Thoughts on Important Concepts in Growth

Product Market Fit

Product market fit refers to whether your product is good enough; if it is, you can start investing more in paid customer acquisition channels. User retention may be the best measure, after all, actions speak louder than words.

What you need to clarify is: "Is the product effective? Is word-of-mouth and retention growing on its own?" Usually, the answer is no. So make sure you try enough times—focus on the solution rather than the problem or the mission. The solution is the reason people use your product.

Product Channel Fit

Do you have repeatable and scalable channels? The two most common repeatable and scalable methods for consumers are Search Engine Optimization (SEO) and referrals.

• Search Engine Optimization (SEO): Generate unique user-generated content
  • SEO takes time to set up; you won't see benefits right away. It's more like "If this company wants to grow in 5 years, SEO must be done well." Therefore, you shouldn't spend 100% of your time on it. More like 10% of your time setting up the basics ("Set it and forget it").
• Referrals: Provide an incentive mechanism that encourages people to invite their friends for rewards
  • Referrals can start working from day one.

Important Metrics

In the early stages, the quality of data is more important than quantity (e.g., retention rate). A 50% or 10% long-term retention rate is more important than user growth rate. In some cases, Daily Active Users (DAU) are important. The metric is not "Can this acquire users?" but rather "Can this retain users or convert them to paying customers?" Many companies over-focus on monthly growth rather than whether the product has genuinely improved. At the beginning, data is scarce, and you might convince yourself that it is effective. But if retention is low, growth won't be sustainable.

Control Analysis

Segment users into control groups so you can analyze how user behavior changes over time and with product changes. You can determine if there is natural churn and whether your changes have unlocked new behaviors.

Lifetime Value (LTV) / Customer Acquisition Cost (CAC) Payback Period

Using just a few months of data to calculate LTV for future predictions is not very instructive. What people want to know is, "How will this product grow over time?" So you should focus on what it will look like as it scales.

Payback Period (PBP) can sometimes be better than LTV/CAC. It means if I spend $1, how long until I can recoup not just revenue but also profit. The importance of the payback period is that unless you have a quick return on investment, it's hard to build rapid growth on paid channels.

What you really need to ask yourself is, "Can I reinvest this money into more growth?" If it takes one or two years to get that money back, then you need to rely on another source of funding to support your growth.

Why Should We Avoid Spending on Customer Acquisition Initially?

If possible, try to avoid spending on customer acquisition at the beginning. Companies with a long-term mindset and large companies do not spend money to buy customers. Avoiding it will force you to find ways for viral growth. Unless you can prove that spending $1 can yield$5, and you don't have a high churn rate, then you can consider using paid acquisition.