Chapter 10: Grow Flashcards
What does the term “Sustainable Growth” mean?
New customers come from the actions of past customers
What are the 4 primary ways to drive sustainable growth?
Word of Mouth: Customer tells others in a good way about your product leading to more sales.
As a side effect of product usage: It is the product when they are used is exposed to others to encourage them to buy it.
For example, when somebody drives a luxury car you might want that car too.
Or when somebody sends you money on PayPal you immediately are exposed to the product.
Through funded advertising: For this to be a sustainable source of growth, it must be paid through revenue and not investment capital. It must also getting paid back (The profit of a customer is higher than the money spent on the advertising)
Through repeat purchase or use: This is a product that customers will buy over and over again. Like Netflix is a subscription and how you always buy the same fruit in your local store.
Should you only use one engine of growth?
No, often your business ends up using more than one engine of growth but it’s likely that one will be more dominant.
How is the sticky engine of growth supposed to work?
It is made so customers stick around as long as possible. (They use the product repeatably)
What business/types could be a good place to use the sticky engine of growth?
Social Media (Facebook, Instagram Etc.)
Marketplaces like uber
Amazon: Customers keep coming back to buy more/sell more
Subscriptions like Netflix.
Metrics to care about with the sticky engine of growth
The churn rate is a key metric to care about. (This is failed customer to stay engaged in a given time period.)
Growth rate - Churn (For example you might get 50% new customers but you loose 30% to churn)
Engagement: Can be deffined as loggins pr. week for example.
AVOID total numbers of signups. This will always increase, but if you gain 20% and loose 30% you will not see this.
How to improve the sticky engine of growth
Improve the product for existing customers and make it more engaging.
Send reminders about speciality and special promotions
For users who have left, create reminders and encourage them to return. (Netlix offers discount to return after you have left.)
How not to improve the sticky engine of growth
Don’t invest in marketing and sales early on. Instead, you should fix the leaks where customers are leaving.
It will be very expensive to pour more water into the product, which will leads to zero growth eventually.
How is the Viral Engine of Growth supposed to work?
The viral engine is supposed to spread like a disease between customers.
1 customer may invite 2 customers, and these 2 customers get another 4 in total, and like that it just spread like a disease.
A famous example of this is Hotmail which added a line to every mail sent with it “PS. Get your free email at Hotmail”
Paypal let you send money to people without paypal accounts and then send them an email with: “John send you 20 dollars. Whos not going to signup to get your money?”
How is the Viral Engine of Growth supposed to work?
The viral engine is supposed to spread like a disease between customers.
1 customer may invite 2 customers, and these 2 customers get another 4 in total, and like that it just spread like a disease.
A famous example of this is Hotmail which added a line to every mail sent with it “PS. Get your free email at Hotmail”
Paypal let you send money to people without paypal accounts and then send them an email with: “John send you 20 dollars. Whos not going to signup to get your money?”
How is the Viral Engine of Growth supposed to work?
The viral engine is supposed to spread like a disease between customers.
1 customer may invite 2 customers, and these 2 customers get another 4 in total, and like that it just spread like a disease.
A famous example of this is Hotmail which added a line to every mail sent with it “PS. Get your free email at Hotmail”
Paypal let you send money to people without paypal accounts and then send them an email with: “John send you 20 dollars. Whos not going to signup to get your money?”
Metrics to care about with the Viral Engine of Growth
The Viral coefficient (How many new customers on average gets onboard)
A viral coefficient is viral when it is about 1. Check the graph in the book or in Shortform.
How to improve the Viral Engine of Growth
Add more options and more ways for a customer to invite their friends.
Dropbox gave more space for each person referred to
Linkedin sends mails to people you have on mail that they should join.
Increase the signup rates from invites.
This is something you can experiment with and improve
Inspiration is found on SHortform
How not to improve the Viral Engine of Growth
Do not add more users if your process isn’t viral
The exception here is that you can do this if it takes a critical mass to jumpstart this. However, this is rare so be careful.
How is the Paid Engine of Growth supposed to work?
This is a relatively straightforward Engine of Growth.
You gain customers through ads and Sales.
Customers need on average to spend more money than it costs you to acquire that customer.
