As economic indicators continue to decline, so do industry leaders Debate Whether the world is entering a global recession or not. No matter which side of this argument you agree with, there is no denying that consumer behavior is changing. People take a more conservative approach to spending, prioritizing needs over wants. Therefore, it is critical that companies looking to weather a potential recession create indispensable products and consumer experiences.
I sat down with Justin Bauer, Product Manager at the leading digital analytics company Capacity, which offers an analytics platform for product, growth, marketing, and data leaders. Amplitude helps companies understand what product features work, where users are crashing, and what actions lead to the right outcomes – all essential to driving revenue growth in today’s market. We discussed how leaders can prioritize their product strategies to ensure their companies can not only survive a downturn but drive growth through it.
Gary Drenick: What are the key priorities that product leaders should pursue to ensure that their product is not adversely affected by economic turmoil?
Justin Bauer: Economic downturns often cause panic, but long-term thinking is pivotal in these moments. Decision making should not be hasty, even if it relieves immediate stress.
First, you play on defense. If you make any quick decisions in a downturn, this is to protect your base by retaining existing customers. According to the post Prosperity Insights & Analytics In a survey, 17.7% of American adults over the age of 18 began cutting or canceling subscriptions to their products as a result of the current economic climate. If you lose your base, the new investments won’t matter. Work with clients to understand the business challenges they face to help achieve their goals and objectives. Your existing clients should view these tough moments in history and instead remember this as the time you invested with them and weathered the economic darkness together as a true partnership.
Then play attack. Prioritize product investment over sales and marketing. This may seem counterintuitive to many. But in most cases, sales and marketing are empty calories – they are short-term gains without doubling the gains. However, the money invested in product compounds over time. There are serious and long-term benefits involved in investing in a product. In an economic recession, you may be reluctant to invest in anything. I mean, according to that Prosperity Insights & Analytics In the survey, more than half (51%) of Americans claim that they will spend less overall given the current economic climate. But all business leaders – not just product leaders – must make the case for product investment.
Drenick: What products do you think will thrive in a recession? Which one will be the first to fail?
Power: It is not necessarily about industry groups or buyers. A great product can survive a recession. Low economies are cycles, and well-designed and managed products will still survive. Products that thrive are countercyclical – they solve customer problems. Just look at Uber or Airbnb, born out of the 2008 financial crisis. Companies whose product leaders focus on amazing product experiences will secure long-term differentiation in the marketplace, but again it’s about long-term vision. They will emerge from this economic age in a much better position for sustainable growth.
Companies with a “growth at any cost” attitude will flounder. They may survive a recession, but only because they spent a lot of money to keep earnings growing. These products struggle with retention. Even if they continue to enter users through the front door, the back door sees the same amount of traffic – which means that users can never sustain their growth. Vidi is a great historical example of that. The social media app was designed for creating and sharing videos, and at its peak, it was attracting millions of users and millions in funding. But soon Viddy started seeing its user base crumble. While growth is still rising, they have had a major retention problem. They couldn’t keep users coming back, and as other players in the mobile market developed like Facebook, they eventually shut down the app in late 2014.
Drenick: Is it better to risk your product during an economic downturn by adding new features, or is it better to stick with core functionality?
Power: There is a classic Warren Buffett quote that I love, to be “greedy when others are afraid and afraid when others are greedy.” My job as a product leader is to think about long-term sustainable growth. What are the few select bets I can place that will set my team up for long-term success while everyone else freaks out?
Don’t be afraid to invest in innovation during this time period. With fewer resources, there is usually less willingness to take risks, but if you don’t keep innovating, your competitors will outpace you. That’s why it’s so important to create a culture of experimentation to understand what works – and what doesn’t – as early as possible.
There is a technical and scientific aspect to the product when it comes to adding or improving features. Successful products require vision, intuition, and an understanding of the market and competitors. This is art. Science is able to determine if it actually works. This is where the metrics show whether the bets you place are paying off. A strong measurement should be able to tell you how and why your customers use your product, and what new features or capabilities they would like to improve the product on. We are no longer in the world of throwing ideas at the wall to see what gets stuck. We don’t have a lot of shots on goal. Using metrics will inform you about the bets you can take, even when you are flexible, which will set you up for long-term success.
Drenick: Is it possible to proactively prepare your product and team for success, so that the economic downturn does not affect the workflow? How do you do it?
Power: Again, it’s up to staying conservative and avoiding rash decisions. You can be proactive by keeping your team calm and focused on building a great product. This means doubling your KPIs and making sure you have the right tools to measure your product’s performance with customers. The more ideas you have about what works and what users want, the faster they can edit and process their feedback and maintain that positive experience.
And one more thing: there is an exceptional talent on the market right now. If you can, you should proactively recruit. By acquiring the best talent now, you are investing in your product for the long term.
Drenick: Justin, thank you for sharing your thoughts. This topic is high on every company’s mind today, and the advice you shared about investing in your product and maintaining your customer base is key. Staying grounded in your long-term vision can be difficult when there are so many signs of stagnation, but as you pointed out, great products will continue.