In a bear market, the must-have feature is a stellar reputation
Sometimes tech companies want to be at the top of Hacker News, but sometimes they really, really don’t.
These days, news spreads as quickly as you can Slack it (or text it, or tweet it, or…you get the idea). With recent subpar earnings, layoffs and leadership snafus dominating the headlines, it’s no wonder that people’s faith in the darlings of this or that industry is being rattled (not to mention their valuations).
When markets turn bearish, high growth companies and startups may fear that the odds are against them, but they can find solace in one critical component they do have control over: their reputation.
Reputation is more than a public relations concern. When times are tough, you need your good name and loyal users more than ever, so turn trust into a product’s feature.
And you can’t stop there. After building reputation and trust into a product, you also need to be able to measure it and its effect on the business.
Why? Across industries, from SaaS to finance, venture capital, and more, the experts are clear: the stickiest products, regardless of market turbulence, are the ones that take reputation as seriously as acquisition and revenue. While there is no one-metric-fits-all, here are proven methods for building a good reputation into your product and measuring its effects.
On The Search for a Number
A long time ago, Publilius Syrus, the Syrian slave turned philosopher (before Christ, might I add) gave some sound business advice: “A good reputation is more valuable than money.” In today’s world, I would argue that actually, a good reputation is foundational to bringing in that paper. Finding and focusing on a reputation metric will help attract new customers, retain current ones, and measure the effectiveness of a company’s mission.
Ashley Carroll, once a product lead at companies like DocuSign, Optimizely, SurveyMonkey, and Shutterfly, and now an investor at Social Capital, said that finding the right reputation metric for your product to drive the business is both an art and a science. What she doesn’t recommend, though, is using revenue as a proxy for reputation and trust.
“Most companies focus too much on revenue, but that’s really a lagging indicator of the health of the business. Think of revenue as the result of delivering value, since users will pay (or continue paying) so long as they’re getting value,” Ashley told me.
“Investors look at revenue, sure, but especially at the Series A and B stage, engagement is a better indicator of long-term success.” Think about it: If someone signs up for an annual contract but stops using the product a month in, how much value are they getting? Is that customer likely to recommend it to others or renew their contract the following year? You learn more about a business when you understand how users engage with the product, rather than how well a sales force can sell it (though that part matters too).
“All companies have a mission, and presumably, the product is the engine for that mission. What you want to do is look at how exactly the product enables the company to achieve its mission” Ashley said. “Then define an engagement metric indicating when the product has done that thing. For example, let’s take a marketplace product; the engagement metric is probably a completed transaction between users.” In this way, how you measure reputation, which is basically about determining if your product delivers value, becomes your true leading metric.
Ashley calls this the “North Star” metric: one that’s focused on user engagement and how the company delivers value to its customers.
When a company aligns itself to that North Star metric, teams across the organization, from Engineering to Support, feel more connected to their customers, and they are motivated to build quality products or experiences (versus just chasing dollars). It’s the North Star metric that works as a proxy to measure reputation, and as this number progresses, it’s clear how invaluable a good name is for both the brand and the bank.
The Godfather of reputation metrics: the Net Promoter Score.
Every North Star metric, no matter the company, tracks how your product fulfills a promise to your customer, but that’s just one side of the story. Every company also needs to be cognizant of how its customers talk about the experience. This brings us to the most common way to measure reputation now: Net Promoter Score (NPS). NPS is an index which measures customers’ willingness to recommend a company’s products or services to others.
While most people think of NPS as a quantitative metric, David Cancel, CEO of Drift, a relationship marketing platform, highlights the qualitative value of NPS surveys: “Customer NPS is the thing I have obsessed over for years. Not just the movement in the score but also analyzing all the free-form comments that customers would leave. At Drift, we would do the survey every quarter and take actions based on the comments and set goals for NPS improvements.”
Mixpanel’s Support team uses NPS to measure both the success of the team and an individual team member’s performance; by calculating this, a company can track not only how its product resonates with users, but also how each teammate can make a company more beloved. In turn, employees can then be rewarded for their positive impact.
According to our own Cassie Gamm, a support engineer at Mixpanel:
“High Net Promoter Score (NPS) is a necessary ingredient for a viral product. The better you understand NPS, the better you can serve your customers.”
NPS is really just the measurement of satisfaction, but it’s the starting point to a positive feedback loop. You don’t have to do anything so crazy over the top to make your customers feel like rock stars. Even sending new customers a simple t-shirt can make them feel special. What matters is understanding who they are and how to make them understand that you care about them.
Of course, the best way to make customers feel special is to deliver such a great product that they want to tell everyone they know, meaning they want to associate their personal brand with yours. Often this is known as evangelism. But how do you build this into your product and then measure its impact on the business?
Take a note from the fast-growing technical boot camp industry. They build armies of engineers who are also brand evangelists.
(But there’s a caveat: evangelism can’t be a side project. It needs to be core to the business.)
Since about 2012, there’s been a tremendous rise in training programs, coined as tech boot camps, that turn non-technical professionals into full stack developers. In this very crowded market, programs like Hack Reactor, General Assembly, Hackbright Academy and Dev Bootcamp sell certainty. They don’t exactly promise six-figure salaries, but they do present historical data to candidates that tell a pretty accurate story: if a student follows their program and earns the chops he or she needs, the probability is high that they’ll earn a lucrative engineering job. And it may only be 12-weeks away.
For example, one of the leader in the space is Hack Reactor. Their 2013 and 2014 cumulative placement rates for developer jobs were 99% (2015 numbers are forthcoming). They also have a five-star rating on Yelp and a median salary of $105K per graduated student.
This isn’t to say building a coding boot camp is easy. It takes a lot of work to be practically perfect in how the outside world sees you. Understanding your reputation and how to measure it is key to growth, but it won’t happen overnight. It involves a lot of trial and error and thoroughly understanding every aspect of your business. Here’s the clincher: Measuring your customer success is intrinsic to your financial success.
Chief Strategy Officer Ruan Pethiyagoda at Hack Reactor said, “We think of ourselves as an education company powered by technology. Because there’s so much interaction with our customers, building a good reputation is extremely high-touch that includes a lot of qualitative feedback.”
In order to fully understand its reputation with students and companies, an internal student outcomes team compiles both qualitative and quantitative data, feedback from students on the curriculum, and they even factor in “student intent” and how that changes throughout the course of the program.
Still, even with a shiny and highly measured reputation, the school couldn’t rest on its laurels.
“As time continued, we knew the quality of the program was improving, but we weren’t sure how to express that. I mean, you can’t get six stars on Yelp.” So, in order to continue to improve its reputation, Hack Reactor dove deeper into the data to figure out the next level in reputation metrics.
What was that next level? Measuring the outliers.
While median metrics have stayed static for a few years (and they continue to report out median numbers), getting granular on the data substantiated their intuition that things were improving.
“As the program continued, the histogram showed more people getting jobs faster than before. We also found that people were making more money than the median; it was exciting to see that we were producing exceptional cases.”
So this is why reputation reigns as a top metric to understand and to further investigate, even when all seems peachy: Your success numbers are your calling card. It’s what attracts new customers and secures ongoing business. Without them (the numbers and the customers), there is no business.
In the world of technical boot camps, employability numbers are cited as the primary reputation metric for technical training programs, but a good reputation can also beget more commercial success. Because coding programs, across the board, have had such high job placement rates, the federal government decided to allow students to apply federal student loans to the tuition costs for these programs. An endorsement from the federal government not only further vouches these bootcamps, but it also widens these bootcamps’ customer base. Federal student loans are far more forgiving, thus these relatively expensive programs are far more accessible to people wanting to make a career change.
Whether it’s an experiential product, like Hack Reactor, or an app that you download, it’s paramount that every product demonstrates it’s worth the investment of time, money, or data. Establishing trust is the most crucial component (and first hurdle to clear) when activating new customers, and it needs to happen at the first touchpoint for the user. A product team needs to figure out how to turn an emotional experience, like building trust, and express it in a digital format. As Venmo said during an event:
Don’t tell users why they should trust you. Just show them.
Several years ago, it seemed silly to make payment activity public on a money exchange app. Venmo did it anyway. They believed a payment platform would only be as useful as the friends who were on it. And eventually, Venmo upended the way people exchanged money by turning payments into a fun and social way to connect with your friends. The company built trust into a product with reputation-enhancing features in order to initiate a network effect.
Venmo baked in social proof to their app, and today they rank as the top payment app in the Apple App Store, transferring $7.5 billion (and countless emojis) between people over the course of 2015.
So why is social proof so great?
Social proof is a way to show potential users that other people are using the product so they will trust it and try it out. Often it’s expressed through ratings, reviews, feeds, a facepile, usage stats, etc.
By building a social feed within the app, Venmo cranked up active user growth with the pivotal feature that built their reputation. Immediately after installation, the app’s launch screen presents all the users who are paying and requesting money from their friends through a simple feed.
This might not sound like a big deal, at first, but Venmo saw users converting 20% more with a social feed versus a static page.
By making payments social, Venmo encouraged new users to invite friends by connecting with Facebook or syncing with their contacts, accelerating activation numbers like wildfire.
These invites were seen as the digital holy grail because users who joined via invite were also 20% more likely to send an invite compared to those who found Venmo through another way.
With social proof as the quintessential feature, Venmo became, “not just another buy button,” Dan Schulman, chief executive officer of Paypal told CNBC. “It is the most beloved way to pay for millennials.”
So maybe this is what it all comes down to when you productize trust, like Venmo:
Provide value for the user at every juncture, and then, scaffold a product that incentivizes referrals or necessitates a network.
As Ruan Pethiyagoda from Hack Reactor also noted, “It’s a very human process to understand reputation, but as you scale, you need to put more procedures in place and be more exact in order to grow.”
Whether it’s tracking the progress of a North Star metric, Net Promoter Score, or the power of a network effect, these are proven strategies to build and quantify a company’s reputation, and following this rubric will take companies to new heights. Astronomical growth and a stellar reputation come to those businesses that follow this final and overarching law: Make the user the center of the universe, and your product will shoot the moon when it comes to engagement and revenue.