Is it better for Luno to focus on attracting new users or increasing engagement of existing ones?

Introduction

The trade-off between attracting new users and increasing engagement of existing ones is a critical decision for Luno's growth strategy. This scenario involves balancing acquisition efforts with retention initiatives to maximize overall platform value. I'll analyze this trade-off by examining key metrics, designing experiments, and providing a data-driven recommendation.

Step 1

Clarifying Questions (3 minutes)

• Context: Based on Luno's position in the cryptocurrency market, I'm thinking we might be facing increased competition. Could you share any recent market shifts or competitor actions that are influencing this decision?

Why it matters: Helps contextualize the urgency of user acquisition vs. engagement Expected answer: Increased competition from new entrants Impact on approach: Would emphasize differentiation in acquisition strategy

• Business Context: I'm assuming Luno generates revenue through transaction fees. Is this correct, and are there any other significant revenue streams we should consider?

Why it matters: Aligns strategy with primary revenue drivers Expected answer: Primarily transaction fees, some additional services Impact on approach: Would focus on metrics tied to transaction volume and frequency

• User Impact: Thinking about our user base, are we seeing any particular segments that are underperforming in terms of engagement?

Why it matters: Identifies potential quick wins in user engagement Expected answer: Newer users have lower engagement rates Impact on approach: Would tailor engagement strategies for specific user cohorts

• Technical: Considering potential engagement features, are there any significant technical limitations or ongoing projects that might impact our ability to implement new engagement tools?

Why it matters: Ensures proposed solutions are technically feasible Expected answer: No major limitations, but resource constraints Impact on approach: Would prioritize low-hanging fruit for engagement improvements

• Resource: Given that both acquisition and engagement require resources, what's our current split in terms of budget and team allocation between these two areas?

Why it matters: Helps understand potential for reallocation Expected answer: 60% acquisition, 40% engagement Impact on approach: Would consider gradual shift based on experiment results