Have you heard? My new book Continuous Discovery Habits is now available. Get the product trio's guide to a structured and sustainable approach to continuous discovery. In Monday’s post, we outlined our success funnel, identified our points of leverage, and explored a few ways you can set and hit aggressive goals.
Some of you, the lucky ones, might be asking yourself, what do you do when your success funnel is converting well? What types of goals do you set?
That’s a great place to be as it means you’ve found something that is valuable to your users. That’s rare.
So first, take a moment and celebrate it.
I mean it. Do a happy dance. Scream from your rooftop.
Building products is really hard. If your success funnel has healthy conversion rates throughout, that is an amazing accomplishment.
I’ll give you a few minutes to celebrate.
….
Okay, now that that’s done, it’s time to get back to work.
It feels great creating value for people. And the natural next step is to create value for more people.
So today we are going to talk about GROWTH!
There is so much hype around growth right now, it’s a little bit maddening. But overall, this is a good trend. Startups can’t thrive without growth.
However, before we dive in, I want to add one caveat. Please don’t get distracted by growth until your success funnel is healthy. All you will do is waste a lot of time, energy, and money on acquiring users who won’t have success. That makes everybody sad.
So if you aren’t driving success outcomes, stay focused on your success funnel.
Okay, now that that’s out of the way, let’s talk about GROWTH!
There are two metrics models that are really helpful for thinking about growth. We’ll take a look at each.
Talk (Metrics) Like a Pirate
Dave McClure’s Pirate Metrics are a great way of thinking about growth. If you aren’t familiar with Dave’s model, here’s how he describes each metric:
Acquisition: User comes to the site from various channels.
Activation: Users enjoy first visit happy experience.
Retention: Users come back, visit site multiple times.
Referral: Users like product enough to refer other users.
Revenue: Users conduct some monetization behavior.
Can you figure out why they are pirate metrics? (AARRR)
Your success funnel drives activation. It’s what leads to a happy experience.
Each of the other metrics drive growth in different ways.
Most people focus on user acquisition as the primary driver of growth. It is an important one, but it’s not the only one.
Improving retention encourages your current users to have success more often. Assuming your users generate revenue (another metric in Dave’s model), this should drive growth in revenue.
If you do well at activation and retention, you can unlock the potential for referrals. Customers that are happy repeatably, with a little encouragement, will tell their friends about your service. But you have to design for this.
And finally, you can always optimize revenue, which drives growth where it matters most – your top line.
Not sure where to focus?
Follow the same process we went through to identify your points of leverage in your success funnel, treating the pirate metrics as your new funnel.
Are most of your users returning often? Then focusing on retention may not yield much more.
Already have a high viral coefficient? Then it might be time to pay to acquire users.
And so on.
Once again, every situation is different. Some products make it easy to add viral hooks. Others make it easy to take advantage of paid search channels.
The key is to play with the numbers and find your biggest point of leverage and then relentlessly focus on that.
By the way, “relentlessly focus” might be my favorite phrase ever.
Start Your Engines
I’m also a big fan of Eric Ries’ Engines of Growth metrics model as it also helps to frame how to drive growth. Eric’s model outlines the following engines of growth:
Sticky Engine: Think Activation and Retention. If you want explosive growth you have to focus on keeping the users you do have around and engaged.
Virality Engine: Think Referrals. Sticky users can bring you more users if you help them do so. Thanks to network effects this engine is trendy. And for good reason. If you can successfully drive up your viral coefficient while keeping your cycle time low, your sticky users will do all the growth work for you.
Paid Engine: Think Revenue. We all love revenue. If you have a ton of users and they are inviting all their friends, but you aren’t able to monetize them, you’ll merely end up with a large server bill. Here you want to make sure that your base unit of economics makes sense. In most cases this means that the lifetime value of a user is greater than the total cost to acquire that user.
Again, how you prioritize these engines will vary from company to company and even within a company your priorities will change during different stages of growth. You have to decide what’s best for your business.
But what about growth hacking?
This is growth hacking.
Growth hacking is simply applying an experimenter’s mindset to focus relentlessly on growth. – Tweet This
If you need more help with understanding Dave McClure’s Pirate Metrics or Eric Ries’ Engines of Growth or simply need some example of how it might apply to your business, pick up a copy of Lean Analytics.
Or share your questions in the comments and I’ll do my best to tackle them.
On Monday, we’ll be moving on to looking at where good ideas come from and how to get the most out of your entire team. You know the drill, subscribe to the Product Talk mailing list if you don’t want to miss out.
