The hierarchy of engagement | Sarah Tavel (Benchmark, Greylock, Pinterest)

Dec 27, 2023 1h 50m 18 insights Episode Page ↗
Sarah Tavill, a partner at Benchmark and former Pinterest product manager, shares two killer frameworks: the Hierarchy of Engagement for consumer startups and the Hierarchy of Marketplaces. She discusses defining core user actions, building retention, creating self-perpetuating loops, and how to achieve market dominance through focused growth.
Actionable Insights

1. Identify Core User Action

For consumer products, pinpoint the single, most important action a user takes that demonstrates product utility and predicts their return. This ‘core action’ should be the North Star for your product roadmap and new user experience (NUX).

2. Optimize NUX for Core Action

Design your new user experience (NUX) to clearly guide users to understand the product’s mental model and successfully complete the defined core action, avoiding diffusion of attention.

3. Build Product Retention

Ensure your product gets better the more a user engages with it, creating accruing benefits and ‘more to lose by leaving.’ The core action should directly enhance the long-term user experience.

4. Create Self-Perpetuating Loops

Convert user engagement into product growth by maximizing network effects and implementing growth/re-engagement loops, where user actions naturally pull others in or bring dormant users back.

5. Focus on Constrained Market

When building a marketplace, concentrate your ambition like a ’laser beam’ on a small, constrained market (a ’thimble’) to achieve deep product-market fit and ‘heat it up white hot’ before expanding. This conserves capital and founder attention.

6. Optimize for Happy GMV

For marketplaces, prioritize ‘happy GMV’ – transactions that result in high buyer and seller satisfaction and retention – over simply maximizing gross merchandise volume.

7. Reach Minimum Viable Happiness

Work relentlessly to remove friction and optimize the product experience until a significant percentage of users retain after their initial transaction, indicating you’ve reached a ‘minimum viable happiness’ threshold.

8. Actively Tip Marketplace

Once ‘minimum viable happiness’ is achieved in a constrained market, identify and accelerate ’tipping loops’ (growth and happiness loops) to reach a saturation point where the marketplace becomes self-perpetuating and easier to grow.

9. Dominate Market Segments

After successfully tipping a market and establishing a repeatable playbook, aggressively expand into adjacent markets or use cases, but always with the discipline to dominate each new segment rather than spreading resources too thinly.

10. Track Cohort Retention

Implement rigorous cohort tracking (e.g., weekly) to honestly assess user retention and activity levels, aiming for a ‘smile graph’ where retention plateaus over time rather than continuously dwindling.

11. Ride Market Currents

Instead of viewing markets as static ‘bodies of water,’ identify underlying ‘currents’ or dynamics of change that provide momentum, making it easier for your company to be pulled forward and endure.

12. Assess Market Tipping Potential

Before attempting to tip a market, assess its conditions: look for non-concentrated (fragmented) supply and low competition. Avoid markets with high supply homogeneity or concentration, as they are less likely to tip.

13. Gauge PMF with Sean Ellis

To measure product-market fit, ask users ‘How disappointed would you be if this product disappeared?’ Aim for at least 40% responding ‘very disappointed’ as a strong indicator.

14. Never Rest on Laurels

Recognize that consumer expectations constantly rise; continuously innovate and improve your product experience to avoid stagnation and disruption, even if you have strong network effects.

15. Target Underestimated Markets

Look for market opportunities that others perceive as too small, as these often have less competition and significant potential for expansion into adjacent, larger segments (e.g., Hipcamp’s growth from hardcore camping to glamping).

16. Avoid Pure Anonymity

Pure anonymity in social products hinders retention by preventing users from building a persistent identity with accruing benefits or mounting loss, making the product less sticky over time.

17. Cultivate Founder Focus

As a founder, maintain intense focus on the right metrics and exhibit intellectual honesty about what’s truly working or not, rather than being swayed by vanity metrics.

18. LLMs for Supply Expansion

Explore how large language models (LLMs) can automate the onboarding and management of long-tail supply, potentially opening up new marketplace opportunities that were previously too labor-intensive.