AI’s best retention strategy?

It starts hiding its own uninstall button.

Tactics to Prevent Churn for AI Apps

• Why Read: 

  • This article provides valuable strategies for B2B AI app companies to improve user retention and engagement, which is crucial for long-term success.

• Featuring:

  • Janelle Teng (@NextBigTeng) , Vice President at Bessemer Venture Partners and Sameer Dholakia (@spdholakia), Partner at Bessemer Venture Partners

• Link: 

  • “Seven product strategies to prevent churn for B2B AI app leaders”

Key Concepts and Tactics:

1. B2C AI Apps Experiencing Strong User Acquisition but High Churn

• Point: Consumer AI apps have seen fast initial adoption but are struggling with user retention compared to incumbent apps.

• "While consumer AI apps have experienced strong top-of-funnel growth and accelerated user acquisition, these businesses have also experienced a notable 'leaky bucket' problem. User retention and engagement metrics of consumer AI apps are markedly weaker than incumbent consumer apps."

2. B2B AI Adoption Lagging but Churn Risks Remain

• Point: Enterprise AI adoption is in early stages but B2B AI apps face similar churn risks as B2C, especially for those perceived as just "wrappers" on top of existing models.

• "Since enterprise AI adoption is in its early innings and many B2B AI companies have yet to hit their first renewal anniversaries, there has not necessarily been sufficient longitudinal and cohort data to credibly determine B2B AI retention benchmarks. So the leaky bucket phenomenon we see in B2C has not become apparent in B2B yet, but that risk remains."

3. Product Strategy as Key Lever for B2B AI Apps to Boost Defensibility

• Point: B2B AI leaders are using deliberate product roadmap strategies to improve user engagement and retention.

• "Acting swiftly upon these signals, we've seen a bold cohort of B2B AI app first-movers lead the charge on leveraging product strategy as a pre-emptive measure to boost defensibility."

4. Seven Product Strategies for B2B AI App Builders:

• Point: The article details 7 specific product strategies with case study examples to help B2B AI apps drive stickiness.

• "Here are seven lessons with case studies from inside and outside of Bessemer's portfolio that demonstrate these best practices for B2B AI app businesses."

  • Embed into incumbent platforms through integrations and partnerships

  • Meet users where they are

  • Generate a tangible work product offering

  • Build across the chain to deliver more value to your ICPs

  • Leverage proprietary data or novel data techniques to create moats

  • Go multi-modal

  • Maximize network effects through platform architecture

5. User-Centricity is Key for B2B AI App Companies

• Point: B2B AI apps must build with deep user empathy, as app layer companies are uniquely positioned closest to the end user.

• "A unifying theme amongst all these examples is that B2B AI app companies must build products with a deep level of user empathy and awareness, as every industry or role has specific workflows and nuances. Ultimately, application layer companies are in such a unique position given that they sit closest to the end user."

How folk Reached 5x Year on Year Growth

Why Read:

• Actionable tips on pre-launch strategies, pricing, user acquisition, and onboarding that can help founders build successful products.

Featuring:

• Kyle Poyar (@poyark), Operating Partner at OpenView

Link: 

• “Inside folk’s journey to 5x year-on-year growth”

Key Concepts and Tactics:

• Building a Waitlist Before Writing Code:

  • Point: Attract a waitlist of potential users before building the product to validate the idea and gather user research.

  • "The first thing Simo and team did when launching folk wasn't creating an AWS account or writing code. It was building a landing page. 'It was like starting at the end and not at the beginning,' Simo told me. 'Fake it until you make it.' He wanted to see if folk's idea resonated with an audience. It was an opportunity for the team to explain the pain they wanted to address and how they wanted to address it, and meet with potential users to go deeper. The early landing page attracted significant interest – generating a waitlist of 10,000 people."

• Spending Significant Time Building Before Launch:

  • Point: In a crowded market, invest ample time in building a differentiated product before launching.

  • "In a crowded market, it matters even more to show you're different than better,' Simo emphasized. folk planned to be different in two ways:

    • People-first rather than sales process-first: folk invested in non-standard CRM capabilities like a Chrome extension for adding contacts, conversation templates for Gmail and LinkedIn, and mail merging.

    • Make CRM more 'Notion-like': folk wanted to reset the expectations for CRMs following modern software practices like collaboration, integrations, ease-of-use, templates to start, and a light UI. Only then did they start progressively opening the app to more users."

• Iterating on Pricing Strategy:

  • Point: Regularly revisit and adjust pricing plans, packages, value metrics, and price points to optimize for conversion and revenue.

  • "Folk has since updated pricing plans every five to six months. This could mean new packages or new limits, different value metrics, or changes to the price points themselves. 'We usually doubled the price. Each time we doubled the price, we were reluctant to do it. But we realized it wasn't changing conversion to paid and was obviously increasing ACV, so we kept doing it.' Interestingly, Simo also found that a higher price can anchor the product as more valuable in people's mind, and therefore make them more likely to invest into it."

• Experimenting with Acquisition Channels:

  • Point: Systematically test and evaluate various acquisition channels based on key metrics to find scalable growth opportunities.

  • "Simo and team ran a rapid experimentation approach to test growth channels, systematically scoring each channel based on five criteria: Volume of signups, CAC payback period, Level of effort, Overall revenue generated by the channel, Overall churn generated by the channel. A major channel folk tested was LinkedIn, which is where customers were spending their time and where there was a tie-in to one of folk's premium features (a LinkedIn plug-in)."

• Leveraging Manual Onboarding Before Self-Serve:

  • Point: Offer white-glove onboarding for high-value customers to improve conversion rates and gather rich feedback.

  • "Inspired by Superhuman's early approach of white-glove onboarding, Simo and team personally onboarded every single customer. During onboarding calls they'd go through the same discovery process; after hundreds of these, the founders developed an instinctive understanding of customers' pain points, goals, and alternative solutions. Simo emphasized that this wasn't as challenging as it might sound. 'It wasn't an effort for us to have customer calls booked. Given that we set up email automations, customer calls automatically arrived on our calendars. The routine of talking to customers was effortless.'"

• Optimizing User Onboarding Flow:

  • Point: Continuously experiment with and improve the user onboarding experience to boost free-to-paid conversion.

  • "Folk has steadily evolved onboarding since then, testing multiple versions before landing on the current approach. The winning flow follows several design principles:

    • Show, don't tell; Very simple flows that tell a story linked to the benefits the users are looking for (e.g. sell more, build partnerships, recruit candidates)

    • Be opinionated about the best next action (folk's opinions came from measuring the actions that are linked to long-term retention and making sure users adopt them)

    • Make the users import their data for the action that's linked with long term retention, actions like source sync, template adoption and the Chrome extension

    • Show them what success look like to avoid the blank page problem

    • Personalize the experience based on what users tell us (their name, company, etc.)

    • Make users feel folk built the experience for them to be successful rather than for the company to simply gather data

    • Be aware of the way users feel during onboarding. For example, when sharing sensitive data folk should reassure them. When folk does something great for users, the product should say it loudly."

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