Growth Hacking, a term coined by Sean Ellis, the founder, and CEO of GrowthHackers, in 2010, generally means any creative and low-cost strategy related to the growth of a business. This term is widely used relating to startups that need to grow significantly, acquiring a large number of loyal customers, with a low budget and within a short time.
Contrary to traditional marketing, growth hacking takes an interdisciplinary approach to growth and marketing. It is a rigorous method of rapid and cross-functional experimentation.
A growth hacker needs to be creative to come up with the right and effective growth strategies. Growth hacking is a continuous cycle where a growth hacker tries out different ideas, analyzes them, and generates new ideas based on the analysis.
According to Sean Ellis, the writer of the book ‘Hacking Growth’, there must be 3 pre-requisites:
1. Building The Growth Team
To achieve growth, a company needs to find the right people and unite them to work together. Only hiring people with marketing expertise is not a very effective strategy. Because it is the joint effort of different areas of a company that plays a role in the growth of a company. It is important to link marketing experts with managers, engineers, designers and forming a multidisciplinary team to accelerate growth. A growth team needs the following people in it:
2. The “Must-Have” For Growth
All companies are working to build something useful for their customers. But there are some products that become a necessary part of our life. Growth requires a company to build a product that people will love and consider to be a “Must-have” item in their daily life.
According to Sean Ellis”, a company should ask their customers the question "If product X was no longer produced, how would you feel?”, with the following options:
(a) Very disappointed
(b) A little disappointed
(c) would not be disappointed (this product is not useful)
(d) N/A (I have never used this product)
If 40% or more respondents are disappointed then the product should be categorized as the “Must-Have”.
This small survey gives the growth team an insight of the customer's mind and makes it easier for them to take the decision of whether they should invest in a product or move on.
3. Finding The Growth Levers
In simple terms, growth levers are activities a company can run to achieve growth and make progress. At any given time, a company can try a limitless number of strategies aka growth levers in order to improve their business. But everything a company does will not bring the expected result.
To that end, finding the right growth lever, one action/strategy/tactic that would move the ball, and then exploiting it is necessary for achieving meaningful growth. The general approach is that once you have exploited and saturated one growth lever, you should find a new growth lever to drive another round of growth.
Take, for example, PayPal. In the beginning, PayPal offered a $20 incentive to each new user. As a result, the number of PayPal users started to grow 7%-10% a day. The payment later dropped to $5. Also, the users would get $40 for referring someone. The company spent around $70M on this strategy and it paid off. PayPal quickly gained traction and managed to become one of the most successful tech companies. Paying your customers to use your product is a growth lever, one tactic that you could use to gain users.
Today, almost every technology startup uses this strategy, paying their customers in some form. For example, ecommerce companies offering cashback and hefty discounts are an example of this strategy.
Now there are caveats to it. All companies need not spend huge amounts of money to acquire customers and accelerate growth. Moreover, paying customers is expensive and most companies can’t afford it. The task of the growth team, to that end, is to find more powerful low-cost strategies. There are many more examples of growth levers and strategies. For example, Dropbox used a famous referral strategy to achieve growth in the early days.
Instagram offers another interesting example. The company made its features so easy to use that people embraced them. To take the thing to a next level, the company let people use Instagram prior to the launching, turning these early users into brand advocates. As a result, Instagram was a huge success out of the gate. Within the first hour of launch, Instagram had about 10K users.
Each company has its own unique formula of growth depending on its product or service.
Growth levers are the core inputs that determine the growth of a company. It’s the responsibility of the growth team to find the unique and right strategy a.k.a growth levers that will help them to achieve rapid growth.
Growth hacking is an iterative process. In an interview with Future Startup, Mahmudul Hasan Sohag, the co-founder and chairman of Onnorokom Group, said, “We have been adventurous in every way possible. We tried and continue to try new things every once in a while.” and he considers it to be one of the main reasons behind Rokomari’s success.
At the core of growth hacking is a process of consistent experimentation. You generate ideas, prioritize which idea to implement first, run experiments and tests, analyze to see which idea works and what does not, double down on the ones that work, and then start again from step one.
To streamline this entire process, Sean Ellis has developed a model, which he called High Tempo Testing in his book “Hacking Growth”.In simple terms, the high tempo testing framework is how basically you implement growth hacking ideas in your company. The framework has four steps and it is cycle and loop.
Many experts suggest, the cycle of growth hacking starts with the “Analysis”, where the data collected from the customers are analyzed to understand their mindset. Based on the insights accumulated from the analysis the team needs to brainstorm to generate as many ideas as possible. Experts suggest spending at least four days in the “Ideation” phase and generating as many ideas as possible within this time frame. While ideation appears to be something simple and easy, it is often difficult to generate a large number of useful ideas. Usually, growth hacking teams take a team approach to idea generation and create a system to encourage company-wide idea generation.
After generating ideas separate them based on prioritization. A useful method for this, which is also recommended by experts is ICE (Impact. Confidence & Ease). The impact is the expected positive change in the growth of a company an idea can generate. Confidence is the possibility (backed by data) of how well an idea will work and lastly ease the time and other resources to execute the idea.
After “Prioritization”, comes the last stage of the cycle which is the “Test”, where ideas selected based on prioritization are tested to evaluate their effectiveness and the cross-functional nature of the growth team makes it easier to test ideas. The cycle is repeated until the right strategy is found.
“Getting more customers is undoubtedly important for any company. However, if for that the company spends more than it expects to earn, we would say that there is a problem.” - Sean Ellis (Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success)
There is a critical difference between a growth hacking mindset where you understand the basics of growth hacking and actually getting down to the work. The next step in your growth hacking journey is to understand your funnel stages and design strategies for each stage. Sean Ellis used four metrics to navigate this stage in his book Hacking Growth:
The Growth Funnel (Image: weDevs)
Sean Ellis suggests three ideas for customer acquisition in his “Hacking Growth” book:
Using the right language to describe the product and its function is crucial to attracting the target customer segment. So refining your marketing language beforehand is an important stage. Using the language of the target customer segment is an effective way to reach them.
Finding the right channel to reach people is also important regarding customer acquisition. While choosing a channel the cost, the activity of the target audience, the time required to get the expected result, and the amount of exposure the channel will provide should also be kept in mind.
Case study: weDevs CEO Nizam Uddin shares how the company hack acquisition:
“In the Acquisition phase, we do a number of activities to bring the users to our site. In this phase, we do these tasks:
After customer acquisition comes the activation stage where a company keeps the customers engaged using growth hacking strategy. A user activity funnel is a great way to identify any area or aspect of the service or product because of which the user number is decreasing.
HubSpot developed ‘Sidekick’ for tracking the effectiveness of email marketing and found that users who signed up with their work email ID were more active than others who provided a personal email account. Thus HubSpot told their users to use work email for signing up on this platform and this small step changed the level of activity of users dramatically.
Case study: weDevs CEO Nizam Uddin shares how weDevs uses growth hack to activate users:
“In the Activation phase, we try to persuade our users in performing any activity on our sites. The special tasks of this phase are:
A company will not be able to make profits if it can’t keep its customers after acquiring them. Having a loyal customer base means lower cost for customer acquisition and more revenue. Besides loyal customers help to gain new customers through referral.
For convenience the “Retention” strategy should be divided into three stages: initial, medium, and long-term retention. The initial stage is more like the “Activation” stage where users are kept engaged for a short term. For medium-term retention, the product or service needs to be part of the users’ daily life. For long term retention, a company needs to upgrade or modify the product or service with more attractive features. The growth team should experiment with different ideas to find the right strategy to keep customer retention rate high.
A good example of customer retention is the subscription service of Amazon, Amazon Prime, that provides the users various facilities including streaming movies and music and among the people who take the free trial, 73% become subscribers, 91% renew for the second year and 96% for the third year.
Case study: weDevs uses the following strategy for retention. weDevs CEO Nizam Uddin:
“The purpose of the Retention phase is basically to bring our users or customers to the site or product and make them our recurring customers. Customer retention is a difficult task. Some of the things that we do in this phase:
Apart from all these activities, there are also many other activities we do.”
Based on the data derived from the monetization, LinkedIn focused on optimizing their homepage encouraging users to subscribe for better business networking, rather than email marketing, which helped LinkedIn to drive more growth.
The “purchase funnel” should be monitored to identify the points that are responsible for losing customers and to find new ways of generating revenue. Understanding your customers and knowing their characteristics is an important part of the growth of the company, as it helps the growth team to figure out the right strategies for maintaining continuous growth.
Caste study: how weDevs use growth hacking for revenue generation.
From weDevs CEO Nizam Uddin:
"In the Revenue phase, we do various activities for the users to buy our products. E.g.
We also do a lot more, including how to reduce customer acquisition costs and increase customer lifetime value."
Growth hacking requires a lot of effort and time. It is normal for one to ask “Why growth hacking is crucial?. Before answering this question here are some statistical data:
20% of the startups can not make it to the end of the first year.
A study by SalesForce showed that 79% of marketing leads are never converted to sales.
The right growth hacking strategy can help a company to overcome these issues avoiding waste of money and effort. The big names we know today such as Facebook, Airbnb, Microsoft. Adobe, Tesla, etc, have all followed their own growth hacking strategy to accelerate their growth, rather than implementing the conventional marketing strategies.
Airbnb is one of the finest examples of growth hacking. Before reaching their current stage, they had to create a loyal customer base and reputation. When they saw that many travelers search on Craigslist for alternative accommodations, Airbnb provided its accommodation providers with an option to post a copy of their listings on Craigslist and this simple solution helped Airbnb to reach a large number of people.
Another excellent example of a growth hacking strategy is Dropbox. Dropbox offered 125MB more free storage for the users who would link their Dropbox ID with their social media accounts and for referring a friend to Dropbox users can get 16GB more free storage. This referral program of Dropbox helped it to grow 3900% within just a time span of 15 months! In September 2008 the number of Dropbox users was 100k, which grew upto 4M by the end of 2009! Dropbox is considered to be a good example of referral marketing.
An effective growth hacking strategy can be simple and low cost, but innovative. Job board Proven is a good example regarding that. They introduced a strategy called “Mission Week” where the employees would get points for improving an existing piece of content on their website. All of Proven’s employees participated in this and this resulted in improving the search result of many contents ultimately helping Proven to get an organic traffic boost.
Growth hacking is a dynamic and iterative process that brings together resources from across operations such as technology, engineering, and marketing. Any company, regardless of its budget, can implement growth hacking making the best possible use of its available resources. The difference between growth hacking and the conventional approach is that growth hacking takes a low-cost and battle-tested approach to growth instead of throwing money at problems.
Finally, growth hacking is a mindset where you take a continuous ‘testing and integration’ approach to run your operation across the organization to find the best approaches to doing things. While idea like the high tempo framework is dedicatedly used for growth, it can equally be used in every aspect of operations in a company.