Sunday, February 17, 2019

Understanding the Difference Between User Acquisition and User Commitment

As was hypothesized in the case of PayPal, a frictionless user experience is a must to pull the users towards the platform. But is it enough to drive long-term success of the platform ?
The answer is probably Yes and No both. To think of it, an effortless induction of user into a platform is the right first step. It ensures that the user discovers enough value to be drawn towards the platform. But what ensures a long-term success is not just the user acquisition but user commitment.

I am reminded of an all hands conversation when one of the senior engineering leaders in my organization was asked what is the key metric that worries him the most ? Without losing a beat, he responded "Daily Active Use" of our products and services. Aptly, the prominence of user commitment is not just limited to consumer products but is equally applicable for enterprise products.

This discussion also takes me to one of the articles i wrote 4-5 years back when i called out Google's Tooth-Brush test for acquiring new companies.
Before Google decides to make an acquisition, its seemingly novel way to evaluate the decision is the toothbrush test. The toothbrush test asks the question: "Is the product the target company makes something people will use at least once a day, and that makes their lives better?"

The real value for tooth brush companies is not when user buys the toothbrush, but it really when a user repeatedly uses it.

Coming back to PayPal example (as narrated in the book: Platform Revolution – How Networked Markets Are Transforming the Economy–and How to Make Them Work for You), PayPal applied novel methods to drive user commitment. Because of its frictionless user interface, it was not difficult for users to get attracted towards PayPal as a payment platform of choice. It removes entry barriers for users. But to make sure that users are using the service, it leveraged pull marketing techniques like offering users $ incentives to recommend their friends and acquaintances to the platform. Due to these strategies, it had a viral growth in its initial days and it created a positive feedback loop that prompted the sellers to offer PayPal as a payment option of choice.

As i delve deeper into this subject, there are apparently more layers to peel to get to the depth of user acquisition and user commitment discussion. More on it in the coming blogs.

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