Product-Led Growth 101, Part 2/2

How to Retain Customers and Monetize Your Product. Going Viral. B2B SaaS Growth Blueprint From 0 to $100M ARR by Eugene Segal.

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Product-Led Growth 101, Part 2/2

Last week, in Part 1, we discussed:

1. What is Product Growth?

2. Why Product-Led Growth?

3. How to Start?

4. How to Acquire Customers?

5. How to Activate Customers?

Product-Led Growth 101, Part 1/2

In today’s newsletter:

1. How to Retain Customers?

2. How to Monetize Your Product?

3. Going viral.

4. B2B SaaS Growth Blueprint From 0 to $100M ARR by

   Eugene Segal

1. How to Retain Customers?

As mentioned in the previous part, retention is the most critical part of the funnel. In his book Hacking Growth, Sean Ellis mentions three types of retention:

1.1 Initial retention

Users are more likely to stay in your product if they keep experiencing the core value of your product in the initial period, just after activation. You might consider it an immediate stickiness (DAU/MAU).

For example, in Hacking Growth, Sean Ellis described Pinterest, which, after analyzing data, determined that users who didn’t return to the site at least three times during the first two weeks are much more likely to abandon the product completely.

They focused on bringing users back to the product and reiterating value and relevance in this initial period.

1.2 Mid-term retention

Users who regularly experience value from the product develop habits.

In his book Hooked, Nir Eyal introduced the Hook Model. It consists of four stages — Trigger, Action, Variable Reward, and Investment:

1. Trigger: This is the starting point, prompting the user to engage with a product. Triggers can be external, like an email notification or an app icon, or internal, related to the user's emotions or routines. For example, feeling bored might internally trigger someone to check YouTube. Another trigger might be a notification about a new video.

2. Action: After being triggered, the user takes a specific action. This action is influenced by the user's motivation and the ease of performing it. For example, receiving a notification about a new video from a favorite YouTube channel might lead someone to tap on it and watch it.

3. Variable Reward: This stage is about the unpredictable rewards users get after taking the action. Unlike predictable feedback loops, variable rewards create a sense of desire and intrigue. For example, on YouTube, a user might start with the video they were notified about but then get suggestions for other videos, some expected and some surprising, keeping them watching for longer.

4. Investment: Here, users contribute to the product in some way, making it more valuable for them in the future. This could be by creating playlists, subscribing to channels, or engaging with content. Such investments increase the likelihood of users returning and re-engaging with the Hook cycle.

Source: The Hooked Model: How to Manufacture Desire in 4 Steps

Full explanation:

The Hook Model is closely tied to the brain's reward cycle, which isn't specific only to humans. Interestingly, when the reward is variable or unpredictable, it further intensifies the dopamine release.

A short video:

1.3 Long-term retention