And he didn’t have much time. The competition was fierce. One start-up, Mozy, had a three-year head start, while another, Carbonite, had raised $48M in funding — versus the $1.2M in seed capital raised by Houston. Meanwhile, behemoths Microsoft and Google were gearing up to enter the cloud storage arena. How could Dropbox grow their customer base in the shadow of such formidable competitors?
A full third of Dropbox users came from referrals of current users of the product. That meant word of mouth was strong, even if it wasn’t yet driving growth fast enough.
Then it hit us: What if we could offer people something else they clearly valued highly — more storage space — in exchange for referrals?
Then plan was working, no doubt about it, but we didn’t stop there; determined to make the most of the opportunity, our team worked furiously for weeks to optimize every element of the program, from the messaging, to the specifics of the offer, to the email invites, to the UX and interface elements. Implement a method I call high-tempo testing, we began evaluating the efficacy of our experiments almost in real time.
The team tried all sorts of ideas to grow the user base, all of which proved unsuccessful. That is, until they finally hit upon an untapped-growth gold mine with a brilliant growth hack, which has since become Silicon Valley legend.
At LinkedIn, for example, the growth team has evolved from an initial 15-person unit to comprise 120-plus members, broken down into 5 units dedicated to: network growth; SEO / SEM operations; onboarding; international growth; and engagement and resurrection of users.
So often, too much effort is focused only on acquisition of new users and customers, who then, in so many cases, quickly disengage. Much too much dumb money is spent this way. For every $92 spent on acquiring more Web traffic, only $1 was spent on converting those visitors into actual paying customers.
The team had lots of theories about why many users hadn’t upgraded to the paid, Pro version of the app, but the most frequent response to the question of why a customer hadn’t purchased the paid version took them completely by surprise. Even their most active users hadn’t noticed the attempts to get them to upgrade.
Another way to mitigate conflict is to ensure that the decisions about which growth hacks to prioritize (and the evaluation of how successful they are) are made strictly on the basis of hard data rather than assumptions, or the “lore” that holds sway about how products should be designed or what customers want.
Few things are more effective for squashing conflict and dissent than success.
No amount of marketing and advertising — no matter how clever — can make people love a substandard product. If you haven’t created and identified core value before you make your growth push, you’ll either end up with illusory growth at best or market rejection at worst.
Even founder Jeremy Stoppelman thought the service was of questionable value. Then Stoppelman’s team discovered, by poring through user data, that a surprisingly large number of users were taking advantage of a feature buried almost laughably deep within the site — a feature that allowed users to post reviews of local businesses.
If you’ve determined the product hasn’t made the grade, the first thing to do is to stop yourself from doing something that feels all too natural: guessing at what the elusive feature might be that make your product more appealing to your customers. It’s essential that you instead talk to users to understand what the true objections and barriers are to your product’s success.
Whichever you choose, the most important principle to remember when conducting them is to be dispassionate about your product. The feedback will be worthless if you’ve spent the whole time selling.
One caution about A / B testing tools is that for all their ease of implementation, the data they provide is somewhat limited, because these tools rely on surface-level metrics, such as which button get more clicks, rather than whether the people clicking the button ultimately become lasting users.
These distinctive behaviors and preferences can be hard to uncover, in part because sometimes they are so unexpected; paradoxically, you often don’t know what you’re looking for until you find it. Yelp didn’t know they were looking to tie review activity to repeat use; it was an insight that emerged by sifting through reams of website data.
Pinterest, which in its original incarnation was Tote, was a mobile commerce app, pivoted to relaunch as a discovery and sharing site when Ben saw that Tote users weren’t making purchases as intended, but instead were stockpiling massive collections of things they coveted on the app.
Because getting users to the aha moment is so critical to building up a strong foundation for all further growth, companies often invest a massive amount of time and effort to get this right. One-third of a company’s engineering time goes to getting the new user experience down just right. Facebook, Twitter, and Pinterest even treat these new user experiences as different products from their main product offering.
You must be rigorously scientific in identifying the kind of growth you need and the levers that will drive it. Especially in the early phase of growth, you must set a highly disciplined course for experimentation that focuses intensely on the most important levers to achieve your goals. Speed of testing alone isn’t the goal; scattershot experimentation is a sure way to waste time and effort, and that’s true even if you’re testing at high tempo. Growth hacking is not about throwing ideas against the wall as fast as you can to see what sticks, it’s about applying rapid experimentation to find and then optimize the most promising areas of opportunity.
When you’re gunning for growth, it’s easy to find yourself in the moors, working madly on improving a metric that ultimately doesn’t matter. Picking the right North Star helps to reorient growth efforts to more optimal solutions, because it helps illuminate when the focus of your experiments isn’t producing the results you need.
Just as it’s easy to lose your North Star and find yourself veering onto the moors in pursuit of vanity or irrelevant growth metrics, it’s equally easy to get lost in the weeds of data analysis and lose the sense of urgency to start experimenting with ways to actually drive growth.
The Facebook growth team decided that better data insights were so important that in Jan 2009, they took the dramatic step of stopping all growth experiments and spending one full month on just the job of improving their data tracking, collection, and pooling. “In 2008, we were flying blind when it came to optimizing growth.”
Instead of vague suggestions like “Our sign-up form is too hard; we should make it easier to sign up,” submissions must articulate exactly what change is to be tested, the reasoning behind why that change might improve results, and an explanation of how results should be measured.
Asking your customers to share ideas can also be enormously enlightening, especially your most passionate users. They’re often thrilled to be asked and may have a good deal more experience with actually using your product than (sadly) your team does.
Create a “Wins” email distribution list, so that recipients can get regular updates on which experiments have won, and the impact on the business. Some companies also send an email that list all of the tests run, and shares the results for failed and inconclusive tests as well.
Before Sean and the team at Dropbox implemented the referral program, the company was spending nearly $400 to acquire each new user and the premium subscription price was just $99.
We don’t mind tricking people into seeing content they’ll love. If they don’t love it, they’re not going to share it. Virality is a balance of how good the packaging is and how good the content is. The takeaway is that while finding the right words to appeal to people is vital, offering true value is a necessary ingredient for achieving viral growth.
To be truly viral, the product must have a viral coefficient (or K-factor) of greater than 1. This means that each new user who signs up brings in one or more new people to the product. Yet achieving this degree of virality is extremely rare, and when achieved it’s often for only very brief periods of time.
Make the invite to share an integrated part of the user’s experience, not an add-on.
Your friend Morgan gave you $25 off your first trip on Airbnb, the best way to travel. Be sure to say thanks.
Remember, most “instant successes” have required extensive experimentation, and successful viral loops are no different. The brilliant strategies you’ve read about in this chapter didn’t emerge out of thin air, but rather through a great deal of testing and optimization, which has involved plenty of surprises for growth teams along the way.
98% of traffic to websites does not lead to activation, and most mobile apps lose up to 80% of their users within 3 days.
In growth hacking, it’s crucial that you never assume why users are behaving as they are; rather, you’ve always got to study hard data about their behavior and then query them on the basis of observations you’ve made in order to focus your experimentation efforts most efficiently on changes that will have the greatest potential impact. Even if you think you understand what the barriers to activation are, the true story can be quite surprising.
They were rather shocked to discover that people were saying that they jumped ship because they didn’t understand how to use it. The team had been certain that the app was a breeze to understand and use.
***The key takeaway here is that you cannot know ahead of time which experiments are going to be most effective. The best you can do is stay nimble and data-driven: continuously tailoring experiments according to the discoveries you make and then being ready to quickly adjust and try other approaches if experiments aren’t working as hypothesized.
What’s tricky is that while we certainly notice the friction in the products we use, we often don’t recognize sources of friction in the ones we’ve bene involved in creating or marketing.
The first rule of designing and optimizing your NUX is to treat it as a unique, onetime encounter with your product; as such, you should think of it as a product of its own. This means that you will need to craft a special experience for it, one that entices users to engage with the product and appreciate what it has to offer.
The second rule is that the first landing page of the NUX must accomplish 3 fundamental things: communicate relevance, show the value of the product, and provide a clear call to action.
Once people take an action, no matter how small, as long as the experience wasn’t onerous, they are more inclined to take any action in the future. The explanation for this, he says, is that they have made a form of psychological commitment by taking the action, and people have a bias for honoring commitments with subsequent, follow-on actions, often regardless of the change in size of request.
The most effective reward in a gamified setting come in the form of status, access, power, and stuff (financial incentives or physical gifts).
A great rule of thumb about deploying triggers is that your rationale for getting in touch with the users should be to alert them of an opportunity of clear value to them. For example, the grocery app team could send notifications when an item that a person has saved in their shopping list goes on sale.
Triggers can incorporate the principle of authority by showcasing that influential people, or companies, have taken the action they’re urging users to take, which is, of course, the rationale of celebrity endorsements. Including the logos of well-respected companies that have used a service, or testimonials from respected individuals, can also act as triggers, by reassuring the visitor that people and companies they know and respect have made a similar decision.
This is unfortunate because high retention is generally the deciding factor in achieving strong profitability, for any kind of company. A 5% increase in customer retention rates increases profits by anywhere from 25 to 95%. The flip side is that losing customers comes at great cost. One reason is that, it takes so much money to acquire a new customer.
Amazon is perhaps the gold standard example of retention prowess. 73$ of free Prime free trial subscribers convert to paying subscribers, and 91% of 1st year subscribers renew for a 2nd year.
If you consider the fact that subscribers in Amazon’s Prime program purchase more than twice as much as non-Premium members, it becomes easy to imagine the compounding gains in revenue one can see from high retention rates.
The longer users stay with your product, the more opportunities they’ll have to talk about it and even to show it to friends and others.
Just think about how many new features and services FB has offered since its launch and how many different kinds of notifications and prompts they’ve devised to keep you using the service. The company continually works to improve how engaged and retained its customer base.
Once new users have crossed the threshold of initial retention, they move into the medium retention phase, a period when the interest in a product’s novelty often fades. The core mission for growth teams in retaining users who are in this midterm phase is to make using a product a habit; working to create such a sense of satisfaction from the product or service that over time, users don’t need to be prodded to use it again because they have incorporated the use of the product into their routine.
Prime offers 2 essential, and very compelling, rewards every single time subscribers purchase an item included in the program — meaningful savings in the form of free shipping and instant gratification with 2-day delivery. The program also creates a reward for members when they shop by validating the decision they made to invest in the $99 Prime subscription in the first place. “See, the $99 is so worth it because I’m saving so much.” The fee was never about the $99 dollars. It was really about changing people’s mentality so they wouldn’t shop anywhere else.
But it’s also important to experiment with offering rewards that are not about money or savings, but instead about the experience customers have with your product. And in fact, some of the most habit-forming rewards are the intangible ones.
The Yelp Elite Squad program has been one of the most successful at using this approach to increase retention. By offering special recognition to those who are first to review a business, Yelp confers powerful social benefits that incentivized users to keep coming back to write more reviews.
Coveted by many as the ultimate status symbol, the card is limited in the number of people who have it, shrouded in secrecy about exactly what the benefits are, and comes with loads of perks that make even the wealthiest Amex customers feel special.
FB and IG have made particularly smart use of this dynamic, using mobile notifications to both let users know when their FB friends join IG and also to encourage users to “like” photos posted by those who haven’t added a new picture in a while.
The company went from having one home page to more than 26 variations based on key accounts, time of day visiting the site, business vertical, and more.
The power of “Coming Soon” by revealing that HBO experienced almost no customer churn between the time the show was announced and the 1st episode aired; subscribers were intent on sticking around to see what the fuss around the new show was all about — even if many didn’t end up ultimately watching it. Those captured revenues more than paying for the cost of production.
Companies routinely hurt long-term retention by packing too many features into a product. Firms should consider having a larger number of more specialized products, each with a limited number of features, rather than loading all possible features into one product.
Too many companies set a price and then treat it as if it’s set in stone, when in reality the team should be continually experimenting with it just as they do with other elements of the business.
Companies and marketers can put the power of reciprocity with growth experiments that center around giving before asking for a commitment to purchase.
You can use this principle to drive revenue by asking users to make small commitments up front to lead to larger purchases later on. Amazon uses this principle with their Wish List feature. They know that when you add books or items to your Wish List, you are more likely to buy the item because you have already acknowledged your desire to do so.
Booking.com uses the principle of scarcity to increase revenue exceptionally well. The travel deal site shows deals that you’ve already missed, letting visitors know that these deals wont’ be around forever. They also show how many other people have booked the deals today, how many rooms are left at the hotels, and even how many people are looking at the listing at that moment.
Often, erosion of customer loyalty has been going on for years but the company has failed to perceive it — until it’s too late.
Stalls are also often caused by companies becoming overconfident of having secured a premium position in the marketplace. That is to say, they detect competitive threats but don’t take them seriously enough. This false sense of security tends to lead to a failure to innovate aggressively, making only incremental improvements in existing products rather than pursuing new market opportunities for growth. Even the most vigilant of product teams can be ambushed by breakout companies that introduce a new technology, or applying a new one in an innovative way.
One common growth stall occurs when companies become overreliant on particular channels, which may be losing their effectiveness.
We suspected that the email sign-up form wasn’t as alluring as it could be and hypothesized that even more users might sign up if they were told how popular the newsletter was.
Paid marketing is so easy to implement that it can sometimes weaken the resolve to seek more innovative solutions. In addition, organic growth channels generally take longer to generate results, which can lead teams to deprioritize them in favor of the faster paid channels.
Think of this as the principle of pushing past the plateau of a local maximum. Getting beyond local maximums is essential to continuing to unlock new growth.