The second part of the 3-part series is here! Check out Part 1 →
In this post we dive deeper into growth. I cover three frameworks that I use often to understand growth better.
Try the Bullseye Framework exercise
You probably won't have a bunch of equally good distribution strategies. Engineers frequently fall victim to this because they do not understand distribution. Since they don't know what works, and haven't thought about it, they try some sales, BD, advertising, and viral marketing - everything but the kitchen sink.
That is a really bad idea. It is very likely that one channel is optimal. Most businesses actually get zero distribution channels to work. Poor distribution - not product - is the number one cause of failure. If you can get even a single distribution channel to work, you have great business. If you try for several but don't nail one, you're finished. So it's worth thinking really hard about finding the single best distribution channel.
In their book Traction - A Startup Guide to Getting Customers, G. Weinberg and J. Mares talk about 19 different customer acquisition channels in startups.
Here's the list:
- Viral Marketing
- Search Engine Marketing
- Search Engine Optimization
- Content Marketing
- Community Building
- Targeting Blogs
- Engineering as Marketing
- Email Marketing
- Existing Platforms
- Social and Display Ads
- Public Relations
- Unconventional PR
- Sales
- Business Development
- Speaking Engagements
- Offline Advertising
- Offline Events
- Affiliate Programs
- Trade Shows
You have the 19 channels now. What do you do? Use the Bullseye framework to brainstorm, rank, prioritize, test and choose 1-2 main channels to double down.
The Bullseye Framework
Here's how you can start using it now:
1. Brainstorm. Come up with ways you might use each channel for your startup. Do not dismiss any channel in this step. Think of at least one idea for every channel.
2. Rank. This step helps you organize your brainstorming efforts. Place each channel into one of three columns (Highest Potential, Possibilities, Long-shots), with each column representing a concentric circle in the Bullseye.
3. Prioritize. Identify your highest potential inner circle-the two channels that seem most promising.
4. Test. The goal of this step is to find out which of the channels in your inner circle is worth focusing on. Make that decision based on results from a series of relatively cheap tests. These tests should answer basic questions such as: How much does acquiring one customer cost? How many customers are available through this channel?
5. Focus. Wring every bit of traction out of the traction channel. Continually experiment to find out exactly how to optimize growth in your chosen channel. As you dive deeper into it, you may uncover effective tactics. Do everything you can to scale them until they are no longer effective due to saturation or rising costs.
Know Andy Johns' Growth Equation
Andy Johns, VP of Growth at Wealthfront who previously worked on growing products at Facebook, Twitter and Quora suggests that the growth head must figure out the startup's growth equation and the core levers that result in sustainable growth.
Growth = Top of Funnel × Magic Moment × Core Product Value
In addition to talking about what a growth leader should do, he also talks about how various levers like Top of the Funnel, Magic Moment and Core Product Value play their roles in ensuring sustainable growth.
Here's a quick introduction to these core levers:
Top of the Funnel
In looking for a robust top of the funnel, you need to figure out: can the product capture traffic and convert it at an increasingly higher rate into some meaningful type of usage? This is a more tactical variable and the least important parameter in the equation.
The basic sub-equation of the top of funnel involves all the factors that are essential for the product's conversion.
Magic Moment
This is the user's emotional response when interacting with the product. It is also called the AHA moment - the moment when your product value proposition becomes clear to your user. Ideally, it strikes early and often in the product experience.
Core Product Value
This lever involves your market size, the legitimacy of the problem you solve and how right you were with your product/market fit hypothesis. For products that get the "magic moment" and "core product value" right, the top of the funnel naturally and rapidly fills and you just need to remove friction where it exists.
Learn about Viral Loops
Viral loops are loops through which your users and customers bring you new users and customers, without you having to advertise or market to those new users. The loop is a combination of the speed and effectiveness of your users going through a three-step process:
- The user finds or starts using your product
- The user tells their friends about it, or invites them to use it
- New users begin using your product, and the process repeats
The "Viral Coefficient"
This coefficient measures how many other users you can expect one new user to bring. For example, a viral coefficient of 1 means that each new user will bring on 1 additional user, and that additional user will bring another user...
To calculate the viral coefficient, take your startup mechanism and assess how well it converts for your average user. For example, say you give users an invitation link to the product that they can send to their friends. You can measure the viral coefficient for your invitation links by tracking the number of sent invitation links, and dividing that by the number of people who join from these invitation links.
Example: Let's say last week 100 users sent out 500 invitations, and 163 new users joined from invitations. Your signup conversion ratio is 163/500 or .326, and your rate of referral is 500/100, so 5. Multiply the two together (5 × .326) and you get 1.63, your viral coefficient.
How do you boost this?
You can focus either on the conversion percentage (how many sign up from invitations), or on the rate of referral (how many invitations a given user sends out).
Inspiration from Andrew Chen.
Don't forget to take a look at the 5 best articles to understand more about Viral growth →
Quick recap
This post gives you an introduction to three basic frameworks you can use to grow your startup. I suggest you try the Bullseye Framework with your team, try building growth models for a fictitious startup using Andy Johns' growth model and play around with viral loops using Excel.