Why user engagement matters

There are many ways to build a software company but this seems to be a common pattern.

  1. Build a product

  2. Get users

  3. Figure out the lifetime value of users

  4. Figure out a way to get CPA below the lifetime value

  5. Scale

In reality, it is far more difficult than a 5 point checklist. Every step is booby trapped with a variety of challenges that your team is unlikely to agree on how to address. The bigger the team gets, the harder it is to make decisions.

Let’s just assume you’ve managed to get past the first 3 hurdles. You’ve got an app that charges $20/month and your average paying user stays on for 2 months.

Your lifetime value per user is around $40. When you factor in marketing and conversion rates you convince yourself that the CPA is $100. Maybe that number takes some liberties and is not entirely accurate but who cares. It’s clear that you’ve got some work to do before you start scaling things up. What now?

  • Should you raise prices?

  • Should you add new features with the hopes of attracting more people?

  • Should you push your sales people to sign annual deals?

  • Should you bring on more customer success people with the idea that you’ll convince people to stay on longer?

  • Maybe you want to invest in marketing automation to get more people through the funnel cheaper.

The options above aren’t inherently bad. Definitely explore your options. But maybe a better solution isn’t to build things around your product but to build a better product.

Take a hard look at the value your app promises to deliver. What actions are associated with that value? Find a way to track those actions and make thoughtful adjustments to the app with the idea of enabling more of them.

People who get more value out of your app will stick around longer. Your lifetime value per user goes up and suddenly the economics look much more favorable.

This is what user engagement means to me and why I’m so excited about starting Knowtify. I want to help businesses enable more meaningful actions and build better products in the process.