Is growth hacking just user acquisition?

Growth Hacking

Is growth hacking just a form of user acquisition? No. But this is fairly common misconception that can take some work to dispel.

First, let’s define acquisition marketing. Organizations typically have one or more user acquisition teams. These professionals are experts in PPC, display, PR, or events etc. You build good user acquisition teams by hiring experts in their respective channels and keeping them focused in that domain.

In contrast, growth hacking is systems thinking with the lens of driving (nearly free) word-of-mouth which in turn will grow your customer base in an exponential fashion. You build good growth teams by hiring good systems thinkers.

The focus of systems thinkers is continually shifting, as changes or improvements to one area surface the next weakest stress points in the system. If this peaks your interest, I encourage you to read The Goal, which is one of the most important business book I’ve ever read. You should also read Paul Graham’s post about growth where he describes this using a related concept: optimization.

So why do growth hackers and acquisition marketers get confused for one another? Depending on the particular phase of growth a company is in, user acquisition teams and growth hackers may at times have the same metrics: bring in more customers who stick around. And do it at the lowest cost structure so it scales. So there is overlap at times, but the lenses by which the two teams look at things are going to be different.

But here’s the key point: a good growth hacker should never simply jump in and assume the most impactful thing that they can do is go out and acquire new users right away. A business that is really humming along actually does not depend on inorganic or paid marketing of their offering. Rather, the user base grows by finding a need, serving it well, keeping all their customers for life, and getting new customers through natural word-of-mouth. Personally, some of the larger impacts on growth I have been able to have were in areas of product, support, and pricing – areas which do not directly overlap with acquisition.

So if growth hacking is systems thinking, let’s take a crack at describing the system, where the growth hacker should focus, and in which order.

Setting up precisely the right pieces in exactly the right order gives you maximum leverage to do incredible things, as in this video.

Job #1: Market-Fit
Firstly you need to ensure product-market fit. If you don’t have that, you shouldn’t be aggressively acquiring new users – whether paid, organic, or social. Get just enough in order to get sufficient product feedback so you can iterate until you find a market-fit. If you bring millions of users to a poor product then you’ve wasted time and money, and damaged your reputation.

At some companies, the product managers may already be assessing market-fit. On the other hand, launching core features can be a full-time job. PMs may also see their product through the same tender filter as a parent sees their child. Assessing market fit requires getting out of the office and talking to prospects and customers and then taking all the input you get as a gift. Don’t dismiss it, rationalize it, or backburner it.

A lot of smart people have said a lot of smart things about the importance of market-fit. Marc Andreeson calls it the “only thing that matters” for startups. He defines life as “before product/market fit” (BPMF) and “after product/market fit” (APMF). I’d add that a company can go from BPMF to APMF and then back to BPMF if the market has changed significantly and your product hasn’t kept up with the times. Also check out Andrew Chen’s presentation on market-fit.

Sean Ellis, CEO of growthhackers.com, came by to talk to our team at Yahoo last week and he shared his very elegant process for assessing market-fit. You may already be familiar of the “Sean Ellis Test”, but if not, here’s a synopsis. Ask customers “How would you feel if you could no longer use (product)?”

If you find that over 40% of the users are responding that they would be “very disappointed” then you have market-fit. This is a “must have” product that will perform in social marketing channels when executed well. You are now ready to scale up the acquisition efforts. Sean developed this approach during his various roles at companies like Dropbox, Xobni and LogMeIn, and then calibrated the test with 100 other companies to arrive at the 40% watermark. If below 40% you have more work to do.

So the first job of a growth hacker is to determine if there is market-fit or not. If so, proceed to amplifying the Dave McClure AARRR funnel. If not, jumping in and helping find market fit is absolutely the job of the growth hacker - and the rest of the company!

Ok, so assume market-fit, the first step in the funnel is acquisition, right? Yes and no. It may be the first step sequentially for an individual user. But for the growth hacker, it may make more sense to work backwards in the funnel.

Job #2: Retention
You’ve got market-fit but if you start driving herds of people to your site only to discover that people don’t stick, you’ve squandered an opportunity. You could have a product that fundamentally meets a need, but once people start using it, they forget to come back, or intentionally cancel due to some fixable problem inside the product. If these issues are not addressed, you will have a Retention Curve of Death. Alex Schultz of Facebook advises, “Retention is the single most important thing for growth.” Watch Alex Schultz’ lecture on this. Having the correctly-shaped retention curve allows you to continue going. It is what elevation is to airplanes.

So first, you’ve gotten the product to market-fit. Then you’ve shored up your retention curve.

Job #3: Activation

Working backwards then, next we come to activation. For your early-adopter set of users, they may be friends or very niche groups that got a lot of handholding from you. Then you thankfully found that they love it, and they continue using it. But now you have to ensure that people you don’t know and people who get no special treatment can activate on to your product smoothly.

For example, it could be the product is great, but the way you present it in on your landers is confusing. Someone heard from their friend a bit about your product, but they hit the landing page and they get confused, turned off, or lost by the images, marketing copy or user flow.

As a growth hacker you need to batten-down the activation stage before you go out and get a torrent of new traffic.

The next piece is about getting traffic, so solve for market-fit, retention, and activation before proceeding.

Job #4: New customers – Referrals & Other Acquisition Tactics
You can now work on general acquisition and referrals more specifically.

Referrals are by definition a subset of Acquisition tactics. You already tuned the product so it is a valuable and sticky and the on-ramp is smooth. So at this stage you are just giving your customers the right tools and incentives to gently nudge them to do something they already wanted to do: tell their friends. This is not trickery or magic. You won’t get large numbers of people to refer their friends unless they already love the product. So the referral step is simply facilitation.

Many of the reference growth hacks you’ve read about or tried may fall under this bucket. Some referral hacks are very explicit, using cash or other incentives to get past the activation energy required to get satisfied users to take actions. You have seen the double-loop refer-a-friend tactic (when your friend signs up you both get a $10 credit). Some use manufactured exclusivity to drive behaviors (“You have 3 beta credits to give out to friends.”) Some are really not a customer explicitly referring their friend, but rather a “powered by” type promotion within the product that by its nature gets shared out (classic example is Hotmail’s old email footer: “P.S. I love you. So get your free email at Hotmail.com.”)

But of course not all acquisition hacks fall under Referral. There are Platform Hijack hacks. An example is automatically posting your housing or auto listings on Craigslist. And Guerilla Marketing. An example is flying a $500 blimp near a stadium of 30K people instead of paying $50,000 for a sanctioned ad.

And then of course, not all user acquisition is growth hacking. Buying TV ads for $20M may help grow the business, but it is hardly a growth hack. For me, growth hacks are things which a) costs little to no money b) rapidly grows customers, engagement, retention or revenues and c) results from lots of experimentation. TV ads may grow business, but is very costly and does not necessarily results from experimentation.

Job #5: Revenue
I’m putting revenue here last under the classic Silicon Valley meme that you get big first, make money later. Or never (get acquired)! Network effect businesses (e.g., Facebook) and eyeball businesses (e.g., Google) are only in a position to make real money after they have grown to be fairly sizeable. But your business may be different. Maybe you are bootstrapping. Maybe part of the market-fit is figuring out if this is something that people want AND will pay for.

Systems Thinking
So to my mind, growth hacking is certainly not synonymous with user acquisition. That is a critical step but only part of the overall problem space when you are growing a business. Rather, growth hacking is a mindset around the whole system.

Growth Hacking is akin to starting a fire. If you’re out in the wilderness, starting a fire is requires much more than striking a flint. First you have to gather the right kind of materials like dry wood of all different sizes and highly flammable kindling (tip: dryer lint works like magic). Then you have to select a good spot that is flat, shielded from wind, and cleared of underbrush. Then you have to arrange the kindlings in a certain manner to allow oxygen in and the kindlings to burn first and then light the twigs, and have those twigs light the sticks, and those sticks light the logs.

So happy fire-starting and we'll fade out with Bear Grylls.

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