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Value Experience Growth

We try to ensure everything we do at Flightfox is related to one of three categories: value, experience or growth. This provides a litmus test to gauge if we're working on ideas that matter.

Value

We get caught up in our own products. We drink our own Kool-Aid. We run around town singing our value from the rooftops. But if our products are so great, why don't they grow out of control?

We can blame slow growth on everything from marketing to management. But it's simpler than that. Companies grow when they deliver good value to customers. Satisfied customers return and spread the good word. That's the most basic formula for growth.

Price & Utility

To this end, we favour ideas that directly drive value. The primary drivers of value are as follows:

If we lower prices and/or increase utility, customers receive greater value. However, it's not just about maximizing value (magnitude); its also about stabilizing value (consistency).

Magnitude & Consistency

We therefore try to reduce price and improve utility along two axes:

Customers respond to both, but optimizing for both with equal effort at the same time can be futile. That's because what often increases magnitude also reduces consistency.

In our research, we've found that discretionary companies (e.g., AirBnb) benefit more from a focus on magnitude of value [1], whereas utilitarian companies (e.g., Dropbox) benefit more from a focus on consistency of value [2].

That said, a material deficiency in either will stifle growth till improved.

Functional & Emotional Value

As if that weren't enough, value also has two persuasions:

For the most part, functional value is objective while emotional value is subjective. Like price and utility, customers respond to both functional and emotional value in different quantities depending on the product.

Companies create functional value by delivering utility at a good price [3], whereas companies create emotional value by stimulating customers' moods, thoughts and senses [4].

For example, corkscrews and can-openers are largely functional. We buy them on observations of efficiency. Conversely, designer clothes are largely emotional. We buy them on feelings triggered by expectations of others' perceptions.

That said, the discussion so far refers to potential value, not delivered value. What's actually delivered depends on the experience.

Experience

We can work tirelessly to engineer superior value (price and utility), but if our web interface is complicated or our customer support is unreliable, much of that value remains locked away. Similarly, if a competitor provides greater emotional stimulation, even for the same eventual value, customers will return to that competitor.

Ipso facto, potential value alone is not enough.

This brings us to experience. The (customer) experience dictates how much, and in what manner, potential value is extracted.

Functional & Emotional Experience

You'll notice a common theme here; we can think of the customer experience in the same terms we think of customer value:

The functional experience refers to the accessibility of value [5], whereas the emotional experience refers to the stimulation of extracting that value [6].

Whenever we talk about improving our UI, customer support, or notifications, we're talking about helping customers extract more value more easily. If the user has fewer on-screen hurdles, receives a faster response from support, or is notified of changes more quickly, they're less likely to get frustrated and leave.

Emotional experience on the other hand concerns the customer's subconscious. It's about pushing the right buttons. For example, a travel company may use glossy photos of the perfect destination to help the customer imagine themselves having a great time away. This helps reaffirm the value of the company's offering.

A good emotional experience may be the following:

Emotional experience can be negative too. Take Dropbox. Recent news about NSA spying created contempt and rebellion for the establishment. The idea that Dropbox's encryption is reversible by design makes some people consider Dropbox part of the establishment too. AirBnb is another example. When a host declines your request, it feels personal and triggers feelings of rejection. This feeling may not be rational, but it certainly matters.

In summary, to satisfy a customer, we must deliver good value and make it easily and enjoyably accessible via a good customer experience. This is the key to long-term growth.

Growth

Growth is the lifeblood of a startup. Not just for financial sustainability, but also for team moral and momentum . Everything is made better with growth. We are happier, work better, learn quicker, it even causes us to call our parents more often, albeit just to share the good news.

Types of Growth

There are two types of growth:

Organic growth is foremost driven by the merits of a company's offering. But it's also about how effectively a company turns visitors (inquiring about the offering) into committed customers.

Inorganic growth creates the initial awareness and curiosity that makes people want to inquire. Examples include advertising, content marketing and direct sales.

Note: when we explicitly discuss growth, we mostly discuss non-product initiatives. Improving the product, even to ultimately drive growth, belongs to the domains of value and experience.

The Conversion Funnel

To better visualize growth, we talk about the conversion funnel Conceptually, it should be called a conversion sieve because it describes visitors falling out of the sales lifecycle, but alas.

Here's our conversion funnel at Flightfox (i.e., how a visitor turns into a paying customer):

  1. Customer sees Flightfox in an ad
  2. Customer visits our website
  3. Customer browses our offering
  4. Customer recognizes value
  5. Customer buys

You can see the two types of growth in this funnel. Inorganic growth (advertising the offering) drives the person into the opening of the funnel, whereas organic growth (messaging about value) converts that visitor to a customer within the funnel.

Growth Initiatives

The terms organic and inorganic growth are a little too sterile for everyday use, so we talk in terms of these growth initiatives:

Sales and brand marketing involves efforts to increase the funnel, i.e., increase visitors, whereas referral, repeat and conversion marketing attempts to improve (efficiency of) the funnel, i.e, increase conversions.

Note: even though referred and repeat custom involves driving more business into the opening of the funnel, both originate from within the funnel, so we consider them organic initiatives.

The Combination

To recap, the most basic formula for growth is to provide good, consistent value to customers. However, that value is only fully realized via a good customer experience. Alone, value and experience will drive grassroots growth and should consume our initial focus. Once purring along, we can maximize growth with greater awareness and a better perception of our offering.

At Flightfox, this makes up our ultimate challenge.

Notes

  1. On the surface, most experienced travellers love AirBnb. But probe ever so slightly and the horror stories flow like water. So why is AirBnb so successful? Because it delivers enough value to mask the inherent inconsistencies of its marketplace. It's a magnitude play, which is typical of a successful human-to-human marketplace.
  2. People rely on Dropbox for sharing and backing up data. This can be done with many other services, but through reliability, simplicity and pervasive adoption, people choose to stay with Dropbox. It may not change your life, but it just works very well across most platforms exactly when required.
  3. Dropbox initially had to rely on the long game. It had to prove its functional value to early adopters. There were plenty of comparable products to share and store data, but to stick, it had to show its superiority over a long enough period to prove its utility.
  4. AirBnb creates planeloads of emotional value by showcasing hosts' interiors with large glossy photographs. When you visualize yourself staying in an 18th century chateaux in Southern France, you leave most functional value at the door. Of course, AirBnb must deliver on this visualization to effect repeat custom and referrals.
  5. Functional experience is currently suboptimal at Flightfox. When I use it for my own flights, I get amazing results every time. But the average customer isn't so lucky. They struggle to extract full value and often completely miss. This is our number one priority.
  6. The interesting part of the emotional experience at Flightfox is the perception of monetary savings. Typically, we'd consider savings functional, but money absolutely has an emotional aspect, similar to fashion or gourmet food. This is both a blessing and a curse. It's a blessing because it helps spread the word, but a curse because it often creates unreal expectations.