Who should learn growth marketing?
As this post will explain, growth marketing is not a shiny new toy you get to ignore. It is the standard for revenue generation in the online economy. This stuff can help companies of all shapes and sizes get ahead.
Pay extra attention if:
You look to found a startup
Growth marketing leverages how the internet economy works. Understanding those mechanics enables you to build an Internet-native business — designed with growth in mind. If, on the other hand, you ignore how today's users use and pay for products, you'll be sailing against the wind from the outset. Righting the ship at that point will prove costly at best. Not every startup founder aspires to unicorn-status, but why miss out on getting more for less?
You own a business
Leverage on the Internet is a multi-variate equation.
- Data — Everything that happens online is recorded. Real-time performance insights for ads, landing pages, online stores and product experiences. This enables swift, evidence-based decisions. Dial up what works, adjust what doesn't.
- Scale — Physical stores can sell to customers in geographical vicinity. Online, you can sell to everyone with an internet connection.
- Instantaneity — The Internet defies space and time. Value reaches markets immediately and from there can spread on virally.
Growth marketing applies best to digital products (software, apps) because they naturally pull these levers. Most notably, they can scale both demand (customers) and supply (product), since the cost per additional product user is near-zero. For example, having 10,000 users more or less makes little difference for Twitter's cost structure: it doesn't cost Twitter on a per-user basis to deliver value. Comparatively, to sell 10 iPhones, you also have to produce 10 iPhones.
That said, most levers can equally be pulled to grow sales for physical products (via e-commerce) and services. Ignoring that potential is bound to cost you. Don't let past success blind you for how the playing field evolves. The map it traced is not the territory. This series of posts aims to provide the blueprint for a better map, for you to localise as you experiment along.
You manage teams
Even if you're not the one at the wheel, it's important you understand what drives growth so teams working it can move faster. For one, you'll develop an intuition for what makes a high-performance growth team and how to hire for it.
You're a hungry student
In essence, growth marketing is about how to make money online. Master it and you'll be sought-after goods in the marketplace of talent. You'll be courted for jobs and asked to join founding teams in exciting industries, other than being well-equipped to build something for yourself.
What is growth marketing?
Growth marketing is systemic revenue maximisation.
It combines creative problem-solving with behavioural psychology, experimentation and data analysis to iteratively optimise every stage of the customer journey — for maximum bottom-line impact.
Let’s break that down.
- All efforts should ultimately grow revenue.
- There is no distinction between marketing and product. Growth teams make ads, create content, make landing pages, run A/B tests, onboard users, design UX, reduce churn, devise product features, build communities, accelerate word-of-mouth and more. They identify and execute is probable to bring in the most revenue.
- Growth marketing is a system: its parts work together. Revenue maximisation requires understanding the underlying hierarchy and harmony. Are you upgrading a cog or the machine itself? The higher the level, the higher the returns.
- Creative problem-solving fuses logic and imagination to reconstruct presumed limits as novel solutions.
- Behavioural psychology studies how mind shapes behaviour. If you understand the deeper reasons why customer purchase, your marketing can match business goals to behavioural patterns.
- Experimentation judges how good (or bad) your ideas are by putting them to the test. Scale what works, harvest what doesn't as new experiments.
- Data quantifies how wrong you are. It resolves ambiguity and argument by revealing reality. Analyze it to scrutinise your ideas and illuminate new ones.
Some examples that make the point.
- Early on, Twitter struggled to keep new signups engaged. Data signalled these users were inactive because they didn’t follow others. This makes sense: no newsfeed to check and no dopamine hits to come back for. The solution was to prompt new users into following at least twenty others before landing in their feeds. More active users means more eyeballs for advertisers means more revenue for Twitter.
- Back when smartphone cameras were shitty, Airbnb increased bookings by offering professional photography services so hosts could make their listings stand out more.
- Booking.com runs about 10,000 experiments per month testing cues of scarcity and social proof for their potential to cognitively hack you into booking more rooms.
- Strava beat out other sports tracking apps by targeting professional athletes first. As curious amateurs signed up for exclusive insights in how the world's best train, network effects sent the social network surging.
- Coinbase pays you cryptocurrencies for learning more about the underlying projects. This quite literally invests you into the platform as well as into the paradigm shift it bets on. You’ll also be more persuasive when telling your friends.
What growth marketing isn't
Your brand is what people say about you. Brand marketing is what you do to set the tone of the conversation. It’s injecting your ads, landing pages and content with a touch of singularity so you’re worth talking about.
Done well, brand marketing increases revenue potential by priming audiences to become customers in the future. Growth marketing is how you realize that potential and get customers to spend.
Traditional marketing is about getting people to the point of purchase: your store or site. It ends where the product experience begins. Growth marketers work to keep customers engaged post-purchase so they spend more and get others to do the same.
Digital marketing is traditional marketing executed on digital channels. It assumes a split between marketing and product, and typically ends with site conversion.
Performance marketing means you pay in proportion to the performance of a marketing campaign. For example, per impression, per click, per lead, per sale. Performance marketers use data to test ideas at scale so they can get more out the budget spent on paid channels. Another word for it is “paid acquisition.”
Performance marketing supports both brand marketing (perception) and growth marketing (revenue). Like traditional marketing, its role is typically limited to a single part of the customer journey.
Growth marketing was initially coined as “growth hacking” because of the incredible success of early growth marketers. People felt like they were breaking the rules. In fact, they were playing a different game.
The playing field has since levelled. The art of beating the system was itself turned into a system. Finding growth hacks became a process. Creative growth “hackers” thus matured into strategic growth “marketers”. It’s not a hack if there’s a process for it.
That doesn’t mean the hacker mindset is dead and buried. Great growth marketers have a knack for trying and testing new things. They challenge “best practices” so to not become prisoners of it. Today’s ever-faster changing environment of channels and customers typically rewards hacker instincts.
Growth marketing strategically interprets the customer journey.
On the internet, that journey generally goes like this:
We'll dive deep on each growth stage as this series of posts progresses. For now, we'll focus on developing base-level intuition with minimum viable explanations.
Acquisition is about reaching potential customers with messaging that prompts them to check your site. There, they ideally convert: they sign up, purchase, submit a lead form — whatever the next step in your customer journey.
You contact audiences through channels. Ads, SEO, cold email, referrals, podcasts, influencer marketing as well as sales are examples of acquisition channels.
Channels come at a cost. You pay advertising platforms, content creators and sales people. For a channel to be viable, you need to be able to consistently acquire customers from at a cost (significantly) lower than the money you make per customer. Customer acquisition cost (CAC) — how much you pay a channel per customer you draw from it — branches acquisition channels into three main categories.
1. Paid channels
Paid channels include influencer marketing, sponsorships and all advertising platforms. They’re paid because returns scale as a linear function of how much you spend, e.g. per click, per impression, per conversion. This makes paid channels predictable: if $1000 gets you 500 clicks, $2000 should get you about 1000. The downside is that growth can only ever be linear. What you get out is directly proportional to what you put in.
2. Owned channels
Also known as organic channels, these include just about everything else. At the intersection of content and community, examples include SEO, newsletters, podcasts, organic social media and Discord groups. Sales also qualifies as an owned channel.
Compared to paid channels, owned channels grow super-linearly (exponentially). They typically cost more to set up and can lag to deliver, but, as you are the owner, don't cost you on a per-acquisition basis.
- A blog post costs you today, but can still attract customers via Google Search in three years. In fact, if it rises to rank on page 1, it can get you more than ten times as many.
- The bigger your YouTube channel, the stronger its algorithmic pull for grabbing new eyeballs.
- The more members in a Discord community, the bigger its potential for value-sharing, engagement and impromptu recruiting.
- The more sales you close, the more efficient your sales process, the more effective your messaging, the stronger your network, the better your reputation and the bigger your negotiation power.
Owned channels are unpredictable and thus risky, but can also reap much bigger rewards. Nobody can copy your self-built community. In fact, they might pay you for access the same way they pay Facebook and YouTube creators.
Build a product people can't shut up about and new customers will flock to you for free.
Referral programs accelerate word-of-mouth through rewards. Rather than merely financial, these rewards ideally augment product experience: Uber Eats gives free food, Dropbox free storage, Tesla free charging miles. Best practice also says to reward both referrer and newcomer. So the former feels altruistic and the latter privileged.
Software products can benefit from organic virality — also known as product-led growth. This comes into play when using the product naturally invites new users. As happens when you invite colleagues to Zoom calls, send money through Paypal, share TikToks and send out Typeform surveys. Organic virality can be engineered by empowering users to work together and create shareable content.
Somebody “converts” when they take the next step in the customer journey. This typically happens for the first time on your site, where your goal is to get visitors to act on their interest by completing a specific action — like signing up.
Since a visitor is only acquired once they convert, you can cut acquisition costs (and grow revenue as a result) by improving your site’s conversion rate. Same idea for subsequent stages: the higher the rate at which prospects take the next step, the lower the integral cost to acquire them.
Conversion recurs throughout the customer journey. You convert a prospect to social media follower to email subscriber to trial user to active user to paying customer to higher-paying power user to evangelist. The exact sequence depends on how customers engage with your product,
Conversion Rate Optimisation
Improving funnel conversion rates through experimentation is known as Conversion Rate Optimisation (CRO).
Some best practices:
- Add a live chat widget to your site to lower the barrier for visitors to ask for information.
- Get your website to load faster if you want less visitors to leave early.
- Reduce the number of sign-up form fields by only asking visitors what you really need.
- Pair product claims with social proof so prospects feel like they're missing out.
CRO actualises behavioural psychology as a user experience that feels natural to complete.
A/B testing configures general CRO best practices to fit your distinct customer journey. It perfects through iteration: ideas for conversion rate improvement (B) are tested against the status-quo (A) for performance. Winners stay to be challenged as A in the next test.
For example, non-profit organisation charity:water grew total donation volume by increasing the pre-filled amount on forms from $30 to $60. They only made this change after an A/B test confirmed $60 trumped $30 for average donation size without significantly reducing the number of donations. It turned out the most optimal configuration (so far) of the principle to steer how users complete forms with pre-filled fields.
You can A/B test pretty much everything, but shouldn't. The skill is in getting a maximum of learnings in a minimum of experiments. Rather than testing buttons, go upstream to re-do the entire top section of your site. Major returns, be it in revenue or learnings, come from major redesigns.
The bottom-line impact of A/B testing scales exponentially as learnings compound. The implication: never let your traffic sit idle. Test all day, every day. Today's bounces inspire tomorrow's conversions.
Onboarding is most intuitive to explain for software products. E-commerce and service business models are discussed below.
When people sign up for your product, they hope it will better their lives. Onboarding bridges promise with experience. It introduces customers to your product in a way that makes them stick around long-term.
This is done through so-called aha-moments. Aha-moments happen when users suddenly get the magic: they intuit how life with the product is better than without it. Aha-moments, in turn, are unlocked by key actions: things the user does to gain value from the product.
Consider these examples:
- Twitter — Follow people that interest you (key action) for an ever-fresh feed of ideas (aha-moment).
- Uber — Signal point A and point B (key action) so the app can take care of the rest (aha-moment).
- Airbnb — Book someone's home (key action) so you can experience new places like a local (aha-moment).
- Slack — Invite colleagues (key action) for fast and focused team communication (aha-moment).
Onboarding is a typical bottleneck because it falls in-between the silos of marketing and product. One gets customers to the site, the other builds features. No one is minding the gap. Growth marketing solves this by considering the full customer journey.
Customers are skeptical. They size up your product in the first 30 seconds. You cannot afford to waste first impressions.
Picture onboarding as a walkway suspended across a canyon:
- Leads start in a world without your product.
- Landing page motivates leads to reach a better world, with your product.
- Onboarding bridges promised with experienced value.
- Each step is a key action that brings users closer to the aha-moment and earns on-going buy-in to keep going as a result.
- Onboarding fails when users lose sight of the promised land and miss a step.
Onboarding for e-commerce
The key to onboarding for e-commerce is to think of the online store as a software product. Since everyone shops online, e-commerce best practices are more one-size-fits-all. You can safely copy-paste strategies like:
- Free shipping — Always offer and advertise free shipping. It's a perception game-changer. Adjust your prices upwards to make up for margin loss.
- Anchor pricing — The best way to sell a $2,000 watch is to put it next to a $10,000 watch. Feature highly priced products to make lower priced ones feel like a bargain.
- Reduce time to checkout — Allow customers to purchase at once. Provide instant options like PayPal and Google Pay. Don't require account creation. Only ask for shipping details after they've paid.
- Return policy — Return policies put at ease anxieties that come with online shopping. Make it easy and painless, without over-promising.
Onboarding for service businesses
Compared to software products, service businesses can't leverage self-service product user experiences to resolve scepticism and build trust. They rely on sales to convert paying customers: leads land with a sales person instead of getting to try out a product.
The antidote is to (1) lower the barriers for prospects to talk to you, and (2) signal expertise earlier on in the customer journey.
Some tactics that achieve this:
- Productise your expertise as content, courses and pre-recorded webinars. Offer for free to signal expertise, possibly via email opt-in.
- Mimic the idea of a free trial with free consultations. But be selective: qualify your leads so to only talk to people you can expect to land as clients after.
- Leverage happy customers. Ask for warm intros and feature testimonials on your site. Document successes as cases. Distill project learnings in social shares.
- Make yourself known in the industry. Write content, get featured in newsletters, get on podcasts. Proactively build your network on Twitter and LinkedIn so you can reach target audiences for free.
If successful, onboarding matures into recurring engagement: retention. Users come back to regularly perform key actions and get product value.
- Frequency — How often the product is used.
- Longevity — The total time window of use.
While every company wants customers to stay for life, frequency goals are subject to product use and business model.
- The longer TikTok can glue your eyeballs to the screen, the more impressions it can sell to advertisers.
- If you watch Netflix at least once a week, you're unlikely to cancel your subscription.
- Bird wants to be your go-to means of inner-city transportation.
- Dollar Shave Club's subscription plans are designed to fit your shaving habits.
- You only use airline compensation services like Airhelp when your flight gets cancelled or delayed >3 hours.
- Banks should not want you to take out a new mortgage every year.
Retention performs as a proxy for how well a product fits the market. As such, it is the tide that lifts all other boats:
- Customers sticking around tend to be happy with your product. And tell their friends all about it.
- Both organic (product-led growth) and artificial virality hinge on retention.
- In every business model, retention scales customer lifetime revenue.
- In doing so, it propels the ROI of acquisition costs.
- Retention generates insightful data on who your best customers are and how they use your product.
Consider how, paying $10 for the past 10 years, my lifetime value to Spotify is $1200 and counting. The earlier I'd have churned (cancelled my subscription):
- The lower LTV would have been.
- The lower the ROI on acquisition cost.
- The fewer people I'd have spread Spotify to — sharing music, using it in social settings, talking about it.
- Instead, I might have paid and advocated a competitor.
In my life, Spotify has achieved god-mode retention: I can't imagine my life without it. It fills my habitual need for music in a way that makes even the lowest switching cost feel prohibitive.
Monetisation describes how product use generates revenue — a financial expression of your (1) business model multiplied by (2) funnel performance.
- Asset sale — You sell ownership rights to a product, e.g. books, fitness trackers, cars.
- Usage — You sell product use in units, e.g. billable hours, haircuts, e-scooter minutes, hotel nights.
- Subscription — You sell access to a product as fixed time units, e.g. gyms, Netflix, Zoom, Headspace.
- Transaction — You charge fees for bringing two parties together, e.g. real estate, Uber, Paypal, Kickstarter.
- Advertising — You sell data and attention of product users, e.g. YouTube, Waze, podcasts.
Revenue scales as you reduce costs, increase stage-to-stage conversion and lengthen retention. On top of that, you can experiment with:
- Up-selling — Getting customers to purchase a more expensive product version, e.g. iPhone Pro, Spotify Premium.
- Cross-selling — Getting customers to purchase another, often complementary, product, e.g. AirPods, Apple Music, AppleTV.
- Pricing — Testing price strategies, points and discounts for global revenue maximum.
Referral acquires new customers through existing customers by word-of-mouth, referral programs and product-led growth.
As we've seen, these are the cheapest acquisition channels. Precisely because they perform as a function of how valuable your product is to users, a.k.a. retention. Your best users recruit new users out of sheer satisfaction.
Feeding back into acquisition, referral closes the growth loop.
Growth stages are generally sequenced in a funnel. This is a useful model because it captures the idea of stage-to-stage conversion — and corresponding drop-offs.
However, ideally, growth stages unfold in loops rather than in lines — as you may have intuited from how referral loops into acquisition. Existing users acquire new users through product engagement, who in turn do the same. The better conversion rates from prospect to retained product user, the faster the loop self-propels.
Growth loops are the subject of Issue 3 (forthcoming). Subscribe below to get notified.