In this week’s episode of Growth Interviews, we invite you to join our podcast conversation with Dan Olsen, product management consultant and trainer at Olsen Solutions, helping executives build great products and strong product teams. He is also the author of the bestseller The Lean Product Playbook, published by Wiley.
Dan is a Stanford MBA with a strong technical background and deep expertise in product management, UX design, analytics, marketing, and Lean Startup. He has led product management for multiple companies and enjoys driving product vision, product roadmap and product definition.
His clients include Facebook, Box, Microsoft, Amazon, Walmart, Sam’s Club, HP, YouSendIt (now Hightail), One Medical, Medallia and Financial Engines.
Welcome to Growth Interviews!
Welcome to Growth Interviews, the fun, stimulating and engaging series of conversations driven by digital business growth. Our mission is to provide valuable insights from the eCommerce arena, and each episode is a fascinating quest into the best-kept business secrets and money-making strategies of an insightful world-class expert.
In today’s episode, Dan Olsen has shared with us his views on customer retention and its crucial role in the healthy growth of a business, especially an eCommerce one.
Here are the biggest takeaways:
- Product management is exploding – 00:30
- The trio of retention, conversion and acquisition – 02:51
- RFM and the “equation of a business” – 04:21
- Customer segmentation and cohorts – 06:19
- Is the data-driven trend going to stop? – 10:00
- The growth mindset – 12:34
Product management is exploding
Dan started his career in product management after discovering his interest in software while attending a business school in Silicon Valley years ago. He was fortunate enough to start his career at Intuit, following the path towards startups and consulting and training afterwards.
“One of the coolest things about being a product management consultant trainer is just getting to interact with so many different companies and product teams. […] The interesting thing is, because they don’t have any other comparison points, they don’t know that the things that they’re experiencing are what a lot of other product teams are experiencing too.”
Dan continues to tell us that these are exciting times to be working as a product manager since he believes product management is exploding. He also quotes Marc Andreessen who said that “software is eating the world”. Moreover, in recent years, there has been a growing request for product managers to build software that meets customer needs.
The trio of retention, conversion and acquisition
Dan started discussing with us about the leaky bucket metaphor. He explained this concept with reference to the holy trio of retention, conversion and acquisition, the key points that every business takes into account when planning their market growth.
“The leaky bucket metaphor says you can think about your customer base as a bucket and the amount of water that you’re holding onto in the bucket is how many customers you’re holding onto. Unfortunately, everybody has a leaky bucket. Everyone is losing customers over time. You could try to improve how good a job you’re doing on acquisition, conversion, but if at the end the day you have a very leaky bucket, you’re going to spend all his money to get this water in the bucket and then it’s just going to leak out anyway.”
The most counterintuitive part of his speech represents the idea of focusing on retention, first and foremost, and then on conversion. Dan is of the opinion that the tools to track retention have been improved and this helps people understand its importance in the healthy growth of an eCommerce business. Bottom line, his main point is “retention first, up to a point, and then conversion, so that when you do spend money and time on acquisition, you get to get a much higher ROI”.
RFM and the “equation of a business”
Dan goes even further, mentioning the “frequency of use” as a closely related concept to eCommerce and retention, so we were started discussing about the RFM (Recency, Frequency and Monetary value) and an idea he calls the “equation of a business”.
“The cool thing about e-commerce and SaaS is you can write out the equation of your business. What you’re doing is breaking down revenue formulaically and say our revenue last month was just how many people bought something X the average amount that they spent X our transaction perceived. […] Then, you can say let’s figure how we can get them to buy more frequently and how we can get them to buy more when they do come. You can isolate those two variables and then you can start to do experiments right.”
He ends his idea with a general reminder that the frequency of use relies on notifying your customers in order to reach out to them and making sure they stick with you on their minds. Their following action should be to visit your website and product again and purchase more frequently.
Customer segmentation and cohorts
Dan Olsen comments on a short Q&A session you should have within your own company to figure out whether you truly consider retention (and customer centricity, for that matter) important:
- Do you appreciate how important it is or not?
- If you appreciate its importance, do you have a tool to track it?
- Do you have the experimentation mindset?
He insists that “the real trick” to improve retention is to start “slicing and dicing” your user base into different cohorts. This will help you as an eCommerce to learn everything there is to know about the specific behavior of your customers, whether it is about a different segment, value proposition, customer needs, acquisition channels or quality of the lead. “All these different variables can affect your retention”, he states.
In order to perform a proper segmentation, Dan tells us that “the trick is trying different segmentation schemes or techniques until you see a difference and the curve pops. […] You need to do some qualitative to inform your quantitative”.
Is the data-driven trend going to stop?
“I think it’s in your DNA.” is Dan Olsen’s sincere opinion. He shares with us his analysis epiphany where he understood some time ago that “a feedback loop of asking questions and having hypotheses and being able to get those answered is huge”.
He thus highlights the importance of having such a mindset and culture in your company in order to be data-driven. He believes many traditional retailers have not adapted to this mindset or are still trying to adapt to it.
“If you go to most stores, they don’t know who you are, they don’t know what’s going on, so they can’t even put all the data together, let alone if they were. If they did, would they analyze it, what insights would they find?”
The growth mindset
Shifting our attention towards personal growth and its significance for Dan Olsen, he considers that “it’s about not being complacent”. And we could not agree more.
“A lot of people, a lot of the good product managers, know they have a natural curiosity anyway so they’re constantly learning and trying to learn new things. It’s just part of their DNA! For me, it’s really about reflecting and say ‘Ok, what skills have I developed?’. I want to invest in developing and that’s actually what led me [to become] a consultant.”
Dan is a huge fan of audio books that have helped him tremendously in his career. He views them as “a nice source of growth and ideas, a different mindset, seeing how other people think about things as well”.
He also recommends our audience to read Algorithms to Live By: The Computer Science of Human Decisions, written by Brian Christian and Tom Griffiths. It is based on the idea that, as a product manager, “you need to be qualitative”. “If you want to take your analytical thinking to the next level, I thought that was a pretty good book,” he concludes.
It is an exciting time, as Dan Olsen keeps telling us during his Growth Interview. Companies are more and more interested in customer retention, they seek the proper tools to track and analyze it and, last but not least, software and the data-driven approach is steadily winning the heart of eCommerce and businesses worldwide. That is surely good news.
We hope you enjoyed our podcast interview with Dan Olsen!
For more valuable insights, make sure you come back to check out our next Growth Interviews as well.
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