Startup Growth

Stacking the Odds: The Key to Startup Growth

  • AUTHOR: Sean Ellis
  • DATE: 11/29/2013

Growth Hacking, a term I coined three years ago, is marketing’s latest buzzword. There are more than 1,000 job postings on Indeed for a growth hacker. While I’m excited that the term has resonated, I’m worried that collectively we’re busy looking for quick growth wins without really building sustainable, authentic growth.

Growth hacks for the sake of growth are destined to fail. They aren’t based on lasting value, and the audience they grow rarely is the type of valuable, long term audience every business needs to succeed. I’ve spelled out the dangers of premature scaling before, but it bears repeating—if you haven’t found product-market fit, scaling is a very bad idea. If you need a reminder, take a moment to read my essay on finding product-market fit first.

In the Startup Growth Pyramid, there’s a period during which you’ve found product-market fit, but you’re not quite ready to scale. During this transitional period, it’s important to stack the odds for authentic growth. What this means is that you evaluate your business model from top to bottom. You tackle the major stuff like figuring out what your strengths are and how to play to them. You also address the more minor stuff, like implementing a solid conversion rate optimization plan.

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Put it all together and you have a three-part system that can lead to lasting growth that really matters: understand the must-have experience, then take care of macro optimizations, and then worry about micro optimizations. Growth hackers can’t succeed in their mission without this framework in place. Driving traffic and new signups for a product that doesn’t fulfill a real need doesn’t create lasting value, it creates inauthentic growth that ultimately kills the business.

First, you have to understand your must-have experience. What’s a must-have experience? It’s the thing your product does that your current users would be crushed if they could no longer do. Most growth hackers do their best work when there’s a must-have experience as the basis for growth.

Once you have a handle on your must-have experience, you can move on to macro optimizations. These macro optimizations are often where the best growth hacks occur. It’s here where growth is focused on getting more of the right people to your must-have experience. It’s the core of creating sustainable growth.

This process can be summed up into a simple equation: Desire – Friction = Conversion Rate.

You can determine desire by analyzing what it is your users want. Use landing page data and traffic sources to determine why and how visitors are reaching you. Of course, the simplest way to find this out is just to ask them. Use all this information to optimize conversions.

This is where conversion rate optimization comes in. Good growth hackers know that authentic growth doesn’t happen without relentlessly optimizing the user experience to get more of the right people to the must-have experience. Authentic growth becomes sustainable as larger percentage of the right users convert.

Conversion rate optimization is not about conversion at any cost—that’s an easy way to get inauthentic growth by tricking the wrong people into signing up. What you’re trying to do is make it easier and more likely for new users to have the must-have experience, which will in turn improve their habit, loyalty, referrals, and sales—all of which improve your odds for growth.

Only after tackling these larger macro optimizations, can you move on to micro optimizations. Micro optimizations should be applied throughout the customer life cycle, in particular, you’re looking to enhance engagement, encourage sharing, and, finally, drive sales—all of which make each user more valuable to your company.

When you want to stack the odds for authentic growth, it’s critical to understand your must-have experience, as this experience and the must-have benefit it offers users will inform all the macro and micro optimizations that must take place before scaling successfully. Without it the best a growth hacker can do is create inauthentic growth with users who don’t care, at worst, their efforts will be in vain. No one can grow an ungrowable product.

Listen to what your users have to say about your product or service—in particular, what they love and what annoys them. Finding a way to emphasize the former and eliminate the latter will help to ensure you have a sturdy foundation on which to build your business. Once you have product market fit, it’s time to find your growth hacker and put more of the right people through to the must-have experience—that’s the formula for lasting, authentic growth.

  ABOUT THE AUTHOR:
Sean Ellis
Sean Ellis

Sean Ellis is the CEO and co-founder of Qualaroo, a technology company that helps marketers better understand the needs of website visitors in order to improve conversions. Prior to Qualaroo, Sean held marketing leadership roles with breakout companies including Dropbox, LogMeIn (IPO), Uproar (IPO), Eventbrite and Lookout. You can follow Sean onTwitter and at GrowthHackers.com.

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