Introduction
Welcome to this section of our blog dedicated to empowering aspiring and seasoned product managers (PMs) who are on the journey to land a role at a FAANG company. FAANG interviews are notoriously challenging, and candidates are frequently presented with real-world problems to test their analytical and problem-solving skills. In this blog post, we will use structured frameworks to tackle the question “Thumbtack revenues are down 4% week over week. Diagnose the issue.” Utilizing methodologies from ‘Decode and Conquer: Answers to Product Management Interviews,’ we’ll show you how to systematically approach this question to demonstrate your expertise during an interview.
Detailed Guide on Framework Application
Choosing the Right Framework
For revenue-based diagnostic questions, the AARRR (Pirate Metrics) framework or the Five Whys technique are typically effective. For this scenario, the AARRR framework will provide a comprehensive structure. AARRR stands for Acquisition, Activation, Retention, Revenue, and Referral.
Application of the AARRR Framework
Step-by-step, we will leverage the AARRR framework to diagnose the potential causes behind the 4% decline in Thumbtack’s weekly revenues:
Acquisition
- Examine if there has been a drop in new user acquisition or website traffic.
- Look at marketing channels to see if there were changes in advertising spend, campaign effectiveness, or SEO performance.
- Consider external factors such as increased competition or market saturation.
Activation
- Identify if there are issues with the user onboarding process that could affect the conversion rate from visitor to active user.
- Analyze user feedback for insights into product changes that might have deterred new signups.
Retention
- Check for changes in user engagement metrics, such as daily active users or churn rate.
- Investigate customer support logs and product updates to pinpoint possible sources of user dissatisfaction.
Revenue
- Dig into the pricing strategy and see if price changes or billing issues might have led to reduced spending.
- Assess the impact of external economic factors that may affect users’ willingness to pay.
Referral
- Evaluate the performance of referral programs and levels of user-generated content as indicators of customer satisfaction and organic growth.
- Determine whether changes in network effects could have led to decreased referrals.
Hypothetical Examples and Facts Checks
Now let’s put the framework into action with a hypothetical example:
Upon examining the Acquisition phase, we discover a 7% drop in website traffic, potentially due to recent changes in Google’s search algorithm affecting SEO rankings. In the Activation phase analysis, customer feedback suggests that a new sign-up process introduced last week increased complexity, causing a 10% drop in conversion rates. Investigating Retention reveals a recent app update that has introduced bugs, increasing the churn rate by 5%. During the Revenue phase, we find out there was a miscommunication about a price hike leading to customer backlash. Lastly, in the Referral phase, we notice that the referral bonus was recently reduced, which caused a 30% decline in referrals.
Effective Communication Tips
Now for some tips on how to articulate your answer effectively during the interview:
- Start your response by acknowledging the importance of identifying the root cause of revenue declines and expressing your intention to use a structured approach.
- Be concise and logical as you walk through each step of the framework, summarizing your findings after each phase.
- Show enthusiasm and a positive attitude towards problem-solving. Emphasize how such a challenge is an opportunity to learn and improve.
- Where you lack hard data, explain how you would gather the necessary information to make an informed analysis.
- End with a summary of your findings and suggest actionable steps based on those insights.
Conclusion
Thank you for following along with this deep dive into how to approach diagnosing a revenue decline for a company like Thumbtack. By applying the AARRR framework, you can systematically unpack the issue to identify and address the underlying causes. Remember, structured thinking and clear communication are key in product management interviews at FAANG companies. Practice leveraging frameworks like AARRR with a variety of problems to prepare for a wide range of questions you might encounter. Good luck on your interview journey!