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What’s the Future of Growth Hacking with Sean Ellis

Marketing
Marketing

Today I’m talking to someone who’s an experienced marketer and also a growth hacker.

Sean Ellis is the person who coined the term “growth hacking” back in 2010. Not only that, but he was responsible for growth at some of the biggest brands and tech companies in the world, such as Dropbox, Eventbrite, Lookout, and LogMeIn.

He is also the founder and CEO of growthhackers.com and the co-author of the book called Hacking Growths.

What does means “growth hacking.”

Growth hacking is really about using the same scientific process that’s been around for hundreds of years. So having some analysis where you figure out ways to drive improvement and then coming up with ideas, running tests, you know, having the right way of prioritizing those tests, running tests, and ultimately figuring out how to move a metric.

It is the scientific process that would be used for innovation.

This is applying it to moving a metric, which ideally as your North Star Metric.

And then probably, you know, that also describes marketing pretty well.

The difference between marketing and growth hacking

Sean: So the most significant difference between marketing and growth hacking is not just doing this with channels and kind of top of funnel stuff, but you’re doing this across all touchpoints in the product.

So it requires usually a cross-functional effort between a marketing team, a product team, engineering, design, really everything that’s about driving improvement in how you grow the business.

What do a growth hacker and a digital marketer have in common? 

Sean: Yeah, so I started as a marketer, and I still think of myself as a marketer. To me, the challenge that I had as a marketer was that in particular, when I was trying to grow LogMeIn, I tested a lot of channels. I tried to develop those channels, but I was constrained on what I could become because our first user experience and the product was just not very good.

It was, it was tough to get started with LogMeIn initially. So 95%, the people who signed up never once used the product. That’s where I discovered that to effectively grow that business, I had to work with the product team to experiment on that new customer onboarding.

Even if I had the skills on the marketing side, I could do the engineering around, you know, different types of installers, and different ways to get started inside the product. I don’t think the product team would have trusted a market or a group of marketers to go in and do that.

Sometimes you can have people who have all of the skills, but they also have to have permission to run the experiments in kind of the deeper parts of the product.

But that’s very interesting because I believe that today there are more and more startups and SaaS products that are using this strategy. They are hiring growth hackers but that they are something like the bridge between the marketing department and also the product department.

There are lots of different ways to slice it, and that’s why I don’t necessarily recommend companies to have a growth hacker on the team or to have a growth team.

But what I do recommend is that they run lots of testing and that they have a shared metric across the company and that ideally that testing.

They have permission to run that testing anywhere that could affect the key metric in the business, what we call a North star metric.

When you come up with the term growth hacking? 

Sean: I spent ten years in two companies where I was the vice president of marketing, and both of those companies listed on NASDAQ, and I ran marketing through the pre-NASDAQ days up until filing for the NASDAQ listing.

And I realized that those companies that kinda first six months of going to the market were the most important was the area where I added the most value. And so after I left LogMeIn, I worked with several companies just for the upfront six months period. And so, the second of those companies was Dropbox.

And what I realized is that a lot of that was to get equity in the business. So I got I guess paid some cash, but a lot of it was just ownership in the market. And so it was crucial for me that when I left after those six months that it didn’t work only a yeah, that all my work, I didn’t just get undone.

So it was essential for me to think about how do they continue to manage this growth hacking process after I leave? So initially, I started to try to help them hire a marketer to replace me. But what I found is that most people who were applying for those positions, they were creating a resume by reading the book marketing 1:1.

The kind of a college textbook around branding and awareness building and nature of all these pieces that, in my opinion, a relatively early stage startup doesn’t have the funds.

And if you do that enough times, you build a good brand, and you make good awareness, but you do it in a more sustainable way.

So that’s where I’ve found that if I just promoted for a head of marketing, I had a very different profile of person applying. So that’s when I started to think, okay, if we call it something else, maybe I can redefine what that role should be.

And that was the impetus for it for saying we’re looking for a growth hacker.

We all know that today, acquiring the first ten customers can be an easy target to achieve when you start a new company. But let’s talk a little bit about churn. What are some of your favorite tactics to get customers to not only stay but also become ambassadors of your brand?

I think that’s the starting point is figuring out does anyone look at your product and say, I, you know, after they’ve tried it, say, Oh my gosh, I can’t live without this product.

And so that’s the starting point.

And then, and then once they considered it a must-have, there are several things that you can do to help drive that ambassador. So I had a great interview on a podcast I recently launched. Um, ah, I released this podcast yesterday with the head of growth at TransferWise. And it’s mostly built that business from 40 employees to 1700 employees, primarily off of your customer ambassadors.

And what he said is, is not just the product that drives it, but it’s people — all of these users who believe in the cause.

Yeah. So it’s kind of this cause-based marketing approach where they believe most people are getting screwed over by their banks when, uh, when they’re doing international money transfers.

They just want to get the word out that there’s a much more affordable, elegant way to transfer money internationally. And so if firstly, it has to deliver on that it needs to be more accessible and very easy to use and just excellent customer service and all of that.

And then people want to get on board what the overall mission of the company is. That is to make it much more, much easier, and affordable to move money around internationally. And so I think that’s an example of what drives that.

But that’s a powerful word of mouth, but it all starts with finding not just your first ten customers, but your first ten customers who say that they can’t live without the product and then figuring out how you engage with them beyond that point.

I think the challenge there is that’s the hardest part right there is creating a product that people can’t live without.

And there’s almost no right way to do that.

I think like marketers and growth people, what our goal is is to take the product that we’re given and help find the market. I can’t live without that. And so the way I do that is, I might throw a thousand people at our product and then it’s about sorting through those people to find the ten who can’t live without it and understanding those people on a deep level.

  • What were they using before?
  • Why do they love this product?
  • Why would they be very disappointed without this product?
  • What would they use instead of this product weren’t available?

Just learning everything about how they use the product and why it’s important to them and then, using that information to go out and acquire the next thousand or 10,000 people.

Can you also define what’s the “North Star Metric” and how you see this concept integrated into a growth strategy? So you want me to take one step back even before explaining what the North Star metric is and, and tell why it’s essential.

As I mentioned, the challenge that growth hacking is all about using the scientific process to grow the business. The problem is that usually one person, a growth hacker might get excited about this process and reading a book and learn about it.

Then they bring it back to their company, and the company’s not used to working that way. And then, that person gets frustrated and is just not able to execute that.

And maybe they’re able to execute it with marketing channels. And then that’s just good, good marketing. That’s the way any digital marketers should be working today.

But to be effective, you need to apply that scientific process around not just acquisition but how you activate new company customers, how you, how do you retain and engage new customers, how you drive referral.

All of those should be done through it a test and learn the process. And so that’s where the North star metric comes in, is that when you can come up with a metric that reflects real progress against your mission and reflects the amount of value you’re delivering to your customers, that that must have value.

And when you’re growing that footprint of value, that is how you created a big, sustainable business. And so it’s a little bit confusing.

Uber Star Metric Example

So usually I find with, uh, examples that it works best. So like Uber has a good one, which is just weekly rides. So every week, they count the number of trips through the Uber platform, and they know that every time there’s a ride in an Uber, drivers get some value, and riders get some benefit.

And so if they compare this week’s weekly rides to last week’s weekly trips, they can see that they’re making more and more impact against customers by providing their solution to those customers.

 

Airbnb Star Metric Example

Airbnb is similar to where it would be nights booked. So again, for hosts and guests, every time there’s nights booked on the platform, there’s value on both sides of the marketplace.

For nonmarketplace businesses like Facebook and Slack there, they’re focusing all their efforts to grow the number of daily active users because they know when there are more daily active users.

  • On Facebook, there are more people reading posts; there are more people making posts.
  • The same thing on Slack, more people, you know, reading messages and writing messages and just primarily driving engagement on those platforms.

But when you start to think about driving the number of rides on Uber or the amount of active monthly or weekly users on a platform, that’s not just marketing’s job.

That’s the product team’s job. That’s the design team’s job, that’s engineering is, is doing that.

When you pick the right number, it’s something that everyone in the company plays a role in moving that number.

And so that’s the power of a North Star Metric that it’s reflecting both impact and value to customers. But it’s also something that all of the teams in the business are working together to move that number.

Robert: You also write in your article, because I’ve done some research and your item back in 2018 dozen North Star Metric over simplified growth. And you’ll see, we said that you define North star metric as the single best metric for tracking accumulated user value for a product over some time.

But yes, I want to dig a little bit deeper into how can you find your note North star metric?

Like is there any strategy, are there any steps? And as a, as a founder, as a marketer, as an entrepreneur, if you have a SaaS product and you’re a market, therefore that a SaaS product, how can you find your North Star metric?

Yeah, so there are two key inputs that I looked for.

 1. The value proposition of the product. 

So what is the value that someone gets from the product and trying to try to document that? So kind of what we talked about before. If someone says they’d be very

disappointed if they couldn’t use the product anymore, why would they be very disappointed?

What is the value that they’re getting that would make them disappointed?

2. The mission of the business. 

So if you ask, you know what:

  • Why do we even exist?
  • What impact are we trying to make on customers?
  • What problem are we solving?

If you have both of those, sometimes it’s the same.

I’ll give you an example of a company I was in a workshop recently in Paris where one of the companies in the seminar, there they are, and they don’t have the same answer to those two things.

So it was a little bit confusing. So their mission was to reduce food waste.

And their product is essentially the value proposition of their product is mostly they take, uh, you know, produce that’s about to expire, and they make it affordable for people.

Who may not have as much money but want to be able to eat, you know, fresh produce.

And so, um, the value proposition for those people is just affordable fruits and vegetables.

But their mission is to reduce the waste of vegetables. So for them, the North Star metric is probably something along the lines of fruits and vegetables that they save from going into the garbage.

So that’s the one time where it might be a little bit different. But for an Uber, maybe their mission is to make it easier for people to get where they want to get. And for the driver is the ability to make money.

So it’s, it’s really, it’s trying to figure out what is the value.

And ideally, the more that you can express that in terms of something that relates to the mission, it brings meaning to the broader team.

I think that the challenge is that what you would typically see is, a marketing team would come up with their number, and it might be new customers, and then a product team might be, uh, you know, a customer retention rate.

And so the problem with that is, you know, new customers might reduce the retention rate, but they could be like profitable new customers.

And so then it creates conflict between those two departments. But if instead, we said active customers on the platform is what both care about and that maybe the product team is more focused on, we can drive active customers by retaining customers and doing a better job of activating new customers.

And then the marketing team is about how do we get, how do we acquire customers but not just acquire them, acquire customers who are gonna stick around on the platform, do it profitably.

So other metrics matter beyond the North star metric.

The future for growth hacking

Everything that we’ve covered so far sounds so logical and straightforward.

But what I have been surprised by is that most companies fail when they try to do it. So today, the truth is that very few companies are working cross-functionally to grow a North star metric and doing that through rapid experimentation.

And so what happens if companies have been working together in their little silo, you know, or they’ve been siloed by, by functional silos, especially as the companies grow.

It’s been that way for decades or hundreds of years potentially.

So even if it’s a new company, people’s experiences in companies that are very siloed.

What I would say is hopefully the future, here’s what I’m talking about because the present is not that for most companies; today is a marketing team, tends to be pretty data-driven and, and testing, but they’re very constrained because of the rest, the company is not testing effectively, or they’re just, it’s not coordinated very well.

I think that’s the first point before we get too far around, how does AI get into there and how do you run better experiments and get better, better results?

It’s, most people are not doing this at all. And that’s, and hopefully, the future is that everyone starts doing this. And then once one, they’re doing this, that’s when I think you could start to have things like AI where you’re doing some, some automatic testing and just getting smarter and smarter about how to segment different users down to a level where you can understand their needs.

On a much more unique basis and you start to have much more customized experiences across your platform based on an understanding of a variety of needs, and then you can begin to support, you can take each person and maximize the value that they get out of the platform by using technology yeah.

To personalize experiences.

But that’s so far away from just the basics of getting teams to work cross-functionally together to figuring out how to effectively drive valuable customers and retaining those customers.

Unfortunately, new companies are the ones who seem to be okay.

They don’t have as much to forget, you know, so the challenge with new companies is that a lot of them don’t even get to product-market fit.

So they don’t figure out how to create something that people want. But once they have product-market fit and they create that, that must have product experience, they’re not too hard to get to adopt this approach.

I would say 95% of the companies that are doing growth hacking well are, are companies that were founded in the last ten years. It’s all those other companies that are losing ground to these new upstarts, which is exciting.

If you’re a startup, it suddenly means that you have a lot more potential to be, to beat these incumbent players.

I would like to see every business that has something precious for their customers to be able to figure out how to get more customers who get more from those products.

And so that’s where I spend most of my time is some companies may already have 50 or a hundred or 200 employees, but they’re not approaching growth in a very effective way.

I think by the time they get to 10,000 employees, they’re almost beyond help.

Also, some of the companies that aren’t too huge that they still have good potential to adopt these approaches and to be much more successful.

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Robert Katai

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