What is Growth Hacking? How To Leverage Growth | Fora Financial Blog
What is Growth Hacking? How To Leverage Growth
January 28, 2020

What is Growth Hacking? How To Leverage Growth

Unless you’ve been disconnected from the Internet for the past 15 years, you’ve likely heard of growth hacking. Despite all that’s been written about growth hacking techniques, there’s some confusion surrounding the term. Due to this, it can be hard to understand how you can use growth hacking to your advantage.

To be clear, there’s nothing gimmicky about growth hacking. It’s simply a different way to conduct marketing. The benefits of growth hacking for your business can be transformative. In this post, we’re going to walk you through what growth hacking is and how to use it to your advantage.

What is Growth Hacking?

The easiest way to understand what growth hacking is to think about it relative to traditional marketing. In fact, Sean Ellis, CEO of GrowthHackers.com, invented the term “growth hacking” to describe a different kind of marketing.

He explains that growth hacking is solely about running experiments to drive business growth. Of course, traditional marketers can and do run experiments to drive growth as well.

However, traditional marketers also do many other things. For example, they run campaigns that they measure based on qualitative measures, such as brand awareness.

A growth hacker, on the other hand, always has a specific, quantitative growth goal. In short, growth hackers scrutinize everything they do based on its impact on growth goals.

Also, growth hacking goes beyond the marketing department into all parts of the organization. Therefore, if you tried growth hacking in a tech startup, you’d have marketers, designers, engineers, and salespeople working together towards the common goal of growth.

Dropbox is a classic example of a company that used growth hacking to maximum effect. In their early days, Dropbox was using search engine ads. While they were getting sign-ups, the ads they ran were too expensive to earn ROI.

Due to this, they dropped the ads in favor of a referral program in which users received more storage space in exchange for referring their friends. The result was 3900 percent growth in 13 months.

However, it wasn’t just the referral program concept that did it. Dropbox experimented and iterated all parts of that referral program from their messaging to the onboarding process itself. To do that, engineers, writers, and product designers all had to work together and be open to testing their assumptions.

In short, Dropbox’s team applied the principles of growth hacking to achieve success. You can do the same, even if you don’t own a tech company.

Using Growth Hacking To Your Advantage

Once you understand what growth hacking is, you’ll want to know how to use it to your advantage.

In essence, growth hacking is about always questioning assumptions, testing hypotheses, collaborating organization-wide, and moving forward. As you can see, anyone who is willing can adopt these principles.

Of course, that doesn’t mean growth hacking is easy. To do it right often requires significant cultural change. People must be willing to admit and accept that the way they’re doing things might not be the best approach.

To help prepare you to adopt this approach at your organization, we’ll outline several core tenets of growth hacking.

Start With The Foundation: Does Your Product Matter?

Y Combinator president, Geoff Ralston writes that “growth is not always the right choice.” Coming from the president of a seed fund, this sounds counterintuitive. However, Ralston’s reasoning is based on a core tenet of growth hacking called product-market fit.

Product-market fit is “being in a good market with a product that can satisfy the market.” Without product-market fit, as Ralston explains, the ROI on growth hacking techniques will always be negative. After all, what good is growth if you’re not making profitable sales?

In addition, even if you’re making profitable sales in the short-term, your customers may eventually leave. Gradually, that exodus of customers will weigh on your profits

This is what makes starting with the foundation so important. That’s why you should ask yourself if your product or service matters to people. If it doesn’t, you must pivot, either by targeting a new market, adjusting your product, or both.

Avoid Blanket Targeting of New Hopeful Customers

One of the advantages of growth hacking is that it helps you learn about your prospects and customers. As a result, you can target customers in much more meaningful and effective ways.

To use growth hacking to your advantage, you must avoid blanket targeting. After all, even if you do get responses to untargeted tactics, those responses don’t necessarily mean you’re getting positive ROI.

Growth hacking is about finding customers who are a great fit for your product or service. The better the fit, the more long-term value there is for that customer and your business.

For example, to apply growth hacking to email marketing, you could be more precise in segmenting your email lists. In theory, this would help you get the right messages to the right person at the right time.

Of course, you’ll need to run experiments with various segmentation techniques to get it just right.

Acquiring New Consumers To Your Brand

In traditional marketing, the focus is often skewed too far to lower-funnel prospects. Why this happens is obvious — lower-funnel prospects are closer to being ready to buy.

Marketing managers, in their quest for the “lowest-hanging fruit” target prospects who are already familiar with their brand. There’s nothing wrong with this in itself. However, to leverage growth hacking, you must strike a balance.

The point of growth hacking strategies, of course, is growth. So, if you’re only running branded campaigns or exclusively relying on your email list, you’re not growth hacking. With these tactics, you’re going to hit a ceiling at a certain point.

If you must look to acquire new consumers to your brand by trying new channels and new campaigns. Doing so will require investment and experimentation. It may even hurt profits in the short-term. Yet failing to do so will mean stagnation, which is far worse in the long run.

Make The Opt-In Process Simpler

You might not call it an “opt-in process” but at some point, your prospects decide to become customers. To leverage growth hacking, you must make that transition from prospect to customer seamless.

That might mean strategically using directional signage in your retail store or simplifying your online ordering process. It could also include simplifying the estimating and proposal process.

Whatever the case may be, the process to become a customer of your business must be frictionless.

A simple opt-in process is critical in growth hacking because it’s so costly to attract quality leads. If you’re losing those leads because of a clunky opt-in process ROI—and your business—will suffer.

To leverage this growth hacking concept, reevaluate the process your prospects go through to become customers. Solicit feedback from real customers. Go through the process yourself. Even without the help of a professional, you’ll likely find areas for improvement.

Putting A Focus on Customer Retention

Another problem with traditional marketing is that it tends to skew towards focusing on customer acquisition.

In fact, only 40 percent of companies and 30 percent of agencies focus equally on customer acquisition and retention.

The reason that this is a problem is that retaining customers is five to ten times less expensive than acquiring customers. By ignoring retention and focusing too much on acquisition, the cost of your revenue increases.

Many companies have realized this which has led to the growth of customer success. While you don’t necessarily need a customer success team, you do need to allocate resources to customer success.

That might mean creating helpful content that makes it easier for customers to work with you. It could also mean creating periodic check-ins with your customers to ensure they’re getting the most out of their relationship with your business.

Less Targeting Revenue, More Targeting ROI

In the Dropbox example referenced earlier, the team started with search engine ads. Those ads had actually increased revenue for the company. Yet they still decided to stop running them.

The reason? The ads were generating revenue, but not ROI. The revenue from the sales that the ads generated were a fraction of the cost of the ads themselves. Each sale was slowly draining the company’s resources.

As you can see, targeting revenue isn’t a recipe for long-term success. However, many traditional marketing efforts are deemed successful when they generate revenue, regardless of their cost.

Growth hacking helps you combat this measurement mistake by focusing on ROI rather than revenue. As simple as this sounds, the difficulty comes in breaking down the silos that cause this problem in the first place.

So to leverage growth hacking, ensure that your teams understand the full costs of their tactics.

Referrals Make The World Go ‘Round

If you’ve been in business for any amount of time, you already know just how powerful referrals are. Yet traditional marketers don’t always strategize with referrals in mind.

To leverage growth hacking strategies properly, referrals must be a core part of your approach. There are two reasons for this:

  1. Referrals can be one of the most cost-effective lead generation sources.
  2. Referrals tend to produce the best, most valuable customers.

As you’ll see, these two reasons go hand in hand. By “best” customers, we’re talking about customers that generate the most long-term value for your customers.

Since referrals tend to create long-term, valuable relationships, it’s okay if those referrals cost more to generate. As you learned, with growth hacking, you’re targeting ROI — not revenue. Therefore the higher cost of acquisition is fine so long as it’s resulting in enough value to offset the cost.

Never Forget Continuous Improvement

If there’s one principle to take away from growth hacking, it’s continuous improvement. When you’re doing growth hacking right, continuous improvement ingrains itself in your organization.

When that happens, all areas of your business start to march towards what all entrepreneurs want, sustainable growth.

However, as simple as it sounds, continually improving is deceptively difficult. You have to question your own methods, test your assumptions, and be willing to prove yourself wrong. Your employees and partners have to as well.

With the internal politics of even a relatively small business, ingraining continuous improvement into the culture takes work. Growth hacking is a big change for many people.

Due to this, don’t expect it to be perfect overnight—or even in a year. Instead, apply the concept of continuous improvement where you can. As you do, your business partners and employees will start to see the results and buy in.

Growth Hacking: More Than Just A Buzzword

There’s a lot of unsubstantiated hype around the idea of growth hacking. Yet when you look deeper—at the principles behind growth hacking—it’s clearly more than a buzzword.

To be sure, you don’t have to implement every growth hacking technique under the sun to be successful. However, by phasing in the core tenets—including continuous improvements, experimentation, and measurement—you can make growth hacking work for you.

If you’re having trouble getting your team to buy in, share this post with them. Then sign up for our email newsletter updates for more insights on small business topics.


Fora Financial

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