Any entrepreneur, regardless of their generation, understands the challenges involved in taking a small company to the next level. However, the landscape has drastically changed with the advent of online marketplaces, opening up a whole new realm of possibilities.
While online business brings its fair share of challenges, it also offers an unparalleled wealth of data and the ability to engage with customers in incredibly beneficial ways. These prospects, which allow you to test your product and gain insights from customers, are pivotal in achieving exponential growth.
How to build a stronger business through collaboration and leadership
In the pursuit of taking a small business to the next level, startup founders often encounter a common challenge. While making a decent profit, they realize the need for prioritizing growth. To address this, the establishment of a growth team becomes imperative. This team consists of members from various departments within the company, leveraging collaboration to solely focus on identifying strategies for expansion.
To exemplify the effectiveness of growth teams, let’s consider BitTorrent, a software company. Prior to forming a growth team, BitTorrent had 50 employees working in engineering, marketing, and product development. Initially, this structure yielded satisfactory outcomes, until their growth stagnated in 2012. The issue arose from the fact that a large number of customers were using the free version of their product, while few were upgrading to the premium, paid version.
However, the situation changed when an innovative project-marketing manager joined the company, forming a growth team and injecting a fresh perspective. By approaching engineering issues from a marketing standpoint, it became evident that the lack of upgrades was not due to product quality. Rather, most customers were simply unaware of the premium version and its benefits.
Armed with this insight, the marketing and engineering teams collaborated to raise awareness by prominently promoting the premium version to free users. Consequently, the number of upgrades surged, leading to a remarkable 92 percent increase in revenue.
Nevertheless, for a growth team to thrive, it necessitates a strong leader capable of unifying the interdisciplinary team and ensuring their progress. This leader must identify the target area, establish clear objectives, and set a timeline for achieving these goals. For instance, they might decide to focus on developing new marketing channels and challenge the team to generate three potential channels within a month.
The growth team leader also bears the responsibility of keeping the team focused and steering them away from distractions. Although tempting new ideas may arise, the leader must discern when these ideas do not align with the current goal and should be temporarily set aside.
Why is it important to understand your Startup’s customers?
Understanding your customers is crucial when it comes to developing a must-have product. Numerous aspiring Startup founders aspire to create the next big thing like Airbnb, Yelp, Facebook, or Amazon. These companies achieved remarkable success because they all had one thing in common: they offered a must-have product or service that resonated with people.
Even if you are confident that your product is well-liked, it is important to gather insights about your customers’ experiences and opinions by reaching out to them. This is the only way to truly determine if your product is a must-have.
One effective method for assessing how customers feel about your product is through a must-have survey. It is a simple and reliable approach that involves asking a single multiple-choice question to at least a few hundred customers.
If, through that survey, you find out that at least 40 percent of your customers would be very disappointed if your product stopped existing tomorrow, you can be confident that your product is a must-have. This milestone indicates that you are in an excellent position to implement the following growth hacking techniques.
However, if less than 40 percent of customers would be very disappointed if your product stopped existing tomorrow, it is crucial to continue improving and developing your product. Don’t worry if this is the case, as there are quick, efficient, and cost-effective ways to experiment with communicating the value of your product.
One method is A/B testing, which involves comparing the effectiveness of two different messages or product variations. For instance, Basecamp, a project-management tool, used A/B testing to evaluate potential marketing taglines. They discovered that the prompt “See Plans and Pricing” attracted twice as many new customers compared to “Sign Up for Free Trial.”
A/B testing can be conducted in-person or online, and it doesn’t have to be expensive. By trying out new approaches such as showcasing a video demonstration or an inexpensive prototype highlighting potential new features, valuable insights can be gained. Even if the tests are unsuccessful, the feedback received will prove highly valuable.
How to effectively track growth-hacking progress?
To effectively track growth-hacking progress, it is crucial to identify key data metrics that align with your business objectives. While standard metrics like web traffic, user acquisition, and returning users are important for online businesses, it is essential to determine unique core metrics that are specific to your growth strategy. Failing to do so can result in drowning in data and losing focus on what truly matters.
Begin by asking yourself which customer actions can be measured to gauge their positive experience with your product. For example, Facebook focuses on metrics such as user logins, time spent on the site, activity in creating posts and comments, and the number of friend requests sent. These metrics are vital for Facebook’s revenue generation through ad space sales, as they indicate site traffic and user engagement.
Nevertheless, it is crucial to identify a single key metric that serves as your North Star. This North Star metric is the ultimate measure of the core value your product delivers. It ensures teams stay focused on growth and the efficient utilization of time and resources.
Facebook’s North Star metric is the number of daily active users. This metric surpasses the significance of the number of posts or friend requests because it provides a simple and overall indication of Facebook’s growth trajectory.
Now that we have established the importance of tracking specific metrics, let’s explore some real growth-hacking techniques.
Generating new ideas through analyzing data and brainstorming
The first two stages of the growth-hacking cycle, which are analyzing and ideating, involve quickly coming up with new ideas.
Let’s take a look at the Baylor University football team’s turnaround in 2008. They had been struggling for a long time, but things changed when their new head coach, Art Briles, introduced a fast-paced, no-huddle offense.
This new strategy not only helped Baylor outperform their opponents during games, but it also allowed them to run more plays during practice. In simpler terms, they were able to learn more in less time. You can apply this kind of efficiency by following the four-stage growth hacking cycle.
The first stage is called the analyze stage. Here, you collect and analyze data to gain insights about your customers. You can ask questions like, “How do our customers typically behave?” or “What are the characteristics of our best customers?” By using surveys and interviews, marketing experts can gather valuable data. Then, they analyze the information to identify trends and patterns. In a team meeting, these insights can be shared and discussed, which will help generate growth-hacking ideas.
The second stage is called the ideate stage. This is when every member of the growth team contributes ideas based on their expertise. After starting the brainstorming session in the team meeting, you can give team members four days to submit as many ideas as possible.
To organize and evaluate these ideas, you can use an idea pipeline. This is a structured format for logging, tracking, and assessing all the ideas that come in. Each idea should have a short name and a brief description, including the who, what, when, where, why, and how. It’s important to note the expected positive outcome of each idea, such as increasing the number of returning customers by 30% through a customer loyalty program.
Lastly, don’t forget to identify the metrics that can be used to measure the performance of each idea. For example, in the case of a customer loyalty program, you can track its effectiveness through the customer retention rate.
Prioritizing and testing ideas
To quickly test new ideas in the last two stages of the growth-hacking process, follow these steps: prioritize and test.
In the third stage, prioritize your ideas using the ICE scoring system. Each member of the growth team rates their ideas based on three factors:
- confidence, and
Impact measures the expected growth, confidence reflects how sure the team member is about the idea’s success, and ease considers the resources and time required for testing. Each category receives a score from one to ten. For instance, if a team member suggests offering a $10 credit for referrals, the impact might be rated as seven, confidence as four due to limited data, and ease as eight because it’s relatively simple to implement. To calculate the final ICE score, add the ratings and average the sum. Higher-scoring ideas are shortlisted for further discussion and testing.
The fourth stage is the testing stage. Here, you present your ideas to customers and assess which ones should be fully implemented. It’s advisable to collaborate with a data analyst to establish strict guidelines for reliable results. For example, use a statistical-confidence interval of 99 percent, indicating a 1 percent margin for error. This ensures that your tests provide accurate insights.
Remember, just like the Baylor University football team, repeating the growth-hacking cycle frequently is crucial. The more you repeat it, the more you’ll learn, and the greater growth you can achieve.
Effective strategies to attract customers and save money
Attracting new customers can be tough. But sometimes, all the effort and money spent on getting new customers may not be worth it. So, how can you bring in new customers without going broke?
The first thing you need to do is create a message that really speaks to potential customers. This message has to quickly tell them why your product or service is important to them.
Nowadays, people’s attention spans online are very short – only about eight seconds. That means you only have eight seconds to explain why your product is valuable. Short and catchy phrases work well. Think about the original iPod’s slogan: “1,000 Songs in Your Pocket.”
Of course, not everyone can be a marketing genius like Steve Jobs from Apple, but you can learn from him. Use words that regular customers would use to describe why your product is useful. You can find these words in social media posts, product reviews, or customer surveys.
To come up with creative ideas, try brainstorming different versions of your message with others. Then, pick the ones that have the most potential and test them using a simple A/B marketing test.
To make your marketing efforts more focused, limit the number of marketing channels you use. Start by making a list of the channels that suit your business. For example, if you want people to find your product through search engines, prioritize search engine optimization.
Once you have your list, test each channel to see which ones work best for you. Consider six criteria: testing cost, setup time, time to collect results, how well the test targets your desired customers, flexibility for adjustments, and the number of subjects tested.
Assign a score from one to ten for each criterion, add up the scores, and calculate the average. Then, test the channels with the highest scores.
By creating a compelling message and narrowing down your marketing channels, you can attract new customers without breaking the bank.
How to bring in more customers?
Even if you manage to attract potential customers to your product or service, the next challenge is to turn them into paying customers. It’s interesting to note that only a small percentage, around 2 percent, of the people who visit most websites actually end up making a purchase. However, this means that there is plenty of room for improvement.
One effective way to bring in more customers is by creating a funnel report. This report helps you identify the points where customers tend to lose interest or drop off, so you can address those issues and improve the conversion rate.
To create a funnel report, you start by mapping out the main steps that a customer takes, from their first contact with your business to actually making a purchase. Then, you note the conversion rate between each step. For example, if you analyze Uber’s funnel, the first two steps would be downloading the app and creating an account. Let’s say that out of 10,000 customers who downloaded the app, 8,000 of them went on to create an account. This gives an 80 percent conversion rate for that step.
The third step in the funnel would be booking a ride, and let’s say only 500 out of the 8,000 customers actually took this step. In this case, the conversion rate would be low, around 6.25 percent. By looking at this funnel report, a manager at Uber would identify a problem: customers are signing up but not using the app to book rides. This could indicate that the booking process needs to be simplified.
Once you identify the points where customers drop off, you can start finding solutions to address those issues. One effective method is to use customer surveys. These surveys can be emailed to customers or appear as pop-up surveys on your website. The surveys should be brief and focus on understanding why customers did or didn’t take the next step.
By using funnel reports and customer surveys, businesses can gain insights into the customer journey and make improvements to increase conversion rates.
Keeping Customers Loyal with Rewards
To keep customers loyal and active, you can help them develop habits. Habits are routines that become easier over time. Just like when you try to start a new diet or exercise plan, the first few weeks are tough, but it gets easier if you stick with it.
Businesses can use the power of habit formation, known as growth hacking, to be successful. One way to do this is through engagement loops that offer rewards to customers.
Take Amazon as an example. They have a program called Amazon Prime, which is a great engagement loop. First, Amazon offers customers the chance to sign up for Prime through emails, website displays, and other notifications. Once a customer signs up, the next important step is to reward them.
When customers sign up for Amazon Prime, they get benefits like instant streaming of movies and TV shows and free two-day shipping. This gives customers instant gratification. Amazon also reminds customers about the money they’re saving with Prime whenever they make a purchase.
These rewards make customers feel good, and they start to expect this positive experience every time they shop online. Since Amazon is the only business with a program like Prime, it has built a loyal customer base of people who habitually shop on Amazon.
To create your own engagement loop, you can test different reward strategies to find out what customers value the most. Two successful types of reward programs are social recognition and user achievements.
Social recognition involves designating your most active customers with a special status, like Yelp’s “Elite” status. These customers get invitations to exclusive parties and events, and they have a badge on their online profile to show their status.
Rewarding user achievements is another effective strategy. For example, a fitness company like Fitbit can send a congratulatory message to users when they reach a milestone, like taking their ten thousandth step.
By understanding the power of habits and using engagement loops with rewards, businesses can keep their customers loyal and active.
How can understanding your customers increase your revenue
If you understand your customers well, you can make more money from them. Increasing your revenue is a key sign of company growth, and it’s important to know where most of your money is coming from.
To do this, you can divide your customers into different groups based on factors like age, location, or membership type. Once you’ve done that, you can compare these groups and see which ones are bringing in the most revenue. This information can give you ideas to try out and strategies to implement for further growth.
For example, let’s look at HotelTonight, an app for booking last-minute accommodations. They divided their customers into two groups: those who used Wi-Fi to access the app and those who used cellular data. Surprisingly, they found that the cellular data group was generating twice as much revenue. They speculated that because cellular data is slower and more expensive, these customers were more motivated to make quick purchases without searching for better deals. As a result, the HotelTonight team decided to target their advertising specifically to cellular data users, and it paid off. More of these users signed up, and the company made more money.
Another way to increase revenue is by continuously developing and introducing new features. This is particularly effective in keeping your current customers happy and willing to spend more.
To figure out what kind of features your customers want, you can use surveys. BitTorrent, for example, asked its customers to rate six potential new features they were considering adding to their premium version. As an incentive, all survey participants were automatically entered to win a free upgrade.
No matter what type of business you’re in, there will always be customers to listen to, valuable data to analyze, and opportunities for growth. By understanding your customers and meeting their needs, you can keep your revenue flowing and your business thriving.
Inspired by a book “Hacking Growth”; Sean Ellis & Morgan Brown