5 product management tips that can help startups thrive in 2023
Last year was akin to a ride through hell. Global macroeconomic instability, Russia’s invasion of Ukraine, funding shortfalls, supply chain disruptions and many other factors made running a company an extremely challenging experience.
It sounds like a cliche, but in the midst of difficulty lies opportunity. Sometimes, you just need a boost to see it.
As companies cut costs to extend their runways, here’s how product managers can make the most of a tough situation:
Focus on monetization
The market has changed dramatically in the past year. VC funds adopted a cautious and conservative approach that resulted in a 35% drop in funding in 2022, and if the first weeks of 2023 are any indication, that trend is likely to continue. “Growth at all costs” isn’t a good idea anymore.
This year is expected to be a time when companies identify their unit economics, and product managers should focus on monetization to weather the shortfall of cash. It’ll be helpful to balance CAC and LTV, optimize conversion rates and understand pricing, bundles and subscription tiers.
Retention is king. There’s no reason to think about growth if your retention is unstable.
To really see what you can accomplish, experiment with paywalls, try out Darius Contractor’s Psych’d framework and implement prediction models to manage the LTV:CAC ratio and drive positive cash flow.
Take advantage of the commoditization of AI
At the end of 2022, OpenAI saw such success with ChatGPT that Google got nervous, and today, companies are pouring millions into building AI technologies similar to ChatGPT. The rapid rise of these AI platforms also birthed concerns that AI would eventually replace vast numbers of engineers and product managers, and those worries aren’t being soothed by ongoing layoffs at tech companies.
But you can consider this commoditization of AI as an opportunity. Indeed, there are endless ways to utilize and benefit from the fast-developing technology.
At our startup, we’re discovering insights from spikes in user behavior, and using natural language processing to discover trends and hot topics during live consultations.
We’ve also used AI to prepare prototypes, generate SEO-friendly content and spark ideas.
Get to know your audience
While AI enables product teams to accelerate processes, user feedback remains a crucial source of insights.
User research services and tools (such as UserVoice, UserTesting and Smart Look) allow product managers to understand the needs of their target audience and build products that have value.
Results are important, but they can only be sustainable and scalable if proper processes are in place. To make user research and customer development processes work and benefit from them, you should have a person managing them. If your team is just starting out, a product manager can orchestrate user research activities as part of their responsibilities. However, as you grow, ensure that you have a person focused on user research.
A product manager must make conversations with users a habit. Each conversation should be aimed at obtaining specific knowledge that will help:
- Fill the backlog with hypotheses.
- Prioritize them according to the company’s goals.
- Run experiments (to improve LTV or CAC).
Personalize user experiences
Personalization is now expected out of the box, but you can’t make a one-size-fits-all solution.
If you have limited resources, you can focus on a fragment of your users — a loud minority, who, if you judge by the Pareto principle, form about 20% of your users and account for 80% of financial results. In some business models, the share of such users can be even lower.
One way to utilize highly tailored UX is to implement bandit tests. Automating these experiments enables you to achieve a healthy level of readiness and provide users with the most relevant experience.
Furthermore, by applying ML algorithms (and generative AI, when possible), you can optimize your product’s onboarding with the most efficient steps and visuals (in terms of conversion rates) simply by running continuous optimization experiments.
Optimize user activation and retention
Retention is king. There’s no reason to think about growth if your retention is unstable. To drive the retention plateau higher, you need to focus on activation.
Activation is a point on the retention curve where the line flattens and turns into a plateau. From a different perspective, working with activation is similar to working with churn. Both are crucial to having strong and healthy retention.
Try to think of activation as a first date where you want to make a first strong impression. You most likely want to be catchy and remembered in a good way. You want to avoid finding yourself among those products that lose 77% of their daily active users in the first three days or get no response afterward.
It took us six months, 22 extensive experiments and hundreds of hours spent on user research to increase our activation metric by 108%.
Building experiments and product roadmaps around the knowledge you have from user research, product customization and new technology will help you build strong retention.