The Convenience Gap
Not long ago I dismantled our home audio system. It was barely a year old. My wife and I would open our media cabinet, turn it on, scroll through the list of artists on our AppleTV, sit back and be enraptured by it’s gorgeous sound. Unfortunately, our set-up wasn’t baby-proof, so as our son began to crawl it had to go. The Day the Music Died. We wound up replacing our stereo with a modest Sonos table top system and the funniest thing happened. We are now listening to more music than ever before. The convenience of the Sonos was a revelation.
Here at First Round Capital, we’ve always seen a lot of business plans for consumer facing Internet services. Back in 2007, my partner, Josh Kopelman declared “the toughest part of a new venture [is] getting your users to pay you anything at all.” This is “The Penny Gap.” Don’t assume a product priced near free will net conversions near that of a free product. Ask people to touch their wallet, and their interest in your product falls off dramatically.
Recently, we’ve seen more companies comfortable with the idea of asking users to pull out their wallet. This is no surprise as commerce as continued to move online and into apps. If the Penny Gap is the biggest challenge a company faces, getting users to meaningfully engage with a product is close behind. We’ve been lucky enough to meet with many founders who are creating beautiful products with rich, high fidelity designs. And while beautiful products can be engaging, they are not definitionally so. For every interaction required of a user there will likely be a fall-off in engagement.
Convenience, not beauty , not finely tuned control, drives engagement. There’s plenty of evidence of this in everyday living. The vast majority of drivers (sadly) choose automatic transmissions for their cars trading less control, worse performance and poorer mileage for convenience. Most of us have abandoned vinyl & CDs for MP3s & streaming services trading sonic depth & quality for the convenience of having our music with us all the time.
Every product manager needs to work through the calculus of engagement. The effort required for a customer to engage with a product, has to be lower than than the value they drive from it. If engagement is low, there are two possible solutions: either provide more value or lower the level of effort demanded by the product. The former may have a negative impact on the economics of a business (i.e., margin pressure for retail businesses). The latter option enhances both the business and product (i.e, profit opportunity).
Within the FRC portfolio, there are some examples of companies which have focused on convenience to drive their businesses. Retail businesses like Fab & One Kings Lane have done well by curating their catalogues and making them accessible both online and on mobile devices. Uber & Hotel Tonight have both significantly reduced the time & number of steps required to book a car service or hotel room. Threadflip’s White Glove Service makes selling secondhand fashion online as easy as calling for a FedEx pickup.
As I meet with founders, I’m now finding that I’m less likely to ask what their company will allow users to do and more likely to ask what their product empower users to no longer do. Convenience is the ultimate feature.