An intro to Growth Marketing (and why it’s a game-changer)
Often mistakenly labeled as a type of marketing with Growth we refer to a cross-functional methodology that consists in creating processes to foster virality, usage growth and the scalability of a product through automated loops and recurring experimentation. The Growth methodology is more of a full-stack strategy as it doesn’t involve marketing solely but relate to a transversal work of different traditional teams within a company (typically marketers, POs, statisticians, engineers and designers) and it’s strictly woven in an unbiased decision making process based on a data-driven approach rather than intuition or human confidence that something is going to work.
The difference from the mainstream methodology (based on creating isolated customer lifecycle stages to help marketers and POs identify where to focus their efforts on and be bound to run quick actions with no margin of error to drive imminent results) is that the Growth Methodology is not about concentrating on a cohort of users or an isolated step of the funnel to pursue specific behaviour chasing short-term wins.
The pillar of this approach is structured on a loop-shaped growth model that involves ideation, prioritization, testing, learning (and failing, as a paramount phase to get to success). The Growth assioma focuses only on the north star metric that is crucial to the business and base the core actions around it combining both quantitative and qualitative insights to measure the impact of an action. Unless for some low-hanging fruit opportunities, it is just unlikely to drive ephemeral wins as it’s based on the so-called iterative learning concept, meaning the systematic testing of specific elements (sprung from a pondered hypothesis) that leads to a statistical conclusion to discover what works and what doesn’t. This is why Growth experiments always involve a control group to benchmark the quality of the output.
That doesn’t mean that GM is not agile or quick, quite the opposite, as it in fact builds its base on a value-centric approach, meaning it’s not about the quality of the output but the value it brings to return meaningful learnings. Opposed to the waterfall model, the GM is built with the capability to launch a MVP (Minimum Viable Product) in the market, alas the quickest and cheapest way to achieve a result or an indicator valid for the hypothesis.
When AirB&B founders wanted to test the validation of their hypothesis, they just sublet a room in their flat through a rough and cheap web page and focused on their customers feedbacks, the idea was so successful that it expanded through words of mouth and they lived out of it for some time while scaling the business.
This being said, the Growth methodology can be a game-changer if scaling up an established business or improving metrics are the main goals but also the way-to-go for recently launched startups that still need to forge their assets, establish a business model or detect their value proposition.
LOOPS vs FUNNELS
It’s been a decade since the product marketing status quo framework AARRR (Acquisition, Activation, Retention, Referral and Revenue) was introduced. This was a conceptual vision based on creating different stages of both the product, marketing and monetization funnel, isolating them and optimizing each container aside to drive qualitative growth but necessarily leading to creating ruptures and silos between product, marketing and revenue. To make an example, this framework was conceived on a strategic organization that as a rule of thumb saw marketing taking care of acquisition, product covering retention and the sales team pushing on revenue. An approach that led each team to hit the throttle on their own metrics and Kpis, disregarding that each one depends on the output of the other. Working with such structural silos causes a hypothetical low-quality acquisition for example would affect retention frequency and that may correlate to a negative output in revenue.
While this has been the dominant proposition in the last decade, it is not able to represent the best way of how a dynamic and viral product that achieves rapid growth and agile scalability nurture nowadays.
Opposed to one-directional isolated funnels, loops are instead automated systems where one is able to generate both exponential and incremental growth combined by playing with small levers to push virality, increase referral programs and create automated growth processes fed by proportional factors called multipliers. By being multidirectional - diversely to funnels - loops generate that automated repetition that causes stable growth. A loop-based strategy means focusing on efficient distribution by taking over all the stages of the traditional funnel at the same time where retention plays a fundamental role in the equation.
Being this the premises, loops lead necessarily to a recalibration to an internal team that must be redesigned in a versatile organization around the loop and not inside a silo funnel.
THE 5 TYPES OF ACQUISITION LOOPS
Acquisition loops are basically just the answer to two main questions.
How can I acquire users for my product?
How will a cohort of users lead to an incremental cohort of other new users?
The GM designs a model where the input of new users taking actions leads to an output that virally generates new other users and keeps spinning circularly.
1. VIRAL LOOPS
A viral loop is a nutshell how a series of acquired users drive exponential new users to your product
Example
Splitwise is a product for friends and roommates to track bills and other shared expenses. The viral loop would consist of a user signing up, creating a new group, inviting new friends, a % of those will create another group, invite more friends and the loop will restart over and over again.
Other common types of viral loops are word of mouth, incentivized (referral scheme), organic and casual.
2. USER-GENERATED CONTENT LOOP
A UGC Loop consists of a user signing up into a platform creating specific content that will get some visibility in a different number of ways (SEO or shared on a social media) and a number of users who come across that content will sign up re-starting the loop.
Example
When looking for a specific topic generally Wikipedia articles are always very well indexed due to their relevance. A portion of these users will sign-up becoming engaging users and become contributors writing new articles that other people will look for and so on.
Other types of UGC include Social Media content loops.
3. PAID MARKETING LOOPS
A paid marketing loop is a loop activated by marketing campaigns through paid acquisition channels. This is very typical for gaming companies but let’s look at other players also.
Example
Spotify has a massive acquisition strategy through paid marketing channels. Spotify launches a subscription campaign on Facebook, a % of the impacted users will close a yearly subscription, that amount of money is totally re-invested to run more campaigns that will lead to new users and revenue and the loop goes on.
4. BUSINESS CONTENT LOOP
This is very similar to loop #2 with the main difference is that the content is generated internally by a company.
Example
Linkedin has recently introduced a skill assessment feature that allows its users to demonstrate their knowledge on specific professional competences and then append a certification badge to their profile to score more changes to get a qualified job or increase professional reputation. A new user sees a pop up to take an assessment of a skill that is relevant for him. The user earns the badge and shares it on its feed, this will drive other people to see it, use the skill assessment feature or even subscribe to Linkedin paid courses to achieve one, this loop keeps on repeating again and again.
5. SALES LOOP
The sales loop is probably the oldest and most traditional of all loops as it’s based on an old-school circular strategy that has been implemented by different companies for a while.
Example
The Salesforce sales reps team acquires new customers through SQL strategy, the revenue from these customers is used to hire more sales reps, those reps will bring new customers and so on.
The sales loop includes both inbound or outbound sales.
RETENTION LOOPS
As said, retention plays a crucial part in the GM and most efforts are circular rather than concentrated on pure acquisition or just retention of previously acquired users (as we are not working in funnels anymore). All the top companies today hold impressive retention rates, vice versa, many others kill in acquisition but are not able to drive long term-win and pass into oblivion.
Retention loops are the answer to the question :
“How can I make sure I continually bring back acquired users to the product?”
Retention is triggered by a defined driver that it’s meant to create a need or a cognitive impulse from a specific medium/channel in return for an outcome/benefit that must lead to a new action a user takes to unleash a new loop.
Example
For whoever has watched the recent Netflix blockbuster the Social Dilemma, a former Facebook employee describes a retention loop that was used to keep users engaged with their product and drive other users to enter the platform. When they introduced photo tagging (trigger), they connected it to an email (medium) to the user mentioning that a photo of them had just been published without embedding the photo on the email itself or giving users the possibility to untag themselves in the proper email. What Facebook tried to do was bring the user into looking at the photo (benefit) and engage users in the platform to tag each-others, comment the photos, respond to the comments, create or interact new content and in a nutshell just keep using their platform (action).
Something similar is done by Tinder, who is not going to open a push notification that says “Someone likes you”, so you can open the app, interact, share profiles to friends or keep swiping.
MAIN TAKEAWAYS
The most important takeaway is that all these loops can be stretched out horizontally at the same time to sustain stable growth. When these loops are activated they need to be sustainable overtime. As we mentioned understanding the value of the multiplier (the ratio of new users between the 1st activated loop and the 2nd) is crucial. Higher the multiplier is higher will be the success and stability of the loop as time progresses. A successful loop starts with a multiplier >1. A small increase of the multiplier generates dramatic results overall until the loop is saturated.
Every loop will ultimately come to an end that is why:
1. The GM must be based on a systematic approach that keeps the loops alive (unlike the AARRR funnel based on a random approach). A successful growth process must include adaptability to adjust in a changing environment, scalability to feed to loop continuously and balance in order to combine different levels of experiments to add meaningful value.
2. The more loops the better, as the more channels diversification the better. Loops need to be generated simultaneously to drive incremental growth in case one comes short as every loop has a different lifespan and acceleration capabilities.
3. Loops with lower lifetime value need to be fed with new linear channels (Ex. PR, OOH, CRM, Influencer marketing etc), the main difference here is that linear channels are unidirectional drivers that do not create automated circular circuits, though still leverage assisted growth.
Dario Di Feliciantonio
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