MaRS Library Case study: Craigslist—Product design with customers in mind
With no venture-capital funding, no MBAs on board and little business experience, how does a 25-person company build and maintain a website that gets 8 billion page views a month? Good listening skills. Craigslist is a case study in innovative product design that paid close attention to its customers’ needs.
In 1996, Craig Newmark converted the local events mailing list he compiled for his friends into a website. As word spread about the list, Newmark wanted to change the name to SF-Events, for San Francisco, where he lived.
Those on the list balked at the name change, insisting that they preferred the unique and quirky Craigslist. Newmark relented and Craigslist is a now a household name in every major city around the globe.
The site has become so popular that today some people have built their entire lives using Craigslist, finding their jobs, their homes, their furniture, their dogs and even their spouses through the local ads.
Customer-driven product (website) design
In 1997, apartment shortages in San Francisco as well as the tech-bubble recruiting boom saw Craigslist users clamouring to post ads for apartments and jobs on the site. Newmark responded by making job ads and housing a permanent feature, and charged for each job posting.
To determine the best price to charge employers for each job ad, Newmark set up a forum on Craigslist.
Thousands of users participated in the discussion, including those actively using Craigslist as a recruiting tool. At the urging of employers themselves, Newmark set the price at $25.
At the same time, Newmark realized that $25 was too much to pay for those who had been using the site to recruit workers for odd jobs and other small tasks. In response, Newmark built a “gigs” section allowing free job postings for those recruiting for small jobs.
The quality of job ads on the paid job boards increased dramatically, while the “gigs” section remained available for other postings.
Similarly, when users began expressing their frustration over the use of banner ads, pop-ups, pop-unders and inline ads on other sites, Newmark paid attention. To this day, Craigslist continues to operate a simple and straightforward site without advertising banners.
Newmark spends the majority of his time at work answering customer emails and managing customer service operations. He promoted another Craigslister from Senior Programmer to CEO so that he could stay focused on the needs of Craigslist users. Every change at Craigslist has been carefully implemented in response to user feedback.
Newmark’s strategy for using customer input to inform product development decisions comes down to the following key points:
- Be accessible. Build lines of customer communication into your company and encourage dialogue with current and potential customers by being open and reachable if they have comments or concerns.
Regardless of whether you run a startup or a multinational corporation, remember that speaking to a live person on the other end of the line can inspire fierce customer loyalty and at the same time help you pinpoint areas for product improvement.
If you are launching a product for the first time, keep in mind that early dialogue with potential buyers can protect you from costly design errors down the road.
- Listen. Throughout the product development process, listen to your customers to identify their pain points, and train your other staff to do the same.
Use informal discussion as well as specific questions to find out what modifications and improvements would be the most valuable for your customer base. To inform the process of product development, gather customer and community feedback through:
- User groups
- online communities
- networking sites
- CEO blogs
- conversations over meals or drinks
Freshbooks, a Toronto company that develops automated billing solutions for freelancers, is a prime example of a company that uses customer communication to perfect their offering and create loyalty and goodwill among their users.
Freshbooks’ CEO regularly invites users to dinner in whatever city he is visiting. He sends invitations at random and ends up meeting hundreds of users who provide important feedback and appreciate the chance to meet the CEO face-to-face.
- Identify the right pain points. Recognizing common pain points among users is essential to building the right features and functions into your product.
Monitor your company’s dialogue with customers and users to capture which pain points they identify, and then isolate which ones are common enough to warrant action. See the forest, not the trees.
- Propose a solution. Announce that you are contemplating a product modification based on customer and user feedback. You can inform all customers or users together, or only those who have expressed a desire for a change.
This will help you find out exactly how to address the problem before you bring in costly engineers and begin building prototypes or alpha sites.
The one proviso with this step is that if you operate in a highly competitive environment, you will need to evaluate the consequences of your competitors learning of your future plans. Balance this risk against the potential benefit of “getting it right the first time” using a lot of customer input up front.
- Try it out. Give selected customers or users a crack at a prototype or private launch. Large consumer products companies do this with market testing and focus groups. So can you.
Contact the customers who stand to gain the most from your modifications and check if they are interested in taking your new offering for a test drive.
Listen closely to their feedback and make any important tweaks and adjustments before a full launch.
- Repeat. Letting your customers drive product development is an ongoing process. Keep the lines of communication open and pay attention to what your users say.
Needs change over time, so staying alert to your users’ feedback puts you in a position to hear about new needs and emerging trends so you can stay ahead of the market.
- Using these six steps, Craigslist has grown to reach over 450 cities worldwide with local ads. Users of these sites post over 20 million classified ads and over one million job ads each month. With only 25 employees, the site is the 36th most popular online destination in the world, according to the web metric company, Alexa. Being a good listener clearly pays off.
See additional learning materials for product development.
Seba, Tony. (2006). Winners Take All—The 9 Fundamental Rules of High Tech Strategy. United States of America.