Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success

by Sean Ellis

the core elements of the method are: • the creation of a cross-functional team, or a set of teams that break down the traditional silos of marketing and product development and combine talents; • the use of qualitative research and quantitative data analysis to gain deep insights into user behavior and preferences; and • the rapid generation and testing of ideas, and the use of rigorous metrics to evaluate—and then act on—those results.

How bad has the crisis of traditional marketing become? A recent McKinsey study of publicly traded software companies showed absolutely no correlation between marketing investment and growth rates. Zero.24 Another study, of CEOs’ views of traditional marketing, conducted by the Fournaise Marketing Group, reported that “73 percent of CEOs think marketers lack business credibility and are not effectiveness-focused enough,” and 72 percent of CEOs agreed with the statement that marketers “are always asking for money but can rarely explain how much incremental business this money will generate.”25

The growth lead sets the course for experimentation as well as the tempo of experiments to be run, and monitors whether or not the team is meeting their goals. Growth teams should generally convene once a week, and the growth lead should run those meetings (which we’ll offer guidance on how to do shortly).

The growth hacking process provides a specific set of activities that growth teams should undertake to find new, and amplify existing, growth opportunities through rapid experimentation to find the top performers. The process is a continuous cycle comprising four key steps: (1) data analysis and insight gathering; (2) idea generation; (3) experiment prioritization; and (4) running the experiments, and then circles back to the analyze step to review results and decide the next steps. At this stage the team will look for early winners and invest further in areas of promise, while quickly abandoning those that show lackluster results. By continuing to move through the process, the growth team will compound wins big and small over time, creating a virtuous cycle of ever improved results.

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.

The way to determine your essential metrics is to identify the actions that correlate most directly to users experiencing the core value of your product, such as, for Facebook, how many people users invite to join their friend circle, how frequently they visit the site, how many posts and comments they make, and how much time they spend on the site. 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. Take Uber, whose essential metric for riders is rides completed. So in addition to the number of new people downloading the app, the company would want to track in the number of rides being booked, the number of riders who return and rebook, and the frequency with which they are booking new rides.

The North Star should be the metric that most accurately captures the core value you create for your customers. To determine what that is you must ask yourself: Which of the variables in your growth equation best represents the delivery of that must-have experience you identified for your product?

PRIORITIZE Before an idea is ready to be considered by the team, it must be scored. This scoring helps the team rank ideas against one another to determine what to test and when. Ideas are scored by the individual submitting the idea, prior to the idea going into the pool of available hacks to consider for testing. At GrowthHackers, Sean developed the ICE score system, with ICE standing for Impact, Confidence, and Ease,

IMPACT: This is the expectation about the degree to which the ideas will improve the metric being focused on, which, in the case of the grocery app, is the revenue per user. You might think that only ideas that are very high impact are worthy of being submitted, but remember that a team should be selecting a mix of potentially high-impact experiments, which will generally require more work, and some that are easier to implement but also have a good, if not great, chance of producing meaningful results. The goal is to privilege as many high-impact tests as possible, but if some of them will take several weeks, or longer, to prepare for launch, then some easier tests should be slotted into the schedule—which is why ease of testing is also a component of the ICE score.

CONFIDENCE: This is a measure of how strongly the idea generator believes the idea will produce the expected impact. This rating should be based not just on conjecture, but on empirical evidence of some kind, whether from data analysis, review of industry benchmarks, published case studies, or knowledge of previous experiments.

EASE: Ease is the measure of the time and resources needed to run the experiment. Ideas such as substantially redesigning the new user experience or revamping the shopping cart in the checkout process might be high impact, but they are usually not easy undertakings, requiring weeks or months of work to launch. The ease score both provides the growth team a reality check about overly ambitious ideas and helps identify some “low-hanging-fruit” tests to run each time through the growth hacking process.

ANALYSIS AND LEARNING The analysis of the test results should be conducted by either the analyst or the growth lead, if he or she has the expertise. The results should be written up in a test summary, and this document should include • The name and description of the test including the variants used and the target customers (for example, was the test run in a marketing channel, only toward mobile users, or to paid subscribers, etc.?) • The type of test run: was it a test of a product function, a change to marketing copy on a website page or screen in a mobile app, a creative test, or a new marketing tactic deployed? • Features it impacted: this could include the screenshots of where the test was run on the site, or on the screen of a mobile app, or include a copy of the creative from a particular billboard ad, TV, or radio ad experiment • Key metrics: what were the metrics that you were trying to improve with the test? • Test timing, including start and end dates of the test including day of week • The hypothesis of the test and the results, including the original ICE score, sample sizes, statistical confidence, and statistical power • Potential confounding issues, such as the time of year the test was run, or if there were other promotions that may have skewed visitor behavior • The conclusions drawn.

CREATING A FUNNEL REPORT OF CONVERSIONS AND DROP-OFFS One of the best ways to measure conversion rates is through a funnel report, a tool that displays the rates at which people who come to your product are moving on to each of the key steps in the customer journey (and by the same token, where they are dropping off). Here’s a very basic hypothetical one created by Kissmetrics, which shows a quite common drop-off between first visit and sign-up.

For other businesses, steps might include, for example, inviting friends, downloading a whitepaper, watching a video, or visiting a retail store. The point is that whatever your product is, you should be tracking all essential steps of the customer journey to that moment of activation.

The next step after doing this basic mapping is to analyze where in the customer journey the company is making the most money, and where there seem to be pinch points, meaning steps where potential earnings are lost, which vary by model. By identifying high-value pages and features within a product, website, or app, growth teams can experiment with ways to generate even more revenue from them, while identifying those pinch points with poor conversion rates and high friction will generate ideas for patching up revenue leaks.

The middle package is sometimes called a decoy package and can be a powerful way to drive customers to higher-priced products.12 SUBSCRIPTION OPTIONS Digital marketer Steve Young used this decoy product to profound effect at SmartShoot, a marketplace that connects professional videographers and photographers with people who need their services. Originally, when the company offered two options, a monthly option and an annual option, 40 percent of visitors bought the annual plan and the remainder purchased a monthly package. Young and team hypothesized that by offering a slightly inferior (and slightly cheaper) offer to their $299 plan they could leverage the pricing relativity phenomenon and drive more annual purchases. So they added a decoy product that cost just $10 less than the $299 plan and severely limited the features available. As a result, their conversion rate soared by 233 percent with 86 percent of buyers choosing the $299 annual product.13 The lesson is unmistakable: teams should experiment with a product option that is priced to help customers better understand the relative value of the items and plans you hope to sell.