Every product team loves seeing the numbers go up and to the right. But how do you actually grow a product?
Last year, I was lucky enough to take the Reforge Growth Series, an 8 week course taught by Brian Balfour and Andrew Chen. I’m certainly no expert, but I wanted to share a few basic lessons that I think any product team can use to grow their product.
Growth comes after product market fit
This may sound obvious, but you shouldn’t grow a product that doesn’t solve a real customer problem. If a startup is trying to hire you as their first growth PM, check to see if their product has good retention and strong word of mouth. This is because:
Growth is about getting users to experience the product’s core value (the magic moment) as quickly and frequently as possible.
Pursuing this goal requires discipline. As a growth PM, you need to understand not just the core value of your product but also the levers that you can pull to help more users experience that core value. You need to be so disciplined that the first thing you should learn is accounting.
Accounting for user growth
Suppose you have job offers from two startups and both show the same growth in monthly active users (MAU). Which one should you join?
Your first step should be to use the growth accounting formula to break up each startup’s MAU curve:
Change in MAU = New + reactivated – churned
This formula states that the monthly change in users is the sum of new users acquired and inactive users that were reactivated minus active users that have churned.
Even if both companies have the same MAU curve, their growth accounting graphs could look very different:
In this example, company A is rapidly acquiring new users but churning them just as fast. Company B isn’t adding a lot of new users but is retaining most of the people that they do acquire.
Without knowing anything else, I would join company B because it has better user retention. Growing B involves scaling user acquisition while keeping a close eye on retention. Growing A could be much harder — you would need to understand why the churn rate is so high and where the new users are coming from. For example, company A’s new users might be coming from a paid ad campaign that’s creating a hole in their finances.
Growth accounting gives you a sense of whether a company or product’s growth is sustainable. But to understand what levers you can pull to drive more growth, you need to look at loops.
Why loops and not funnels?
Most people think of growth as optimizing funnels (e.g. acquisition, activation, retention, referrals) but funnels have several drawbacks:
- When orgs are isolated into funnels (e.g. acquisition PM, retention PM) no one is thinking about the whole picture. For example, if acquisition is bringing in low quality leads, retention could tank.
- Funnels don’t emphasize building sustainable growth engines. They focus your attention on getting to that next active user instead of on how that active user can bring in more people.
Instead of funnels, think of growth as building loops. There are two types of loops:
Retention loops drive reactivated and churned users.
Acquisition loops drive new users.
Retention loops help deliver the core product value as frequently as possible. These loops have four components:
- Trigger: The cue that inspires action. Triggers can be external (e.g. Jane just tagged you in 5 photos) or internal (e.g. I’m bored and want to check out my Instagram feed).
- Channel: How the trigger is delivered. Channels could include e-mail, mobile push, in product, paid media, snail mail, and more.
- Reward: The dopamine hit that a user receives for responding to the trigger. Rewards are strongest when they’re variable (e.g. you never know how many likes you’ll get for your Instagram post).
- Action: The action that the user takes to get the reward.
A simple retention loop is receiving a comment on a social media post:
- Trigger: Jane, a friend of a friend, comments on your post.
- Channel: Instagram sends you an on-site notification that Jane has commented.
- Reward: You get a dopamine hit that someone cared enough to comment.
- Action: You respond to the comment, add Jane to your network, or publish a new post. All of these actions drive new loops.
Acquisition loops convert new users to active users and then encourages them to bring in even more users. An active user should be someone who has experienced your core product value at least once. If you have a video app for example, an active user is someone that has watched a video, not someone that has logged in to your app.
There are five main types of acquisition loops:
A simple acquisition loop is content and SEO (search engine optimization):
- A user publishes an article on LinkedIn.
- The article gets indexed by Google.
- Someone searches on Google and reads the article.
- That person is prompted to sign in and create more content.
Ideally, a product will have a few acquisition loops that it can rely on. Relying too much on one loop is risky, especially if that loop is likely to change. For example, if 80% of views for this blog post came from Medium’s homepage, a change in how Medium ranks articles (e.g. prioritizing paid posts) could significantly hurt this post’s overall views.
Give your users a magical onboarding experience
A critical step in every acquisition loop is new user onboarding. Your goal should be to get a new user to experience the product’s core value as quickly as possible. New users who haven’t experienced your product’s core value aren’t really motivated so every unnecessary step that you add to the onboarding flow could lead 50% or more people dropping out. In fact, the onboarding flow itself can be a magic moment. Most products have terrible user onboarding, so you can really differentiate your product by building an unforgettable first time user experience.
The ethics around growth
Growth teams are usually more metrics focused than any other team in the company. But as I mentioned before, it’s easy to become so metrics obsessed that you lose sight of the customer. For example, recently I discovered that a messaging app I used often didn’t have a sign out button. Yes, preventing users from signing out might increase messages or some other core metric, but it could also erode user trust. Just because trust is harder to measure for this quarter doesn’t mean that it’s not important.