Product Channel Fit Will Make or Break Your Growth Strategy

In the introduction I explained there are two types of companies:

  • Tugboats, where growth feels like you have to put a ton of fuel in to get only a little speed out.
  • Smooth sailors, where growth feels like wind is at your back.

1. Products Are Built To Fit Channels, Not The Other Way Around

The Channel defines the rule of the channel.

  • Facebook defines the rules of what content and feed items appear in people’s feeds. They also define what is allowed via their API’s. They also define which ads get shown and how expensive they are.
  • Google defines what content appears in the top ten search results. They also control what the top ten search results look like. They determine what ads appear and the rules that govern their cost.
  • Email clients such as Gmail determine what is spam, what ends up in the promo box, and what the content format is allowed in emails.

You control your product, you do not control the channel.

  • Virality. For virality to be a high ceiling channel, a product at a minimum needs
    • Quick Time To Value. Virality thrives when the viral cycles are short.
    • Broad Value Prop. Value prop of the product needs to be applicable to large percentage of a user’s network (branching factor).
    • Network Makes Product Better. Ideally the product value increases the more of your network is on it.
  • Paid Marketing. To have product channel fit with paid marketing:
    • Quick Time To Value - Users have less patience to find value when coming from an ad.
    • Medium to Broad Value Prop - Value prop needs to be fairly broad due to targeting constraints of ad channels.
    • Transactional Model - Product is built to extract transactional value to fund paid marketing.
  • UGC SEO. To have product channel fit with UGC SEO:
    • UGC - Product needs to enable users creating millions of pieces of unique content.
    • Motivation to Contribute - Product needs to have the core motivation to contribute content.

2. The Power Law of Distribution

The second problem with that original statement is “we’ll test a bunch of different channels.”

In his book Zero to One: Notes on Startups, or How to Build the Future , Peter Thiel Peter Thiel pointed out why this is wrong:

“The kitchen sink approach doesn’t work. Most companies get zero distribution channels to work. If you get just one channel to work you have a great business. If you try for several but don’t nail one, you’re finished. Distribution follows the Power Law.”

If you look at most $100M+ companies, you will find this to be true:

  • UGC SEO: TripAdvisor, Yelp, Glassdoor, Pinterest, Houzz all got 70% of their growth from UGC SEO.
  • Virality : WhatsApp, Evernote, Dropbox, Slack all got 70%+ of their growth from some form of virality.
  • Paid Marketing: Supercell, Squarespace, Blue Apron all got 70%+ of their growth from some form of paid marketing.

Product Channel Fit

Product Channel Fit has a few immediate implications:

  1. You shouldn’t take a shotgun approach to testing channels. Here is a step by step on how to test and prioritize your growth channels.
  2. Over time you shouldn’t seek to diversify channels for the purpose of diversification.
  3. Don’t have team members focused on user acquisition and team members focused on product in silos from each other. This is partly why cross functional growth teams have emerged.

Product Channel Fit Is Your Blessing and Your Demise

  1. New Channels Emerge