Market like a Pirate: Growth hacking beyond the hype

This blogpost is based on a talk on growth hacking that I gave at Royal Bank of Scotland and NatWest.

In 2015, we had over 600,000 startups launch in the UK, that to me is absolutely amazing. It demonstrates how entrepreneurial we are in this country. But on the flip side, according to statistics, 90% of these startups will unfortunately fail in 2 years. That is a pretty high number whichever way you look at it.

So why do startups fail at this rate? The top 2 reasons are because they either have a product/service that doesn’t really have a big enough market and/or they run out of cash before they attain sizeable growth. Product/market fit is the first step to success for any business and that would probably require a whole blogpost on it’s own. This blogpost however focuses on achieving growth before running out of cash.

Achieving growth requires raising awareness of the product or service. Traditionally, the best way to do this has been to spend large amounts of money on marketing. The problem with that is everyone is doing the exact same thing and us consumers are bombarded with ads left, right and centre; both online and offline. The battle for attention is huge. A startup does not have the resource, time or money to invest in this sort of battle.

So how did startups like Facebook, Uber, AirBnB, Spotify etc succeed? They expanded the definition of marketing. They utilised “growth hacking”.

Growth hacking combines the skills of a marketer with that of coder and analyst to come up with creative technical solutions to solve the problem of distribution. Growth hacking doesn’t require the huge budgets generally associated with marketing.

According to Sean Ellis, the person who coined the term, Growth Hacking is not anti-marketing, it is the evolution of marketing, it is pro-growth. In traditional marketing, growth depends on the budget you have spare but in growth hacking it is growth first, budget second.

Let’s temporarily move away from the world of growth hacking to the world of cycling. Sir Dave Brailsford became the performance director of British Cycling in 2003 and at the 2004 Olympic games Great Britain won 2 gold medals their best performance since 1908. They continued on from that performance to dominate the world of cycling for the next decade including winning 70% of the cycling gold medals at the 2012 Olympics. Brailsford believed in a concept that he referred to as the “aggregation of marginal gains.” He explained that “Small improvements in a number of different aspects of what we can do can have a huge impact to the overall performance of the team”

They started by optimizing the things you might expect: the nutrition of riders, their weekly training program, the ergonomics of the bike seat, and the weight of the tires. But Brailsford and his team didn’t stop there. They searched for 1 percent improvements in tiny areas that were overlooked by almost everyone else: discovering the pillow that offered the best sleep and taking it with them to hotels, testing for the most effective type of massage gel, and teaching riders the best way to wash their hands to avoid infection. They searched for 1 percent improvements everywhere.

So what does this have to do with growth hacking? There is no big idea or silver bullet in growth hacking. Significant growth is delivered through an aggregation of gains through growth hacks across the whole customer journey.

Traditional marketing has a huge focus on acquisition. Growth Hacking uses what we call the “pirate” framework (AARRR!)and gets the marketer to focus on the entire funnel.

• Acquisition – How do users find us?
• Activation – Do users have a great first experience and how do you convert them?
• Retention – Do users come back?
• Revenue – How do you make money?
• Referral – Do users tell others?

In traditional marketing, you generally have a marketing plan set at the start of the year and you work through it. In startup land things change all the time and you don’t really know what works and what doesn’t. So Growth hacking can also be thought of as an experiments based marketing. It is a process of ideation, execution, analysis, learn and repeat. This process is repeated over and over again and a successful experiment that leads to growth is called a growth hack.

Now let’s look at a few practical examples of growth hacking across the pirate framework:

Acquisition

1. Hook early adopters: Uber
   Uber started off their astronomical growth by giving free rides at tech conferences in San Francisco. Techies tend to be early adopters, early adopters are people like geeks like me who love to be the first to try out new products and services. They are great at sharing awareness of new products/services through their networks if they really like it. There are quite a few early adopter communities online where startups can have their product or service listed. ProductHunt, BetaList, HackerNews to name a few…
2. Backlinks: Hotmail, Apple, Olark
   Probably the most famous growth hack is Hotmail automatically adding a signature on to emails sent through it – “Get your private, free email from MSN Hotmail”. The product quite literally promoted itself anytime someone sent an email. This growth hack has been copied numerous times, more recently when Apple launched their iPhone adding the “sent from my iPhone” signature to email sent using an iPhone. Backlinks are also popular on widgets to drive traffic back to the widget developer’s site.
3. Leverage bigger brands: World First
   Having lead the digital team at World First which is a high growth company, there are numerous examples I could probably give of how World First consistently beat their own stretch targets for growth. One that is highly effective is capitalising on the customer base of bigger brands and to do that the World First site is built in such a way that it could be whitelabeled fairly easily and also has APIs available that third party partners could hook in to their own systems.
4. Side project marketing: Hubspot, Crew
   Sideprojects are about building something of value for customers that isn’t your core proposition but solves customer painpoints. Google famously encourages it’s employees to spend 20% of their time working on sideprojects. Companies like Hubspot and Crew have created useful free services such as Website grader and Unsplash that drive significant traffic and leads to their main propositions.

Activation

5. Involvement device: World First, Nutmeg
   
   Back in the days of direct mail, marketers were able to double or even quadruple responses to their marketing campaign by including a visual device in their mailings. The core aim of these devices were to get you to interact or get involved with the mailing. This has transcended to the digital world too; you are more likely to get conversions if you have some sort of involvement device on the landing page. At World First, we had a currency converter; Nutmeg allows you to demo their dashboard even before you register.
6. Exit intent: World First
   
   Don’t you hate those annoying promotional popups that appear on some sites when you try to move towards the back or exit button. These are known as exit intent popups. But a great way to implement them is on signup forms to capture feedback as to why users have gone all the way to sign up but decided to leave. This helps to capture useful qualitative insights that could be used to improve the signup forms. World First do this really well.

Retention

All growth begins with retention, acquiring customers is easy but if you can’t retain them then you don’t grow. It costs 5 times more to acquire customers than to retain one

7. The Aha! Moment: Twitter
   
   An interesting way to retain customers is to find your products’ Aha! Moment. It is the moment at which customers find value in your product and getting them to this moment as fast as possible helps with increasing the chances significantly of them returning.
   
   Twitter’s Aha Moment is to get users to follow 30 people and be followed back by a certain number. They helped speed up users getting to that moment by getting users to follow other people as part of the onboarding process.
8. Event-based notification: Mondo
   
   Showing people the events that interest them, via email or push notification, is a powerful way to hook people back in to using your product/service. Mondo do a great job at this, even if I don’t open the Mondo app it reminds me that it is running in the background. But make sure you’re tracking and monitoring these notifications, and after X amount in a row not getting opened, it may be time to reduce the frequency or play with the content.

Revenue

9. Bandwagon effect: Crazy Egg, Amazon
   
   Humans have a cognitive bias towards following the herd, i.e, the bandwagon effect. Price plan pages could make great use of this by highlighting the “Most popular” plan like how Crazy Egg do or get really personalised like Amazon with their data based personal recommendations.
10. Fear of Missing out (FoMo): Ticketmaster, Booking.com
    
    Another cognitive bias is the fear of missing out. TicketMasters capitalise on this using a timer/countdown to encourage its users to purchase tickets quicker. Booking.com utilise a limited availability tactic to speed up bookings.

Referral

11. Double-sided incentive: Dropbox
    
    Dropbox is the most popular example of this, they were spending over $300 on acquiring customers who were paying $99 yearly membership fees. Clearly not a great business model, so they decided to implement a referral system where the both the person referring and the person being referred received 250MB of free space. Registrations went through the roof and the cost of acquiring customers dropped significantly.
12. The Waiting list/ Viral signup form: Mailbox, Mondo
    
    This is probably my most favourite hack, it uses 3 psychological principles, the first is the bandwagon effect – looking at large numbers of people ahead of you in the queue makes you feel that you have made the right choice, the 2^nd principle is that people hate waiting and are more willing to invite friends to move up the queue faster, it then further gamifies the experience by telling you how many people are behind you which invokes your competitive spirit. Both Mailbox and more recently Mondo have implemented this hack quite successfully.

Key takeaways from this blogpost are:

1. Growth doesn’t always require huge marketing budgets
2. Growth hacking combines creative marketing with engineering and is data informed
3. There is no silver bullet to growth
4. Growth is achieved through an aggregation of gains across the pirate framework
5. Ideate, execute, learn, repeat….