Growth hacking is now a well-known buzzword in tech circles. Every young startup wants to hack growth and acquire millions of customers at a mind-boggling pace. Even so, growth hacking remains a loosely defined and somewhat esoteric function that few people really understand.
Growth hacking is a phrase that was coined by the original growth hacker, Sean Ellis, in 2010. Sean Ellis is famous in Silicon Valley as the consultant who helps early-stage startups (like Dropbox and Eventbrite) acquire initial users at a phenomenal pace.
When Sean was looking to find a job description for what it was he did, he realized that his role could not be defined by the “marketer” label. In their initial days, startups are looking for one thing and one thing only – user growth. Someone whose expertise lies in thinking out of the box and finding innovative ways to grow is known as a “growth hacker”.
Growth hacking refers to a new form of advertising in the 21st century. Traditional methods of advertising like billboards, radio, TV ads, and so on are quite expensive and can be ineffective for a startup to grow quickly. Growth hackers, therefore, find new and cheaper ways of advertising that are tailored perfectly to the product’s market. This enables explosive growth and very rapid customer acquisition.
Examples Of Phenomenal Growth Hacks
There are some legendary examples of startups that used growth hacking very effectively in their early days to become household names today.
The Airbnb and Craigslist Hack
Around 2010, Airbnb realized that people who were looking for accommodation that was not a traditional hotel (in other words, their target market) went to Craigslist to look for listings there. Through an ingenious growth hack, they managed to provide Airbnb hosts with the option to re-post their Airbnb listing to Craigslist with one click.
This gave them access to the huge number of users on Craigslist who were looking for properties. Since the look and feel of Airbnb listings were so much more superior to Craigslist, most users who came through Craigslist stuck to Airbnb for future bookings. Moreover, hosts were able to make more money on their properties through the Craigslist users, and this kept them hooked to the platform as well.
Of course, this was not sanctioned by Craigslist who soon became wise to what was happening and made the necessary changes to prevent it. By then, though, Airbnb had already gotten the boost it was looking for and they haven’t looked back since.
Dropbox and the Referral Hack
Dropbox tried a few growth strategies until it found one that really worked, and focussed 100% of its energy on it. Dropbox allowed users to increase their Dropbox space by up to 16GB by referring their friends to Dropbox, who would also get additional space.
This technique was wildly successful because it had a dual advantage. It encouraged existing users to share more files through Dropbox and also introduced new users to the product with a small free sample.
These are just two examples but there are tons of examples of startups who growth-hacked their way to success.
Youtube made embedding of their videos super easy, thus allowing sharing across several platforms and phenomenal growth.
Facebook restricted initial access to its platform to Ivy League schools, thus creating hype around their product and pushing demand to exceed supply which made it an aspirational product among young people who couldn’t wait for access to reach their school.
The Growth Hacking Process And Present-Day Tactics
The tools and tactics that are used by growth hackers change very quickly. As the Airbnb example above shows us, growth hacks work explosively when they’re outside-the-box and haven’t been tried yet.
When a growth hacking tactic gets too popular, it loses its efficacy, and that’s why there’s a constant search for new tactics.
While growth hacking tactics change constantly, the process of a growth hacker remains the same, and it’s important to get a grip on the process in order to succeed as a growth hacker. A very effective approach to growth hacking is by dividing your user funnel into different stages and focus on using the right tactics for each stage.
Dave McClure, one of the founders of 500 Startups, has an effective funnel that helps growth hackers all over the world streamline their process. It is known as the “AARRR!” metrics which are defined as:
- Acquisition: How people get to know you exist.
- Activation: How your users have a happy first experience.
- Retention: How you make them come back for more.
- Revenue: How you monetize your users.
- Referral: How you get users to bring their friends.
Any growth hacking strategy will only be really effective when tactics are applied across the funnel, and not just to acquire customers.
Growth Hacking Tactics
There are three main types of present-day tactics that are being used by startups across the world
One of the most commonly used methods of viral growth hacking is referrals. Dropbox and Uber are great examples of using good referral tactics that immediately expanded user growth.
Other viral marketing tactics include showcasing your brand when users use the free version of your product. This is done very effectively by products like WordPress & Wix (both of which show their brand names on the free website domain), and the email tracking software Mailtrack.
Another viral tactic involves piggybacking on another product which is already successful. For example, Youtube created embed codes making it easy for people to share their videos on already popular sites like Facebook.
Facebook is a great example of this: they know exactly what users like, and they cleverly manipulate that knowledge to create an experience that will make a user spend more and more time on their site. The best way to create a sticky product is to really really know your customers. A great way to do this even in the initial stages of your product is to have an effective social media engagement strategy to help get in-depth customer feedback.
A lot of people disparage paid advertise as an engine of growth. However, paid advertising can actually be a very useful growth engine as long as your CAC (Customer Acquisition Cost) is sufficiently less than your CLTV (Customer Lifetime Value) and leaves you with a good margin.
Groupon is a great example. They spent money on online marketing to rapidly scale their customer base. Even though they spent $50 to acquire a customer, that customer gave them $500 worth of business.
Tools Used By Growth Hackers
The chief tool that all growth hackers need to really understand the impacts of their decisions is good analytics. Google Analytics is a great analytics software when it comes to tracking common metrics like geography data, device data, bounce data, and so on. However, these days effective growth hacking should have you tracking different events, features, and people in order to get the insights you really need. Having an event-based analytics software like Kissmetrics or Mixpanel now seems to be necessary. Finally, if you have the engineering resources, you can also consider building in-house analytics tools when you need them.
Growth Hacking As The Key To Early Growth
In today’s day and age, growth hacking is no longer just something desirable to have. Growth hacking has become a part of a businesses’ DNA right from the start when a company begins to first develop their product. Without this, it can be very difficult to see the kind of early results you want to help catapult your startup to success.
About The Author:
I am Paweł Tomczyk, a technology enthusiast and an early adopter. I have been specializing in marketing and Fintech for six years. Nowadays, I’m the founder of Cyberius, which specializes in content creation and crowdfunding.
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