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Marketing Leaders Book Club - Hacking Growth

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“There is no question that stalled growth is one of the most pernicious and pressing problems for today’s businesses, and that’s not just true for start-ups, but for just about any business, large or small, in just about any industry you can think of.”  Sean Ellis and Morgan Brown write in their work "Hacking Growth".

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But how can companies continue this growth, without sinking huge amounts of money they don't have, into projects that might not even work? Especially in a long term, or in a scalable way. Luckily, Sean and Morgan have the answer.

But to find out what it is, we have to travel back in time. Way way back in the distant 2000s, Sean Ellis started using unusual approaches to help companies grow at unprecedented rates, for an unprecedentedly low cost. These are the techniques which eventually became the growth hacking model this book was built around. But what does this look like? What does growth hacking look like IRL? Is it just a hooded man and a laptop chatting to customers on Twitter? 

Well, let's take Hotmail for example. A pioneer in the growth hacking scene. The company was introduced to customers when free email was practically non-existent. So, at the end of every email, they included a hyperlink reading "P.S get your free email at Hotmail". An easy-peasy way to get people to sign up for their service - limited resources, maximum impact. 

Dropbox is another example. Using no traditional, and expensive, marketing techniques, the company grew its users from 100,000 to 4M in just 14 months. How was this done, you might ask? Well, the company cleverly offered 250 megabytes of free storage to each user who referred their friend to try Dropbox, with every customer becoming a potential brand advocate. 

Top Ten Consumer Growth Hacks that Have Been Tested

So, it's clear growth should be a priority for all companies, despite their size. In fact, The Harvard Business Review has suggested that firms can lose 74% of their market capitalisation in the decade surrounding a growth stall. 

But hacking growth requires a rigorous method for it to succeed. This includes a system of rapid, cross-functional experimentation. It requires an analytical approach in order to build marketing into products, and simulate organic growth. 

But before we have a look at the book, we need to define what growth hacking is.

What is Growth Hacking?

Growth hacking is, basically, a term used for any strategy focused on growth, especially in regard to early-stage start-ups. This is usually who needs to see a large amount of growth, in a small amount of time. 

 

Think small budget, small amount of time, big growth. So, growth hacking answers the question: "How can I gain as many customers as possible, with limited resources?" It's about focusing on the most cost-effective solutions.

 

Let's have a look at an example: AirbnbAirbnb gave an option for anyone listing their property on their site the opportunity to post it on Craigslist. If they agreed, the listing would appear on both sites. Then, any clicks on the Craigslist site would be linked back to the original posting on Airbnb.

 

On top of this, Airbnb combed through posts on Craigslist, contacting users. If they were looking to rent out their place, they would be sent an email tempting them to also list it on Airbnb.

 

So basically, they infiltrated Craigslist, and overtook 'em from the inside. Like a cool spy, or a parasite.

 

But let's jump into the book.

 

What's the Main Idea behind Hacking Growth?

 

Well, the idea is that today's business powerhouses, like Airbnb, Pinterest, Tesla, LinkedIn, etc. didn't get where they are by creating a product that people wanted, and liked, and just hoping customers would flock to them. Instead, they used growth hacking strategies.

 

This saw them conducting a number of rapid-fire experimentation across multiple marketing channels, and in different product development directions, in order to figure out the most low-cost or cost-effective ways to grow their company. This means they're building marketing right into their products. It's all about focusing closely on what customers want. 

 

What is Growth Hacking? (2021) What does a Growth Hacker do + Examples

 

So, growth hacking goes beyond normal marketing strategy. Instead, every person in the team should be using a growth hacker methodology to improve every bit of the sales funnel. This looks like:

  • Developing better products
  • Optimising products for intended markets
  • Delivering an excellent customer experience
  • Activating and engaging existing customers, to the fullest extent
  • Monetising and generating more revenue

But in order for your growth team to growth hack, you need to build this team. The first part of the book covers just that.

 

How to Build your Growth Hacking Team

To build a fantastic growth hacking programme, you need to develop your experiments team and structure their work. In fact, LinkedIn has over 120 employees just focused on growth alone. These staff members are spread across five teams, being network growth, SEO operations, onboarding, international growth, and user engagement.

A top tier growth hacking team would ideally have:

  • A Growth Lead. "Growth cannot be a side project. Without clear and forceful commitment from leadership, growth teams will find themselves battling bureaucracy, turf wars, inefficiency, and inertia," say the authors. This person manages the process, moderates discussions and functions as a project manager, and has a full overview of the customer funnel. 
  • A Product Management. This is an individual with a deep level of product understanding. 
  • A Developer. A person in this role can figure out the technological reality of a project, and keep the whole thing a bit down to earth. 
  • A Customer Success Manager. Focusing on gathering customer feedback, the customer success manager can understand how the CX can be improved. 
  • A Marketing Specialist. This individual focuses on a specific step of the user funnel or channel.
  • A Designer. 
  • A Data Analyst.

This list shows how important the human aspect of growth hacking is. Tools are all good and shiny and fun, but making sure you have the right team is essential. The book pushes this investment in human capital. But in order to save money at the beginning, one individual can take on several different roles. So, a product manager can also play the role of the growth lead, and might also take up some data analyst work. 

 

In order to keep things running smoothly with a small team, you'll need to limit the scope of your testing and experiments. That might mean focusing on a specific project or channel and then hitting it with the full force of your testing and management. But let's have a look at what the book says about this.

 

Collaboration and Leadership

Right, now you've got your team made up of inter-department members of your company. Next, Sean and Morgan say that this team will benefit from collaboration in their aim for company growth.

In terms of collaboration, Sean and Morgan give the example of BitTorrent. The company only had 50 employees, all working with similar colleagues within traditional departments. But although the company was doing well, its growth plateaued, thanks to an influx of free customers overshadowing any 'premium' customers. 

But this is where things changed. The company hired a project marketing manager, who decided to establish a team dedicated to growth. The team identified that customers were not upgrading purely due to the lack of premium specific marketing. A simple fix - the customer was basically unaware there was a premium option. So, the company then began marketing its premium version to the free users. As a result, the premium customer base skyrocketed, and they received a whopping 92% increase in revenue. 

But like this example shows, a growth team might be talented, but they'll always need strong leadership. Uniting these disparate, interdisciplinary teams, and organising them to stay on track is difficult, and requires strong leadership.

So, a team leader's position is to help them identify the target area, set clear goals, and establish a time frame. It's all about prioritisation. Plus, the leaders have to understand what keeps the team motivated and undistracted. This might look like highlighting when ideas are not essential for achieving a current aim or goal.

 

Ongoing, and High Tempo, Testing Processes

“One of the cardinal rules of growth hacking is that you must not move into the high-tempo growth experimentation push until you know your product is must-have, why it’s must-have, and to whom it is a must-have: in other words, what is its core value, to which customers, and why.”

– Sean Ellis

So, the main goal of the growth team mentioned above is to set up an ongoing and continuous testing process. But what does this mean, exactly?

Well, tests are a series of changes that have a measurable impact on results and will return data within two weeks. The reason for this specific time period is that this regularity helps companies get feedback from users, and quickly learn from the market. Any longer than that, even getting into the months, will bring little value. It doesn't matter how interesting a test might be, if it takes ages and ages, it's not cost-effective. 

In order for your team to operate smoothly, and execute experiments at a speedy rate, it needs to utilise Sean and Morgan's Growth Hacking Cycle. It consists of the following steps:

  1. Analyse. This includes looking into the initial data from the first wave of users. This will help you develop clear and distinctive groups. You'll be able to see what their behaviours are, where they live online, what features they use, and what your best customers look like. 
  2. Ideate. You need a bunch of ideas for experiments lined up. When run, they'll help you improve your core metrics. These unrestrained brainstorms are a key to the growth hacking process and can come from the team, the wider company, outside partners, and customers. You'll need to set up a project management system to coordinate the collection and utilisation of ideas. 
  3. Prioritise. See below for the ICE system. This is all about directing priority, but don't spend too much time fine-tuning the idea's score. This should just be a tool to help the team select upcoming experiments. 
  4. Test. Create a control group and experiment group for each test to make sure results can be tracked properly. Then set a 99% statistical confidence bar for each test. Then log all results in a test summary and share them with the team. 

This cycle can then be monitored by a weekly growth team meeting, where you can review results and agree on actions going forward. 

ICE Scoring

One of the main ideas in the work is the ICE Scoring format. This involves every person in the growth team participating in a weekly meeting, in order to review the results of the latest tests and generate new ideas. Each member describes and scores their ideas before the meeting, in order to save time.

This format stands for:

  • Impact: How big of an effect will the experiment, if successful, have on the key metric?
  • Confidence: How likely is it that the experiment will have a successful result?
  • Ease: How easy is it to complete the experiment, and how much money or time will have to be sunk into it?

But this score is not the be-all or end-all. It should be used as a leading indicator of experiment feasibility, but should not be stuck to religiously in terms of prioritising ideas. Even if an idea does not have the highest score, your team should still consider it. This takes out pedantic arguing about specific scoring, like whether an idea should be a 3 or 4 in Impact, or a 4 or 5 in Ease. Instead, the team can focus on prioritisation and further planning. 

Get to Know Your Customers, and Keep Them Loyal

Though a must-have product is essential to success, it is impossible to even conceive of this product without knowing your customers, So, in order to create this product, you have to reach out to your customers.

One of the big rules of growth hacking is that you shouldn't move into high-tempo growth experimentation unless you know your product is a must-have, to whom it is a must-have, what its core value is, and to which customers.

This is all about determining what the "aha moment" looks like for your customer. That's when the usefulness of the product becomes incredibly clear for the client, and when they understand the core value. Basically, they identify why the product is a "must-have". 

“You want to track, at a minimum, the metrics for each of the steps users must take to reach the aha moment and how often they are taking those steps.”

- Sean Ellis

 

But this isn't about just stabbing around in the dark. Instead, you need to adopt methods for probing into user behaviour to discover the core value. Look out for your biggest fans by mining user data and feedback, then search for similarities in the way they use the product for hints about what they value most. Sean and Morgan recommend using a 'must-have survey'. This involves using one multiple-choice question to a few hundred customers. This is:

How disappointed would you be if this product no longer existed tomorrow?

  1. Very Disappointed
  2. Somewhat Disappointed
  3. Not Disappointed

If 40% or more of your customers say "very disappointed", your product is a must-have. This suggests you're in a strong position to start using growth hacking techniques. If your product does not meet this threshold, you can work on improving your product first. 

This survey isn't recommended beyond the early testing stage, however. It's not the best idea to suggest to your biggest fans that your product might be discontinued. Also, if you don't have a few hundred people to get responses from, you can rely on customer interviews instead. 

Now you've got customers, how can you keep them loyal? Well, Sean and Morgan suggest developing customer habits. 

Businesses that have achieved success with growth hacking often involve habit formation in their approaches. This means making your product part of a customer's habits and, as a result, creating a sustainable business model.

Sean and Morgan encourage a rewards-based programme to form these customer habits, which they've called "engagement loops".

They give the example of Amazon Prime. The customer makes an offer to customers, which involves subscribing to a service. Then, they reward the customer for accepting this offer. They also provide great customer service, keeping their customers happy. So, the customers will keep subscribing to their service, with over 90% of Prime subscribers continuing their memberships year on year. 

Amazon Prime Membership: How To Cancel Amazon Prime Membership Subscription?  - Gizbot News

So, to start your own engagement loop, Sean and Morgan propose testing different reward strategies, based on what your customers value. The most common and successful reward programmes, however, continue to be social recognition and user achievements. 

This might look like Yelp's 'Elite' users, who receive the title due to being the most active members. As well as gaining social recognition, they're also given invitations to parties and events. Other companies might also congratulate users when they reach a particular milestone, such as Strava's 'Local Legend' status when a user beats a certain running record in their area. 

The Growth Hacking Playbook

This part of the book offers a detailed set of tactics for acquiring, activating, retaining, and monetising your customers. Let's take a look at each of these steps:

Acquiring. This is about finding cost-effective ways to get new customers, and seeing how your messaging resonates with your target audience. Then, you have to ensure your channel and product fit this audience, or find the marketing channels appropriate for your intended audience. 

Activation. The next step is all about mapping the path that gets your customers to the "aha moment". This'll involve creating a funnel report that profiles the conversion rates for each of the steps. Then, conduct surveys and interviews of users who progressed through each step, and who left early. As a result, you'll get a better sense of the experiments you'll need to improve activation. 

Retention. Retention falls into three phases: initial, medium, and long-term. Initial comes down to increasing the rate at which users reach the "aha moment", medium comes down to helping users develop a habit, and long-term is about making sure a product keeps providing value over time.

Monetisation. The monetisation step involves highlighting all the parts of the customer's journey which could potentially earn revenue. Identify barriers such as friction in the payment or renewal process, and identify differences between the highest and lowest paying customers. 

But overall, growth hacking is more than just a process. It's a thought pattern, a philosophy, and a huge shift in behaviour. But the one thing to keep in mind is this: driving growth never finishes, and the companies which sustain success over a long period of time constantly strive for more, capitalise on opportunities and create an ongoing cycle. 

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