Design a Referral System for a Grocery App - Product Design

Google PM Interview: Product Design - Design a referral system for a grocery app

Nov 22, 2023

∙ Paid

The primary responsibility of a product manager is to lead the vision, design, and development of a product. When a business decides to create a product, it is based on the recognition of a genuine customer need, one for which the customer is willing to pay. The product manager plays a crucial role in recognizing customer needs and steering the design and development of products that effectively address those needs.

This product design interview question assesses your comprehension of the process involved in transitioning from customer needs to product development. This process entails clearly defining the customer's identity and understanding what they aim to achieve. It also involves outlining various use case scenarios where the customer engages in activities related to the product, and subsequently, prioritizing the features to be developed.

What is the interviewer looking for?

The interviewer is gauging your performance based on the following:

Can you offer insightful observations about the customer and their requirements?
Are you capable of presenting a variety of use case scenarios that cover different aspects?
Is your response well-organized and coherent, or does it deviate from the main topic?
Do your solutions delve beyond superficial suggestions, offering in-depth descriptions?
Can you introduce unique ideas that set you apart from other candidates?
Does your demeanor convey confidence and credibility? Would your guidance be compelling to engineers and product professionals?

How to answer Product Design Questions?

Here is a step-by-step guide/framework, you should follow while answering product design interview questions:

Ask clarifying Questions to narrow the scope. (Q)
Define the Goal you want to achieve. (G)
List the User Segments and choose one segment to focus on. (U)
List and prioritize the Pain Points. (P)
List out your Solutions. (S)
Evaluate the solutions and prioritize them. (E)
Walk through the MVP & Define the Success Metrics (M)
Summarize your answer (S)
1. State which solution you would recommend.
2. Recap what the solution does and why it is beneficial.
3. Explain why you prefer this solution.

(PQ-GUP-SEMS) -> Mnemonic to help you remember the steps & their order.

Answer

1. Ask Clarifying questions

Here are some clarifying questions,

a. Goal Clarification:

Q1. What is the primary goal of the referral system?
Is it to increase user acquisition, enhance user engagement, retention or drive sales revenue, average order value (AOV)?
A1: You can take primary goal as new user acquisition at a lower CAC.

b. User Segmentation:

Q2. Can you provide insights into the current user demographics? Age groups, geographic locations, user profiles (like busy professionals, families, or students) and user behaviours will influence how we design the referral system.
A2: It’s up to you to decide.

c. Referral Incentives:

Q3. What types of referral incentives are permissible? Monetary rewards, discounts, exclusive access, or a combination?
A3: It’s up to you to decide.
Q4. Are there budget constraints for implementing the referral incentives, and is there flexibility for testing different incentive structures?
A4: No budget constraints.

d. App Functionality:

Q5. How does the app currently operate? Is it primarily for online grocery shopping, or does it offer additional features like recipe suggestions, loyalty programs, or in-store experiences?
A5: Its an app for online grocery shopping
Q6. Is there a loyalty program already in place? If so, how will the referral system complement or integrate with it?
A6: No.

e. Existing Marketing Channels:

Q7. What are the existing marketing channels employed by the grocery app, and how can the referral system synergize with these channels?
A7: Currently, paid advertisement is the only marketing channel employed.
Q8. Are there limitations or preferred channels for communication with users, such as in-app notifications, email, or social media?
A8: No.

2. Define the Goal

The primary goal of implementing a referral system for the grocery app is to strategically increase user acquisition while fostering user engagement and potentially boosting sales revenue. The objective is to leverage existing users to bring in new customers and enhance the overall user base.

Goal Definition:

Increase User Acquisition: The referral system would aims to attract a substantial number of new users to the app. This involves turning existing users into advocates who actively refer friends, family, or acquaintances to join the platform.
Metric: % increase in users from referral over a period (say Week on Week)
Enhance User Engagement: Beyond acquiring new users, the secondary goal is to ensure that referred users actively engage with the app.
Metric: % increase in referred users who made their first purchase (i.e conversion) & D7, D30 retention rates of the referred users.
Drive Sales Revenue: The tertiary goal would be to contribute to tangible business outcomes. This includes driving sales revenue by encouraging both referrers and referees to make purchases on the app.
Metric: % increase in revenue contribution from referred users.

3. User Segments:

At this step, list down the different user groups that are part of the ecosystem of the problem you’re solving for.

User groups should be distinct from each other and have unique characteristics. Here are some of the major user segments:

Family Shoppers:
- Characteristics: Large basket size, weekly purchases for the entire family.
- Needs: Bulk discounts, convenient delivery options, family-oriented promotions.
Singles:
- Characteristics: Small basket size, frequent eating out, occasional grocery shopping.
- Needs: Quick and easy shopping experience, personalized recommendations.
Young Couples:
- Characteristics: Small to medium basket size, high disposable income, open to trying new things.
- Needs: Convenient and fast service, access to exclusive perks.
Old Couples:
- Characteristics: Basic shopping needs, not very tech-savvy.
- Needs: Simplified app interface, assistance in using the app.

Focus Segment: Young Couples

Reasoning: This demographic typically has higher disposable income to make frequent purchases, is more open to trying new services, and has a lifestyle that involves frequent app usage. Additionally, since they are very socially connected and active they are likely to influence their peers, making them valuable advocates for the referral program. The focus on this segment aligns with the goal of not only acquiring new users but also ensuring active engagement.

4. Pain Points

Following are some of the Pain Points for Young Couples,

My PM Interview - Product Manager Interview Question Answers