The Nest screwdriver
Raising the bar on customer obsession
We often equate the user experience of a product with the experience of a user interface and the benefits the product is providing. Arguably, we should be taking a more holistic view on this one as a user interface is only a subset of the real experience.
In Build, Tony Fadell who led the creation of the iPod and iPhone and knows a thing or two about user experience, shares the story of the creation of the Nest thermostat. It would have been a narrow view to only focus on the experience of using the thermostat. Their website, packaging, marketing, and app to control the thermostat settings from your phone, even the customer support interactions were also crucial. “70% of the experience was on phones or laptops: control the device on the way home or check your energy history.”
Tony used a technique to map the whole experience focusing on different elements. One of these elements was the thermostat box, a critical part of the journey to purchasing the device.
He started working on mock ups of the box to help drive decisions about what the product would be and how to market it. Due to the physical limitations of size, this forced tough discussions about what was the right priority of the different benefits and how to express them in a concise way. The principle of starting with the end vision is another version of the famous Amazon technique of working backwards: finalize the press release of the product before writing a single line of code.
After some initial testing, the team found out that their target audience needed about an hour to install the thermostat. An hour was more than they expected. Spending an hour plugging cables in a wall doesn’t sound great for a customer’s first interaction with your product (see a video of how to install a thermostat). Diving deeper into the customer insights, they found that about half of that time was spent looking to find the right tools, basically a screwdriver that would allow them to install the device. This was an aha moment for the team, which decided to include a screwdriver as part of the packaging.
Driving ROI by delighting customers
I loved this story for two reasons: First, the team could have stopped at the initial insight “it takes an hour to install a Nest thermostat” and while a bit surprised, they could let it slide. However, they were curious to understand why it took customers so long and ended up with a more in depth understanding of the installation process. Dive deep into customer behavior is always the right thing to do. Second, they decided to act on the insight, and improve the experience, despite eroding margins.
I assume that this wasn’t an easy decision. Tony mentions that the cost of the screwdriver was $1.5 over a $249 device. While this might not seem material, hardware devices have notoriously low margins so this would have been an easy thing to drop. The team used second order thinking to view this both as an experience enhancement during the critical first interaction with the product, as well as an ongoing marketing investment. The screwdriver not only cut the unpleasant installation in half, but it also reduced support costs, created a new source of reviews from delighted customers, and reminded of Nest every time homeowners were using this screwdriver. Pretty decent ROI for $1.5. Tony had taken that path multiple times. He knew about the value of good design as part of shipping the iPod and iPhone and wanted to disrupt the thermostat category focusing on design and user experience (along with a “learning” feature that would reduce energy bills).
One major takeaway is the idea of thinking about user experience and economics more holistically. However, to an extreme, this could destroy a company’s profitability. How can we assess which features matter and how do we value them? For example, you could also offer free installation for each Nest thermostat through a technician. Would that be an even better experience than a free screwdriver? Probably for most people. Would it be financially viable? No way.
A framework for assessing such offerings is to quantify the benefits and costs and then ask “what do I need to believe to justify this decision?” Let’s see an example with the screwdriver. I am not very familiar with unit economics of a thermostat but for the sake of this example let’s assume a profit of 10%, so a ~$25 profit for a $249 device. The cost of the skrewdriver was $1.5 so it decreased profit from $25 to $23.5, a 6% reduction. Any CEO would not take this lightly, so let’s now quantify the benefits:
Cut installation time by 50% which leads to more satisfied customers (word of mouth, reviews). This is likely to reduce CAC in the long term.
Nest is top of mind every time the customer gets to use the screwdriver. This likely contributes to additional word of mouth and an increased probability of purchasing another Nest device in the future.
Less support tickets. Nest can precisely calculate the cost of support for each customer and then make some assumptions about reduced cost due to the offering.
What do I need to believe to green light the free screwdriver? That these benefits will in aggregate account for more than $1.5 over the lifetime of the customer. We can debate the exact CAC and support reduction but shaving $1.5 is believable. Similarly, the free installation idea would likely cost between $50-100/device making this a non starter.
What are other examples of going the extra mile in terms of customer obsession? What other “Nest screwdrivers” are you aware of?