Randhir Vieira, Head of Product at Headspace, decided to focus on improving customer retention. He ran several strategies for improving retention and interviewed customers to figure out why they were leaving the app. This case study discusses how the company can retain its customers while providing for their needs.
Robert Siegel and Peter A. Seibert
Harvard Business Review (SM314-PDF-ENG)
November 12, 2018
Case questions answered:
- What are the most common goals of an addressable user population?
- How can Headspace attract more users to the free version so that it can potentially convert more to paying customers?
- What is the distinction between free vs premium version? Is the company offering too much in the free version which dissuades free users from converting?
- How can the company distinguish itself from direct competitors such as Calm, Buddhify, etc.?
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Case answers for Headspace in 2018
Introduction – Headspace
The two founders of Headspace are Andy Puddicombe and Richard Pierson. Andy was a trained monk and was looking to bring meditation to the masses. He used meditation techniques to help his patients and improved the meditation practice to be shorter and more effective. Pierson was Andy’s student with a marketing background. Pierson suffered from anxiety and found that meditation was an effective cure, so he saw the potential in meditation and decided to partner with Puddicombe to establish this business.
In the spring of 2010, their first product vision for the company was “The gym for your mind,” where you have to exercise frequently to be healthy.
In 2012, they launched their first freemium model of the app, which includes meditation basics. Their mission of the app was to “improve the health and happiness of the world.”
Marketing of the app was effective, attracting 11 million downloads and b00k paying subscribers. In 2017, it grew 75%, and they realized the need to grow their business model.
They were faced with two choices: 1) higher price per customer or 2) increase how long they use the application. This was when Vieira, head of Product at Headspace, decided to focus on improving the retention of customers. He ran several strategies for improving retention and interviewed customers to figure out why they were leaving the app.
His initial finding was that customers were happy with the app but still left. He also found that 40% of the users only completed the basic meditation and didn’t experience the more advanced content.
Given this feedback, he started to look for the North Star metric, a metric for them to focus on and optimize their product to increase this metric. Through data analysis, he found that people were much more likely to convert if people came back on the 2nd week. As a result, he focused his efforts to try and increase this metric.
They came up with a series of hypotheses that caused users to not come back, such as registration push notification, etc., and found nothing of value. Then, he thought there was too much friction in the onboarding process for the users, so he reduced them to a minimum. The finding was that although more people came back in week 2, people didn’t convert.
This was the turning point. He then asked users why they were coming to the app so that Headspace can focus on providing the value the customers sought. He realized that people came to the application with a specific goal in mind, either reducing anxiety, improving sleep, etc. So, the company needed to provide tailored products/content for these customers.
Headspace has competitors like Calm, but the more important thing is for the company to retain these customers, so they don’t flow to other applications. It is time-sensitive for Headspace to keep these customers.
Another interesting observation is that the company ran multiple trials for the freemium and premium version as to how much time they gave full accessibility to customers for free. We see that the Freemium version offers too much information, and customers thought the basic version satisfied their needs and didn’t understand the value of the premium version. So customers left the application afterward.
Headspace now realizes the need to reframe its product vision and development around needs with the above considerations. It should focus on the specific reason as to why customers use the application.
The customer journey from discovery to conversion would need to be rethought. They partnered with Nike to help people strengthen their mental part, to fulfill that purpose.
The company is now deciding how to tailor the user experience given their needs, such as providing the right content and how to scale the product.
Headspace has gone through a philosophical transition. The company was founded as a way to provide easy-to-access mediation videos to customers.
Through its own user research, data analysis, and testing, the company determined that the company would better serve its users by closely adhering to its mission statement: “to improve the health and happiness of the world.”
This goal of becoming a wellness platform is more difficult than simply providing users with meditation techniques and will require the company to expand into new markets and attract new users. Expansion will bring new obstacles to overcome, and how Headspace chooses to do so will shape the company’s future.
Instead of concentrating on mediation, Headspace will provide users with tailormade solutions to common problems like sleep, focus, diet, and stress. As it builds into a wellness platform, it will begin to offer more…