Hacking Growth by Sean Ellis and Morgan Brown: Summary and Notes
“Growth hacking cultivates the maximization of big data through collaboration and information sharing.”
Rating: 8/10
Related Books: Traction, Zero to One, Growth Hacking, Hooked, Blitzscaling
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Table of Contents
Hacking Growth: Short Summary
Hacking Growth by Sean Ellis and Morgan Brown teaches you how to continuously grow your start-up. The authors share hundreds of tips that have proved worthwhile for some of the most successful start-ups of all times such as Facebook and Evernote. A very informative book on start-up growth.
Part I: The Method
Building Growth Teams
A Growth team refers to the team that’s responsible for growing a company’s revenue and acquiring new customers.
Members of a growth team have cross-functional expertise. They come from marketing, product design, and data analysis. These groups of people compliment each other and they may be as few as 4. In huge companies such as Facebook, growth teams work on different aspects of the product but in smaller companies, a growth team is often more focused on specific aspects of the product or service.
Every growth team has to have a leader who actively participates in idea generation and experimentation. One of the key responsibilities for the growth lead is to choose core focus areas and objectives. They also must ensure that the metrics that the team has chosen to measure and work to improve are appropriate to the growth goals established.
There are mainly two types of organizational arrangements for growth teams:
- Product-led (functional) models that report to a product manager
- A stand-alone team that reports to the leader of the growth team
Determining If The Product Is A Must-Have
Creating a must-have product is the baseline requirement for rapid and sustainable growth. The cardinal rule for high-tempo growth experimentation is to have a must-have product first and then push it to customers.
The aha moment: “the moment when the utility of a product really clicks for the customer”
When you discover the aha moment, that’s when you initiate the high-tempo growth phase.
To know whether a product has made it to a must-have category, create a survey asking the following question: How disappointed would you be if the product no longer existed tomorrow?
If at least 40% of the respondents answered very disappointed, then it is a must-have.
Another measure that can be used to tell whether a product has reached a must-have status is the retention rate. When the retention rate is stable over time, then the company can push for more growth.
“Achieving stable retention should not be viewed as a benchmark that once passed can be assumed has been accomplished and that the team is done with; teams must expect to continue to work on sustaining retention.”
Identifying Your Growth Levers
Without a well-focused effort to vigorously drive growth, even truly great products that are loved by an early group of adopters will fail.
Growth hacking is a process of continuous experimentation as this ensures that those hacks are achieving desired results.
When the startup is young, the experimentation should be more aggressive.
“The first step in determining your growth strategy and figuring out where to focus is to understand which metrics matter most for your product’s growth.”
To determine your essential metrics, find the action that correlates most directly with users experiencing the core value of your product or service.
“To hone your growth equation and narrow your focus, it’s best to choose one, key metric of ultimate success that all growth activity is geared toward. This is hugely helpful in keeping teams focused on the most productive use of their time and avoiding the wasting of resources that generally results from haphazard, scattershot approaches to growth experiments.
Testing At High Tempo
“Learning more by learning faster is also the goal—and the great benefit—of the high-tempo growth hacking process. The companies that grow the fastest are the ones that learn the fastest”
Success in growth hacking comes from a series of small wins that compound over time with every bit of learning leading to better learning and better ideas to test.
For example:
A 5% improvement in conversation rate every month leads to 80% improvement in a year.
The hacking process has the following steps:
- Analyze
- Ideate
- Prioritize
- Test
At the analysis phase, things to look out for include what features customers use, what screens they use to visit the app, how often they open the app, and what other apps they use.
At the ideat stage, members need to submit as many ideas as possible. Self-censorship should be discouraged and any idea should be entertained.
“Ideas should be submitted to an idea pipeline, following a templated format by which they should be submitted. It’s important to standardize the format so that ideas can be quickly evaluated, without the team needing to ask lots of questions.”
Prioritizing means scoring ideas. Ideas are ranked against each other and a decision made on which ideas to pursue and which not to.
At the last stage, testing is done with the goal of identifying which ideas have practical value.
PART II: The Growth Hacking Playbook
Hacking Acquisition
Getting new customers should not cost you more than you stand to make by acquiring them. By applying the growth hacking process, you will know the most cost-effective way of acquiring new customers.
“Once you’ve put together your growth team, determined your key growth levers, and done sufficient testing to establish that your product is a must-have, you’re ready to start hacking the first stage of the growth funnel: acquiring customers.”
The first message a potential customer sees about your product must tell them what they hope to gain.
The smallest changes in language can have the most outsize impact in bringing new customers. So start small.
“So as you plan your first hacks to test, start with language, and then go from there.”
There are two ways to discover which marketing channels bring the most customers: discovery and optimization.
You can rank channels based on the following six factors:
- Cost. How much do you expect to expand on a particular channel compared to others?
- Targeting. How easy is it to reach your intended audience?
- Control. How likely is it for you to change an experiment that’s running?
- Input time. How much time will it take to launch the experiment?
- Output time. How long will it take to get results from the experiment?
- Scale. How large an audience can you reach with the experiment?
Hacking Activation
“Improving activation is at its core about increasing the rate at which you get new users to your aha moment. The more visitors who experience what makes your product a must-have, the more of them will stick with you.”
The first step in hacking activation is to identify all the steps that a customer makes to get the aha moment. Any of the steps might need improvement.
“Once you’ve identified the steps that lead up to the aha moment, the next step toward homing in on stumbling blocks for customers and figuring out what’s causing them to flee is to calculate the conversion rates for each of the steps on the way to the aha moment, or, in other words, the percentage of all visitors who are taking each of those steps along the path to success.”
The goal of the growth team is to identify problems in the activation process and eliminate friction. In the design world, friction refers to any annoying hindrances that prevent a potential customer from completing the action they are trying to complete.
Desire – Friction = Conversion Rate
Ways of reducing friction include simplifying the sign-up process or allowing users to start enjoying a product before signing them up.
“The more information people put into the product, the more their commitment increases, through a concept called stored value.”
Another way to increase conversion rates is to use a strategy called gamification. It involves offering rewards to customers for taking certain actions.
For example:
Photoshop was able to increase conversion rates by launching LevelUp for Photoshop which turned boring tutorials into missions that Photoshop users had to complete.
Triggers are some of the most useful hacking activation tools. Triggers should only be used to alert users of an opportunity of clear value to them.
Hacking Retention
The purpose of a business is to create and keep a customer. High retention is the secret to great profitability.
“It should go without saying that the longer you retain customers, the more opportunity you have to earn more revenue from them, whether that’s from selling them more items or services, from ongoing subscription renewals, or from bringing in more advertising revenue due to advertisers wanting to target your large and loyal customer base.”
The main strategy of retaining customers is to provide a product or a service that is of high quality and that continuously addresses a need of theirs.
Some of the reasons why businesses lose customers include the emergence of a competitor and poor communication on the part of the business.
Retention has three phases:
- The initial retention period. This the period in which a new user becomes convinced that using a product or a service is beneficial to them
- The medium retention period. At this stage, the interest in a product novelty fades. At this stage, the mission of the growth team is to make using the product a habit
- The long-term retention. The role of growth teams at this stage is to ensure that the product keeps offering more values to customers
One of the best ways to study retention phases is to do what’s called cohort analysis. This involves breaking up users into different groups depending on when they signed up when they bought the app, and so on.
Once analyzed, the data can then be used to identify drop-off points in retention. Surveys can then be deployed to identify the reasons for the defections.
Hacking Monetization
Products are created so that they can be monetized. So the goal of everything including retention and growth is to find ways to earn more money.
The ideal situation is to increase the lifetime value of a customer (LTV). Different business models have different ways of increasing LTV.
For example:
Retailers are concerned with making sure that their customers buy more of what they sell. While a SaaS company might be more concerned with getting customers to renew their subscriptions.
“One of the many ways of hacking monetization is by mapping the entire customer journey and finding areas where there is potential to earn revenue. The mapping can also help identify pinch points or where potential earnings are lost. Growth teams should also again make use of surveys and find out directly from customers what improvements in the product, such as possible new features, new plan levels, or perhaps improved selection of items for sale, each of your key customer segments would most like to see.”
Other monetization strategies include optimizing pricing and service and product personalization.
A Virtuous Growth Cycle
There are many threats to long-term success and the greatest of them all is complacency.
For example:
After being acquired by Microsoft, Skype failed to continue to innovate, and as a result, lost ground to the likes of Zoom.
Growth stalls can also happen when companies lose focus on their core products and services. To keep growing, growth teams need to keep innovating, experimenting, and trying new things.
