Hacking Growth by Sean Ellis Analysis and Summary
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Synopsis
Hacking Growth offers an outline of the hacks that the fastest growing companies in the world have adopted. From Facebook to Uber, growth hacking has allowed companies to take an idea and rapidly transition towards significant growth. Hacking Growth explains how you can develop a growth team of your own. Then, Hacking Growth provides step-by-step techniques to hack growth. Finally, Hacking Growth offers strategies for creating loyal customers that will renew value and prevent growth plateaus.
About Sean Ellis
Sean Ellis is an entrepreneur, angel investor, and startup advisor. Sean attended the University of California before becoming head of marketing for several billion-dollar companies. These companies include Dropbox, LogMeIn, Eventbrite, Uproar, and Lookout. Sean is also currently the CEO of GrowthHackers and was previously founder and CEO of Qualaroo. He also hosts The Breakout Growth Podcast and is a prominent keynote speaker.
About Morgan Brown
Morgan Brown is currently the product management director at Facebook. After a career of bringing new ideas to market as head of product growth for several successful startups, he obtained this role. For example, he has helped ScoreBig, TrueVault, and Qualaroo make it to market. Morgan studied Zoology at UC Santa Barbara but ultimately realized his strengths lay in maximizing the potential of companies.
“There is no question that stalled growth is one of the most pernicious and pressing problems for today’s businesses, and that’s not just true for startups, but for just about any business, large or small, in just about any industry you can think of.”
– Sean Ellis, Hacking Growth
Growth Teams Require Collaboration and Leadership
Hacking growth relies upon you developing a growth team within your business. The authors explain that growth teams consist of inter-department members from your company. Subsequently, growth teams benefit from collaboration in their pursuit of company growth.
Collaboration
The authors provide an example of the software company BitTorrent. As a company, they were performing well but needed to take things to the next level. They only had 50 employees, and they were all working with similar colleagues within traditional departments. Although this approach facilitated initial success, the company’s growth plateaued in 2012. They continued to obtain free customers but were struggling to convince customers to transition towards their paid version. BitTorrent’s growth blew up when a project-marketing manager joined the team and decided to establish a team dedicated to growth. The growth team identified that customers were not upgrading due to insufficient premium-specific marketing. The customers were merely unaware of the premium option. After the growth team’s revelation, BitTorrent started marketing its premium version to the free version users. Subsequently, their premium customer base skyrocketed, and they benefited from a 92 percent increase in revenue.
Leadership
Growth teams have the potential to have a significant impact. However, they rely on strong leadership. Uniting interdisciplinary teams and keeping them on track is challenging. The leader’s role is to identify the target area, set clear goals, and establish a time frame. Hence, prioritization is an essential part of being an effective growth team leader. Finally, the authors explain that leaders also have to keep the growth team motivated and undistracted. For example, highlighting when ideas are not essential for achieving the team’s current goal.
Know Your Customers
“One of the cardinal rules of growth hacking is that you must not move into the high-tempo growth experimentation push until you know your product is must-have, why it’s must-have, and to whom it is a must-have: in other words, what is its core value, to which customers, and why.”
– Sean Ellis, Hacking Growth
The companies that have achieved rapid growth, like Facebook and Amazon, succeeded by providing a must-have product. However, it is impossible to provide a must-have product if you don’t know your customers. Hence, the best way to create a must-have product is to reach out to your customers.
The authors suggest you reach out via something called a ‘must-have survey.’ You just need to ask one multiple-choice question to at least a few hundred customers. This question is:
How disappointed would you be if this product no longer existed tomorrow?
- Very Disappointed
- Somewhat Disappointed
- Not Disappointed
Your product is a must-have if you establish that 40 percent or more of your customers would be ‘very disappointed.’ This milestone suggests you are in a strong position to start utilizing growth hacking techniques. Alternatively, suppose your product does not meet this threshold. In this case, work on improving your product before attempting to hack growth.
Data Helps You Track Your Progress
“You want to track, at a minimum, the metrics for each of the steps users must take to reach the aha moment and how often they are taking those steps.”
– Sean Ellis, Hacking Growth
A great idea is just a great idea. You have to build something that does your idea justice to achieve success. One way to drive traffic to your product once it’s produced is by utilizing metrics. Specifically, the metrics that matter most for generating product growth. The most commonly used metrics for online businesses are web traffic, user acquisition, and returning users. These metrics can generally be applied across all online businesses. However, there will also be metrics that are uniquely relevant to your business. Identifying these core metrics will help you to hone in on the critical data.
The authors suggest asking yourself the following question to identify your core metrics:
Which customer actions can be measured to reveal how positive their experience with your product is?
The answer to this question will be unique to each business. The authors provide Facebook as an example to suggest how metrics can be tailored to a specific business. Facebook’s core metrics are the frequency of user logins, time spent, and the number of interactions. These metrics suggest users are enjoying the product Facebook provides. However, these metrics are also crucial to Facebook’s revenue. Facebook’s revenue relies on selling ad space.
The authors introduce the idea of a North Star as your most important metric. Fundamentally, this metric should measure the core value your product is delivering. This North Star should be used to motivate your teams and improve efficiency. Again, the authors use Facebook as an example by outlining that their North Star would be the number of daily active users.
Growth Hacking Techniques
The authors argue you can significantly improve your team’s efficiency by adopting the four-stage growth hacking cycle. This is the same cycle utilized by the Baylor University football team in 2008. The team had been struggling for several years, but their new head coach, Art Briles, integrated a growth cycle. This growth cycle allowed the team to learn more in less time than other teams. Subsequently, they achieved significant success for the first time in decades.
Stage I – Analyze
The first stage of the growth cycle involves finding and analyzing customer data. The goal of analyzing this data is to gain some customer insight that you didn’t previously have. Again, the authors recommend you ask your team a series of questions that are accompanied by sub-questions. They provide these questions as typical examples:
- How do our customers typically behave?
- What are the characteristics of our best customers?
- What events lead customers to stop using our product?
After establishing these questions, you should then develop surveys and interviews that allow you to collect valuable data related to these questions. You should allocate this work to marketing experts. Finally, after receiving the data, you should analyze it to identify trends and patterns. These trends should be presented during team meetings to make everybody aware of the customers’ patterns. This presentation should then lead to the next stage of the growth hacking process, which is brainstorming.
Stage II – Ideate
“The more information people put into the product, the more their commitment increases, through a concept called stored value.”
– Sean Ellis
The ideate stage involves every member of the growth team developing ideas. These ideas should be related to each individual’s area of expertise. The authors suggest presenting this concept during a meeting. Then, give your team four days to submit as many ideas as they can identify. All proposals made by team members should be passed through the idea pipeline. The idea pipeline is a structured format to log, track, and evaluate all incoming ideas. An idea pipeline often requires each idea to be given a specific short name. Additionally, a description of the idea should be provided that includes both an action and the expected outcome. For example, ‘By rewarding customer loyalty, we’ll increase the number of returning customers by 30 percent.’
Stage III – Prioritize
Every member of your growth team should be involved in prioritizing the ideas provided. The authors suggest a specific scoring system to do this. The ICE scoring system allows team members to prioritize ideas. They prioritize based on impact, confidence, and ease.
Quantified levels of expected growth define the impact. The greater the growth, the greater the impact. Confidence is defined by the team member’s conviction that the idea will succeed. Although this might sound like it is based on intuition, this point should also be supported by data. Finally, ease concerns the amount of time and resources required to test the idea’s feasibility.
Each of the features of ICE should be scored between one and ten. Then, to establish an idea’s ICE score, you should average out the three features. Finally, after establishing the ICE scores for each idea, you should rank them from highest to lowest. The highest-scoring ideas should be immediately shortlisted for further team discussion and testing.
Stage IV – Testing
The testing stage occurs once you have decided which of the highest-scoring ideas should be trialed. After this stage, the ideas which are well-received by customers should be fully implemented. It’s recommended that you work with a data analyst. Come up with strict guidelines so that you produce a reliable set of results. Additionally, rather than using the usual 5 percent margin of error for statistics, the authors suggest using a 1 percent margin. Subsequently, you can be almost certain that your results are accurate.
Create a Message that Resonates
Marketing can be one of the most expensive parts of growing a company. Subsequently, several companies have gone bankrupt on the back of hugely expensive marketing campaigns. The issue is these campaigns do not guarantee success and can often cost more than the value produced. The authors offer alternatives to expensive marketing. Firstly, they suggest you ensure you offer a positive first impression. The first message that your business offers customers is critical. The authors recommend creating a message that communicates information but also has a message. The message should resonate with your customers. Crucially, these messages should be short and sweet.
Designing your company’s message should rely on customer feedback. Then, once you have brainstormed dozens of variations, you should pick a few variations that have the most potential. Perform a simple A/B marketing test. Ask a group of at least one hundred customers to suggest which message is more attractive to them.
Once you have established an effective message, you should consider which marketing channel you use. Limiting the number of marketing channels you use is an effective way of focusing your efforts. Choosing the best marketing channel for your message can be achieved by asking yourself six questions:
- How much will the testing cost?
- How much time will the tests take to set up?
- How much time will it take to collect the results?
- How well will the tests target your desired customers?
- How flexible is the test?
- How many subjects will you be able to test?
As with the ICE model, you should give each category a score out of ten for each marketing channel. Then, average out the score and test the channels with the highest scores.
Keep Customers Loyal Through Customer Habits
Engagement Loops
Businesses that have achieved success with growth hacking will generally incorporate habit formation into their approaches. If you can make your product part of customer habits, you will create a sustainable business model. One way that these businesses tap into customer habits is by offering rewards. The authors call these engagement loops.
The authors suggest Amazon Prime as one of the most successful examples of an engagement loop. The company makes an offer to customers, which involves subscribing to a service. Then, Amazon rewards its customers for accepting this offer. Importantly, though, they also provide an excellent service, so they can keep their customers happy. Hence, these customers will keep coming back for more. In this case, they keep subscribing to Amazon Prime. Amazon’s renewal rate for Amazon Prime is remarkable due to how effectively they have established this engagement loop. Over 90 percent of Prime subscribers renew their membership the following year.
Start Your Own Engagement Loop
To start your own engagement loop, the authors suggest testing different reward strategies. Your customers will value a specific type of reward. However, the most common and often most successful reward programs are social recognition and user achievements. Companies like Yelp use social recognition. Their most active users are given titles like ‘Elite’. As well as gaining social recognition, individuals within these groups are given invitations to select parties and events. Comparatively, user achievements involve congratulating users when they reach a particular milestone. For example, Nike Run Club has congratulatory badges for when you reach set numbers of miles.
Rating
We rate this book 4.4/5.
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