How UX can grow your business

Howdy!

I recently had the chance to watch some of the talks from Insight Out - Dovetail’s global conference for customer-obsessed product people.

Among the lineup of awesome speakers was Claudia Natasia.

She is the founder of Riley AI and a mastermind that generated $5 Billion worth of total valuation from her previous ventures. Crazy, right?

How did she generate that much value? Well, good thing she shared her workflow in one of my favorite talks of the night!

What's the deal with Growth Strategies?

Claudia started off by hitting us with a reality check. While everyone talks about executing killer growth strategies, only a tiny fraction actually pulls it off.

We're talking a measly 2% of leaders confident in their game plan, resulting in a paltry 10% success rate. Yet, implementing the right strategies can boost profitability by a whopping 77%. Insane.

So, how do we ensure we can pull it off?

It's all about them Profit Margins.

So, let's ask ourselves first. What's the secret sauce to business success?

Claudia broke it down for us: profitability ratios. Specifically, she honed in on net profit margins - you know, that sweet spot where net income meets sales. It's the ratio of net profit and sales.

So what drives profit? There are only ever two things you need to do:

1. You increase income.

2. You drive more efficient sales.

Now, let's talk about how to achieve those.

What not to do.

Claudia first depicted a not-so-good hypothetical venture that built features without understanding their impact on metrics. When economic conditions changed, metrics plummeted, leaving the team baffled. What happened? What caused metrics to go down? No one knows.

So yep, don't just blindly build features.

What to do.

Claudia then went on and gave an example on what she did at Fivestars that resulted in a $317 Million acquisition.

Profit Drivers: Increasing Income

The first profit driver is increasing income. There are two ways to do this:

1. Customer Acquisition

2. Customer Retention

Let’s discuss strategies on how to achieve those.

Claudia mentioned her first strategy to be Competitive Arbitrage. In forex terms, arbitrage is buying one currency at a lower price and selling it later on for a much higher price. In business terms, it’s simply discovering a new business opportunity, and building a product to exploit it.

At Fivestars, Claudia discovered a highly unique arbitrage opportunity through customer insights! She collected multiple data from user research studies, review sites, and even some payment data to discover a big pain point of their customers. Small business owners, i.e. Fivestars’ customers, were complaining that the archaic payment terminals they use were so expensive and has hidden fees.

Bingo! Fivestars, back then, was just doing customer loyalty programs and nothing more. So Claudia solved this payment terminal problem. They built a new payment terminal, placed it on a modern tablet, and made it cheap. Naturally, even the customer loyalty programs were integrated in this tablet terminal.

In 2 years, this product alone caused Fivestars to reach $500 million in yearly payment volume, both from existing and new customers.

Now, let’s move on to her next strategy: Growing Behavioral Clusters. Some context, it was 2010-2016, mobile was an emerging tech, people started being more reliant on it. Fivestars, at that time, was a tablet-only experience: customers of those small businesses input their phone numbers, and nothing more.

Claudia and her team conducted about 50 interviews with the customers of small businesses Fivestars were dealing with. They were using Instagram a lot. Mobile-first started being a thing!

In parallel, they were running an experiment unrelated to the above interviews. They started showing nearby deals of shops in their tablets, and it worked. Usage of those deals by the customers increased by 70%.

Claudia and her team then went “woah”. Well, not really, but they saw an opportunity. What if we combine the two insights from above. Let’s build a mobile app for nearby deal discovery!

This resulted in their customer base growing 4x. Had they only focused on the first insight, they wouldn’t have known what to do with being mobile-first. Had they only focused on the second insight, they would have only built nearby deals on their tablets, preventing them from having such a massive growth.

Profit Drivers: More Efficient Sales

Yep, just like the above examples, this all started with collecting customer data and discovering a unique insight. From online forums, review sites, and more customer interviews, they found out a unique customer behavior. Customers were returning to same local stores over and over again within same vicinity. Another insight!

Naturally, this resulted in Claudia building out the local partner program. Customers get rewards, small businesses get more customers.

Since it was so easy to convince small businesses to participate, Fivestars improved sales velocity by 38%.

What is the Playbook?

The key takeaway from Claudia's talk was the importance of translating signals into actionable strategies. She narrowed it down into 4 steps:

1. Identify Signals: collect raw data from customers

2. Synthesize: combine multiple raw data into one insight

3. Apply Insights: act on it

4. Measure Success: track, track, track - know if it worked

Overall, Claudia’s talk at Insight Out wasn't just another conference spiel. It was a wake-up call to the power of UX in driving business growth. As a fresh face at Dovetail, I'm stoked to put her insights into action. Here's to staying customer-obsessed and hustling our way to success in this crazy world of product development!