Note: This discussion is restricted to the domain of web based consumer products/services
Every business has two fundamental questions it must address in order to survive: How do I attract users and what must I do to retain them? This question (and virtually every other question that comes up when designing your product) can be better answered if posed as a rather simple, economic one: is the utility I’m providing to my user greater than or equal to his/her opportunity cost at this very moment? In the world of micro-economics, it’s the most basic question a person asks when making any decision.
Opprtunity Cost
Let’s first start by examining what the user’s opportunity cost really is. As a web user, there is no limit to the products and services that are made available to you. At any given moment, there is an overabundance of information that could be more relevant to you than what you are doing right now (such as reading an important email, looking at a new update in your RSS reader, breaking news, a link your friend sent you, checking out your Facebook page… the list is endless).
Information Overload
Source: http://www.acm.org/crossroads/xrds1-1/mnelson.html
This opportunity cost is also a function of the user’s intent at the time (or more generally, the scope of the intent). If a user is looking for specific information addressing a particular need, she values that information more at this particular moment than the value provided by other non-related products or services. For instance, if Samantha is looking for the cheapest air tickets to Phoenix, her immediate value of being at Kayak.com is much more than her being at nytimes.com and is more likely to outweigh the opportunity cost of being elsewhere. This is a key (and obvious) attribute that must be exploited by any product developer and/or marketer and is largely done by maintaining and controlling user expectations (via product positioning and branding), targeting the right market segments and of course by the very nature of your product. Aligning your value prop with a user’s current intent mitigates her opportunity cost and makes her willing to commit more of her attention on your product than she would otherwise. There is therefore an inverse relationship between the user’s opportunity cost and her attention (and hence a direct relationship between the value provided and her attention).
There is also very little preventing you from going to another website or trying another product. Unlike traditional products, for instance a television, where once you have invested in it, there is a high cost of switching to a competitor (packing it back up, taking to the store, or calling tech support and waiting for them to come pick it up or you having to mail it back, or disposing it and buying a new one), today that cost is simply the click of a button. This ease of switching to a different product removes any transactional and substitutional costs and further “increases” the opportunity cost of a user sticking to one product.
Given this high opportunity cost, a need arises for any product to be continuously engaging the user (and preferably providing increasing utility over time) as she interacts with it so as to not lose her attention. At any given moment, the user can simply jump to another page with a few keystrokes or a mouse click and therefore the utility to the user and her opportunity cost must be kept in mind every second the user is in contact with your product.
User Interaction Model
If we model the user interaction of your product as a finite state machine you get the following picture:
Here, there are five states that a user can be in when interacting with your product. The first is when the user initially comes into contact with your product, be it a website, a widget, a service. The probability of a user being in this state is a function of your marketing, PR, brand awareness, product virality and numerous other variables. This is a topic best left for another blog post. What I want to focus on here is the other four states and their state transition probabilities.
For every given state, as an entrepreneur/product developer/marketer, you want to maximize the probability (p) of a user transitioning to the next preferred state (thereby, minimize his probability of exiting and never returning, signified by the last “Exit” state). These probabilities are a function of the user’s opportunity cost and value provided to the user at each state; the higher the utility & lower the opportunity cost, the greater the attention span of the user and hence, the higher the probability that she will jump to the next state.
Let’s look at each of the state transition probabilities a little closer. Since we have no control over the user’s opportunity cost (except for aligning our product with the user’s intent and managing user expectations as stated above) we will examine these probabilities from a user utility perspective. P1 is the probability that the user understands the value your product provides after first coming in contact with it. It may not even be the actual value that your product provides but more the value perceived by the user. Hence this is directly related to the simplicity of your message and how well the user can relate to your value proposition. P2 is the probability that the user registers (or follows whatever conversion path required to become a user i.e. download, grab, register, use etc). This probability is maximized by making the conversion process as frictionless and effortless for the user as possible. P3 is the probability of converting this “registered” user to a repeat/power user and P4 is the probability that the user will continue to use your product over the course of his/her lifetime.
Measuring Utility
At Youlicit, we call the first two probabilities (P1 and P2), the interestingness of the product and the second two probabilities (P3 and P4) addictiveness. Combined, they model the response of users to your product. Taking the analogy further, interestingness is the transient response and addictiveness is the steady state response of the system (comprised of the users and your product).
The interestingness and addictiveness of your product are what help attract and retain users and capture their attention. Maximizing these probabilities is what helps generate and sustain a compelling user experience. They are the two key metrics that we look to examine and dissect when designing our products, prioritizing development and deciding what features to add.
As this post has already turned into quite a lengthy one, I will elaborate more on these two metrics in my next entry. We shall see how maximizing these two properties of your product help minimize a user’s opportunity cost and hence her exit probability from any state. In the meantime, I would love to hear your thoughts on this model and the assumptions made.
