Julian Shapiro: preference

Transcript context

…Awesome. This episode is brought to you by Eppo. Eppo is a next generation A/B testing platform built by Airbnb alums for modern growth teams. Companies like Netlify, Contentful, and Cameo rely on Eppo to power their experiments. Wherever you work, running experiments is increasingly essential, but there are no commercial tools that integrate with a modern growth team stack. This leads to waste of time building internal tools or trying to run your experiments through a clunky marketing tool. When I was at Airbnb, one of the things that I loved about our experimentation platform was being able to easily slice results by device, by country, and by user stage. Eppo does all that and more, delivering results quickly, avoiding annoying prolonged analytics cycles, and helping you easily get to the root cause of any issue you discover. Eppo lets you go beyond basic clickthrough metrics, and instead use your north star metrics like activation, retention, subscriptions, and payments. Eppo supports test on the front end, the backend, email marketing, and even machine learning clients. Check out Eppo at geteppo.com, getE-P-P-O.com, and 10X your experiment velocity. I have many questions I'd love to ask, but I also want to make sure we get to the other topics. We talked about acquisition, which we'll link to in the show notes, by the way, this whole post. The flip side you could say is retention. If you're a reader of my newsletter, you know how much time I spend thinking about retention and how important that is. I know that's a second topic that we wanted to chat about, because you've also helped a lot of companies think through their retention strategies and to help them retain more users. I'm curious to hear what you've found to be the best strategies for retaining users and increasing retention. Yeah, sure. The way I think about retention, my favorite strategy is what I call building state. It's a concept I stole from video games, where basically the more you play any given game, the more state you're accruing. That might be your armor, your weapons, your character skins, and whatever. As a player of the game, the more state you build, the more you're compelled to stick around, because you don't want to lose everything you've worked so hard for. The more state you have, the more you can exploit that state to get more. The rich keep getting richer. The same mental models apply to let's say SaaS retention. This is as old as time, or at least as old as modern capitalism. If you think of credit card rewards or frequent flyer programs, you spend money. You accrue points. You convert the points into rewards. Once users build momentum doing that, they're less likely to switch to a competitor. That's the age old example of building state. Software, it's unbelievably powerful. This building state concept is why mediocre companies like eBay or Craigslist remain completely unbeatable for decades. Even though the UX is bad, people don't like using them, they fail to innovate, no one topples them and it's because of state. Let's walk through some examples. State, kind of like my PLA mega spiel, mega rant there, subdivides into a few categories, but I'll make this one shorter and less boring. The first subcategory of building state is when you're encouraging your users to accrue non-transferrable reputation, meaning they're doing stuff to build reputation on the platform and they cannot take that reputation to them off platform. They're stuck there to get the compounding advantage of that reputation. For example, let's say you've spent years getting 10,000 or more feedback ratings as an eBay seller. You are not leaving eBay anytime soon, because that reputation's just too valuable. It's producing a huge boost in revenue because of the trust it engenders with buyers on eBay. It probably results in you ranking better in search results for an eBay query. Because you cannot move those 10,000 feedbacks to an eBay competitor, you're not incentivized to go use an eBay competitor. This type of stickiness, this non-transferrable reputation, basically applies to all marketplaces and directories. Same thing on Yelp. You as a restaurant build your reputation on Yelp. The momentum keeps you stuck there. You want to keep getting reviews and hone your reviews. Airbnb with your properties, Etsy, for you as a seller, Alibaba, all of this stuff are examples of companies that are kind of old now, cannot be top old or haven't been yet. People are like, why? Well, because of this exact reason. This is why those companies pester you so much to leave reviews and provide feedback all the time. They want you to play into this game of in market reputation building. because of this exact reason. This is why those companies pester you so much to leave reviews and provide feedback all the time. They want you to play into this game of in market reputation building. The second state building technique that a startup could adopt, and again, this is all under the guise of how do we maximize retention and build somewhat of a moat, for example, the second way you can do this is you encourage your users to accrue a non-transferable audience. If I'm a big YouTuber and I've acquired a million subs, those subs can't be transferred anywhere else. I can't bring them to Twitter. In fact, YouTube doesn't even tell me their email, so I can't even bring them to a newsletter if I wanted to. The more subs you acquire on YouTube, the easier it is for you to go viral on YouTube. This is what I mean earlier by the rich keep getting richer. It's this momentum trap. It's very, very hard to convince any YouTuber to get off YouTube. If anything, they'll dabble with another network in parallel at best. Basically if you have a startup where you're creating a marketplace or an audience graph, you want to encourage users to build a follower graph within that product that they can take advantage of by pushing their product or their content or their insights too. This is why Twitter... By the way, a big shout out to Substack, which actually allows customers to export emails off of Substack. Substack is not playing that same game, which is better for users and a very nice thing for the ecosystem. But this is why Twitch and Instagram and Twitter are just irreplaceable. I mean, not necessarily. Everything dies over time like Facebook, but they're just so darn hard to topple. Let's maybe touch one more. I don't want to ramble so much about this. Well, this one's kind of similar. Basically if you spent a lot of time building a social graph in a product, like if I spent the last 10 years trying to remember the names of all my high school friends and elementary school friends and add them one at a time over the years to Facebook, or I've added all my colleagues for the last 20 years onto LinkedIn and I've built a social graph on these products where I've curated and found people, that's really sticky. You're building state in the form of taking time to expand the graph. The graph is a representative of the state, the work you've put in. You don't want to lose those connections with people. That makes that product extra sticky. This is why social networks in general can be sticky. It's not just the fact that you have your audience there, it's that you've invested time. If Facebook doesn't allow you to export your graph out, then that makes it extra sticky as well, because you don't know how else to talk to old Jimmy from elementary other than Facebook. Anyway, there's actually many more of these examples of building state. I'm going to just stop with that. But the basic concept is what can you encourage users to do within your product that makes them more deeper entrenched in the product, and most apps just completely lack this.…

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