that causes big companies to struggle to innovate as all new products must meet the same metrics as well established products (3) The pivoting will disorient customers who are using the product and getting value, leading to even greater churn, and which then increases CAC.

Needless to say – focus on retention and activation before anything else. Once you nail these, you have a fire – now is the time to pour gasoline via your GTM strategies and focus on distribution.

How to address acquisition (i.e. Product Lead Growth)

Once you feel like you’re efficient on the retention and acquisition side, you wll need to determine how to efficiently acquire customers. Many product managers delegate this to sales and marketing professionals, but sales and marketing are primarily driven by the product that they are selling. The most critical part of this is to identify the pricing (what is the unit that you are selling and how much will it cost), and the packaging (what features are available in each unit). Ideally each unit should be targeted towards one ideal customer profile, and if there are others that fit also benefit that’s great, but its not the purpose. To do this effectively, you need to make sure you’ve included all the features and services that make customers love the product (see retention), and you’ve put together product marketing that talk, in-detail, how these features benefit the customer. The second part is to determine the pricing, where the pricing is set to mitigate the objections, and accelerate the alignment needed to drive adoption. Jerry Chen wrote a great article on how to think about pricing, packaging, and how that determines your sales strategy here. Based on your pricing and packaging, you will be driven to 4 proven sales strategies: API-based, Self-Serve, Inside Sales (email, or phone-call based sales), and Direct Sales (in-person selling). API and Self Serve force a product-led growth strategy, where tools like Pendo and Chameleon work well. Inside and Direct Sales require account based marketing (AMB) best performed by sales development representatives. They should be using tools like Koala, and SalesLoft.

In all four cases though, you need to continue to focus on LTV and retention. Functions like customer success (tools to use are PlanHat, and Gainsight) can help here. This function can (1) implement robust customer feedback systems, by establishing multiple channels for gathering customer feedback, including surveys, interviews, usability studies, and analytics. Use this data to inform product decisions and prioritize improvements; (2) enhance user experience and onboarding, by simplifying the user onboarding process and focus on getting users to key “aha moments” quickly; and (3) develop strong customer relationships, by engaging with customers regularly through various touchpoints, such as quarterly business reviews, customer advisory boards, and personalized communications. Show that you value their input and loyalty. Having customer success focus on quotas, upsell, and resales, pushes them away from being a champion of the product.

However, Customer Success teams are not a panacea. You also need to continue to focus on product value and continuous improvement: ensure your product consistently provides value to customers by solving their core problems. Regularly update and improve your product based on user feedback and changing needs.

How to address Referral

There are plenty of growth product management books that can guide you on how to grow your customer base through referrals. At a high level, I recommend using data-driven retention strategies like Net Promoter Score (NPS) (reserving customer satisfaction scores for retention metrics) to identify approaches to encourage more referral activity. Most of my product management experience has been around taking products from conception to 8 or 9 figures in revenue, at which point I usually hand the reigns over to someone to lead the growth activities. I would lean on others to find expertise here.