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

by Sean Ellis

In order to evaluate whether you’re achieving a stable rate, the team should be frequently tracking the number of users who churn, usually on either a weekly or monthly basis.

The retention rate is simply calculated as the percentage of users who continue to use or pay for your product, generally tracked month to month.

Business products, such as software as a service, fare much better, with annual retention rates north of 90 percent, according to a study of private SaaS companies done by Pacific Crest in 2013.13 And fast-food restaurant chains see month-over-month retention of customers ranging from 50 to 80 percent. For example, McDonald’s saw 78 percent of their customers come in every month to their restaurants in 2012.14

It’s essential that you instead talk to users (on a deeper level than achieved through the aforementioned survey) to understand what the true objections and barriers are to your product’s success.

They had considered employing several growth hacks to drive more adoption. For example, they thought about requiring people to whom users sent photos to also sign up for the app in order to download the photos. But they decided against that because they were afraid it would annoy people. But remember that growth hacking involves more than picking from a menu of hacks; it is, rather, a process of continuous experimentation to ensure that those hacks are achieving the desired results. If they were truly practicing growth hacking, they would have run a test to determine whether or not their assumption was true. Instead they kept focusing on improving the product; for example, by offering a feature that sent users an email with photos they’d taken on the same day the prior year.

The Everpix tragedy demonstrates the importance of focusing not just on growth but on the right levers of growth at the right time. The conversion rate and positive feedback were clear indicators that they already had a great product and a solid base of active users; what the Everpix founders needed to do was shift attention from making the product pleasing to making it more profitable—i.e., channel their considerable design and engineering talent toward the mission of turning more customers into paying ones. Had they done so, it may well have become a lucrative business.

In the early phase of growth, you want to craft a strategy for running the experiments that will have the greatest impact on growth in the least amount of time. The more focused efforts are at the start, the more intentional your experiments will be, and the more impact you’ll achieve. While large companies can afford to deploy test after test to tiny slivers of their massive audiences, for smaller companies, each experiment has a significant opportunity cost, and so you must be aiming for high impact per test.

While all products will share common drivers of growth, such as new user acquisition, higher activation, and better retention, each product or business has a more specific combination of factors that are uniquely its own.

The North Star may change over time as the company grows and initial goals are achieved. As Facebook learned how to engage users more actively, their initial metric of monthly active users became obsolete and daily active users became the better yardstick. At Zillow the Play is its North Star, and a new one is selected for each year, according to the shifting needs of the business. As companies grow, they also create more product and growth teams, which have their own North Stars, even while the company may still have its one overridingly important metric. Recall that LinkedIn now focuses on initiatives in five areas: network growth; search engine optimization/ search engine marketing; onboarding; international growth; and engagement, with a team dedicated to each.

The cofounders and Graham wrapped up the meeting and booked a flight to New York. Gebbia and his cofounder Brian Chesky rented a $5,000 camera and went door to door, taking professional pictures of as many listings in the city as possible. Then they compared the number of bookings for the listings with the improved photos versus the rest of the New York listings, and found that the new photos led to between two and three times more bookings, instantly doubling the revenue they were seeing from New York.10

One of Schultz’s favorite quotes when he talks about the growth process is of US World War II commander General George Patton, who said, “A good plan violently executed now is better than a perfect plan tomorrow.”

In fact, marketing specialist Rob Sobers has outlined a simple method using off-the shelf tools that creates a data tracking system that (at time of writing) costs just $9 a month. (While we won’t go into the details of how to do this here, you can find a link to it in the book’s endnotes.)15

That translates into much more experiential learning, in the actual heat of battle, about which plays work best and in what circumstances.

Learning more by learning faster is also the goal—and the great benefit—of the high-tempo growth hacking process.

The companies that grow the fastest are the ones that ...

Remember that, generally, big successes in growth hacking come from a series of small wins, compounded over time. Each bit of learning acquired leads to better performance and better ideas to test, which leads to more wins, ultimately turning small improvements into landslide competitive advantages.

To illustrate the power of small gains, Peep Laja, a renowned expert in conversion rate optimization—the science of getting more visitors to a website or app to become customers—loves to point out that a 5 percent improvement in conversion rate every month nets an 80 percent improvement in a year due to the compounding nature of wins. If you were generating visitors through search ads, that increase in conversions would cut your costs of advertising per customer just about in half. This same principle applies everywhere in a company. In fact, small increases in retention can be even more powerful. As a team of researchers from Bain & Company and Harvard Business School discovered, a 5 percent increase in retention leads to an increase in profits of between 25 and 95 percent, because just small gains in retention lead to compounding revenue growth the longer customers stick around.2

Just as you shouldn’t try to run a triathlon without proper training and warm-up, neither should you jump into the growth hacking process at breakneck speed. That is a sure recipe for failure.

Recall that the stages of the process are: data analysis and insight gathering, idea generation, experiment prioritization, running the experiments, and then returning to the analyze step to review results and decide next steps, in a continuous loop.

NUMBER OF INSTALLS × NUMBER OF MONTHLY ACTIVE USERS × NUMBER OF PURCHASERS × AVERAGE ORDER SIZE × REPEAT PURCHASE RATE = AMOUNT OF GROWTH

“The best way to have a good idea is to have lots of ideas.”

IDEA DESCRIPTION: The best way to think about what the idea description should look like is along the lines of an executive summary. It should address the who, what, where, when, why, and how of the idea. Who is being targeted? For example, all visitors, new users only, returning users, or users from a particular traffic source? What is going to be created, such as new marketing copy or a new feature? Where will the new copy or feature be implemented: Will it be on the app’s home screen or elsewhere? When will it appear during the customer’s use, such as on the landing page when a visitor first comes to the site? In addition, the description must include the why—the rationale behind the idea—and the how—a recommendation of the type of test to be done, such as an A/B test, or new feature to be built, or a new ad campaign to be launched.

And indeed, some of the best ideas the team has ever tested came from outside the company. One of our most active community members, for example, recommended we do question-and-answer sessions on the site with well-known growth experts, which have since become important traffic and engagement drivers for the site. And after one of our advisers shared some search engine optimization tactics that worked well on his site, we found that when we deployed them they worked powerfully to drive our search rankings up on Google.

At GrowthHackers, Sean developed the ICE score system, with ICE standing for Impact, Confidence, and Ease, as a way to organize all the ideas generated in

At GrowthHackers, we once ran a simple experiment that involved moving the location of a sign-up form to receive our weekly “Top Posts” email newsletter. We had originally put the form at the bottom of our home page because we thought that users would want to evaluate the content on the site—i.e., scroll through the feed of trending posts that we feature on the home page—before they could decide whether they wanted to sign up to get the newsletter. Then Morgan had the humble idea to move the invite from the bottom to the top, giving it more visibility. Truth be told, he wasn’t sold on the impact the change would have, assigning it a score of 4 out of 10. But we decided to test it nonetheless because he gave the experiment a 9 for ease based on feedback from the engineering team, who said it was relatively easy to implement, and on his confidence that it would improve email sign-ups to some degree by being more visible, giving it a confidence rating of 8 that it would do so. The results were staggering. Much to our surprise, we saw a 700 percent jump in sign-ups, far exceeding our humble assumptions about the experiment’s potential impact on our growth.

TIR system, which stands for Time, Impact, and Resources.3 Another system is PIE, for Potential, Importance, and Ease.

customers.2 Before Sean and the team at Dropbox implemented the referral program, the company was spending nearly $400 to acquire each new user and the premium subscription price was just $99. Drew Houston smartly recognized that the expense-to-payoff ratio was unsustainable, but unfortunately, not every company comes to that realization in time. Take, for example, Fab, a flash-sale site for specialty designer goods. Once lauded as the “Amazon for design,” and feted as the latest Silicon Valley unicorn, the company was growing its customer base at breakneck speeds; the only problem was, it was spending $40 million a year on advertising and customer acquisition costs to do so—more than 35 percent of its revenue.3 Suffice it to say, excessive spending quickly caught up with them, leading to the start-up’s dramatic implosion and sell-off at a fire-sale price.

The first phase of work in scaling up your acquisition of customers should be devoted to achieving two additional types of fit: language/market fit, which is how well the way you describe the benefits of your product resonates with your target audience, and channel/product fit, which describes how effective the marketing channels are that you’ve selected to reach your intended audience with your product, such as paid search advertising or viral, or content, marketing.

One of the best examples of an enormously compelling product description is the language Steve Jobs used to introduce the original iPod. When the product was unveiled in 2001, the market was full of MP3 players, and it would have been tempting for Jobs to fall back on messaging explaining why his version was different and better. Instead, he brilliantly chose not to resort to any of the language being used to describe MP3 players and their utility whatsoever. Instead he completely reframed how people thought about the appeal of portable music players with the simple and captivating phrase “1,000 Songs in Your Pocket.” Rather than spend his time trying to differentiate his product from others on price or features, in other words, Jobs understood that the core value, the magical aha experience, was carrying your entire music library around with you anywhere, all the time, totally hassle free. Of course we’re not all such brilliant marketing minds as Steve Jobs—but with the right testing strategies in place, we can come close!

Another reason the up-tempo growth hacking process is so perfectly suited to this challenge is the fact that language is a breeze to run A/B tests on. Website copy can be swapped out and tested relatively easily with tools like Optimizely and Visual Website Optimizer, which install a small piece of code on your website or app that randomly displays different versions of copy to your visitors and then measures and compares their responses.

Now one of the largest media sites on the Web, Upworthy grew at a lightning-fast clip, thanks in large part to their dedication to seeking language/market fit for every story they publish—their genius is in repackaging content they find on the Web with headlines so catchy they often go immediately viral. But it’s not that Upworthy’s editors are necessarily the most naturally brilliant or creative; their brilliance is that they don’t leave creativity up to chance. Instead, they hack it. The process of selecting headlines begins with a staffer writing at least 25 different possible headlines for each story. Out of these 25, a curator chooses a handful of favorites, and then the managing editor green-lights a set of those for testing. And their testing method couldn’t be simpler. The only tools necessary are Facebook, Bitly (a free online site that generates trackable URLs for Web content), and an old-fashioned timer. Here’s how they do it.

Given that, according to Eli Pariser, the site’s founder, “a good headline can be the difference between 1,000 people and 1,000,000 people reading,” this extra work is well worth it.6

START SMALL Often it’s the smallest changes in language that can have the most outsize impact on bringing in customers, which is why the most efficient experimentation process is one that lets you quickly test many different iterations. Consider how Tickle, a start-up James Currier founded in 1999, achieved two breakthroughs by experimenting with small changes to the language describing its social networking and photo-sharing products. When the response to the original webpage language that described the photo service as a way to “store your photos online” was “anemic,” Currier hypothesized that users weren’t spreading the word because they didn’t see a storage vault of images as a particularly share-worthy product. So Currier and his team experimented with a small change in language, to “Share Your Photos Online.” The test took almost no time to implement and the results were instant and staggering. The change of one word, from “store” to “share,” completely altered users’ perceptions of what the product was and how they should use it. Suddenly they were uploading and sharing photos like crazy, and in just 6 months, Tickle added 53 million users to the service.

Buoyed by this success, the team pulled off a similar feat shortly thereafter with a dating app. The original app featured the tagline “Find a Date,” and once again, growth was sluggish. They thought that maybe they could once again ignite growth by positioning the app as a social product, not just for people to use simply to find a date, but as a hub for connecting singles to one another through their friends’ networks. So they changed the tagline to “Help People Find a Date,” and sure enough, users started sharing invites with their friends, even sending them to married people because, after all, they can help their single friends with finding dates, too. The service added 29 million users within 8 months of making the single change.7 So as you plan your first hacks to test, start with language, and then go from there.

Procter & Gamble’s Febreze, for example, was an honest-to-goodness breakthrough product: a chemical mixture that truly eliminates odors rather than just masking them with a pleasant scent. So when P&G launched it, they understandably touted this unique feature in their messaging, with the line “Febreze cleans bad smells out of fabrics for good.”8 Yet sales remained sluggish until P&G realized, through market research that included videotaping how avid buyers use the product, that the better positioning was as another product to use as part of your regular cleaning routine, in part to fill a freshly cleaned room with a pleasing scent.9 So P&G added scent and then repositioned the product in a major ad campaign showing women loving the way it smelled, and using language such as “for freshness that surrounds you like never before.”

Sophia Amoruso, the founder of Nasty Gal, a women’s fashion brand that soared to popularity among millennials in its early years, recounts how learning what language resonated with her target customer was crucial not just for bringing in new business, but for the development of her brand’s whole identity. When she started her business by selling secondhand clothes on eBay, she would spend hours scouring the Web for the most enticing descriptions of similar items. To get ideas, she researched popular search terms to learn about current trends, which she then used for inspiration in defining her brand. As New York magazine reporter Molly Young recounted in a story about Amoruso’s success, “[B]atwing, lamé, and lumberjack were big in 2007; studded and architectural and origami in 2008”; with this knowledge she scoured rag houses, with their stockpiles of secondhand clothes, to resell on eBay. She crafted a unique, always on-trend brand that resonated with millennial fashionistas.11 Amoruso recalls in her book #GIRLBOSS that “[e]ach week I grew faster, smarter, and more aware of what women wanted.”

If you can get even a single distribution channel to work, you have great business. If you try for several but don’t nail one, you’re finished.”12

THE THREE CATEGORIES OF CHANNELS Viral/Word of Mouth Organic Paid Social Media (Facebook, Pinterest, Snapchat) Search engine optimization Offline ads (TV, print, billboards) Embeddable widgets Public relations and speaking Online ads (Google AdWords, Facebook, YouTube) Friend referral programs Content marketing Affiliate advertising Online video App store optimization Influencer campaigns Community engagement Free tools Radio Contests and giveaways Email marketing Retargeting Platform integrations Community building Ad networks Crowdfunding Strategic partnerships Sponsorships (blogs, podcasts) Games, quizzes Contributed articles Native content ads Website merchandising

THE LEADING TYPES OF CONTENT MARKETING Case studies How-to guides Press releases Infographics Special reports Articles PDFs and e-books Web forums Reviews Videos PowerPoint presentations Images and photos Interviews Lists Q&A websites Pinterest Instagram Facebook Snapchat Tumblr LinkedIn Pulse Twitter Local business listings Podcasts Ask Me Anything series Quizzes Free tools Medium posts BuzzFeed Testimonials

User Behavior Channels to Explore Are people using search to find a solution? Search engine optimization (SEO) or marketing (SEM) Do existing users share your product via word of mouth? Virality or referral programs Does having more users improve the experience? Virality Are your target users already using another platform? Integrations and partnerships Do users have a high lifetime value? Paid acquisition

HubSpot’s Website Grader, a free online tool by which customers can enter a URL and automatically get insight about which aspects of a particular website were performing well and which should be improved.

Virality is a balance of how good the packaging is and how good the content is.”

The best loops are ones in which users are motivated to help sign up more users because doing so will improve their own experience of the product, such as with Facebook or LinkedIn.