Hacking Growth by Sean Ellis: Summary & Notes

Rated: 8/10

Available at: Amazon

ISBN: 045149721X

Related: To Sell is Human, The 1-Page Marketing Plan

Summary

Invaluable for those new to growth, and even those who are experience will find value.

Gives an overview of the whole growth process across acquisition, activation, retention, and more, and clearly instills the growth mindset. Supports the lessons with lots of examples from real companies too.

Recommended for founders, marketers, product managers and anyone related to growth.

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Notes

Introduction

  • Companies with >40% of customers who say they would be “very disappointed” if the product disappeared have high growth potential.
  • Most growth is due to an accumulation of small wins.
  • Growth hacking is a team effort, and the biggest successes often come from cross-functional teams (data analytics, programming and marketing).
  • Growth teams should work on acquisition, activation, retention and monetization.

Part I: The Method

Chapter One: Building Growth Teams

  • Growth teams should bring together staff who have a deep understanding of the strategy and business goals, those with the expertise to conduct data analysis, and those with the engineering chops to implement changes in the design, functionality, or marketing of the product and program experiments to test those changes.
  • Growth teams can be as small as four or five members or as large as one hundred or more.
  • Growth teams should have:
  • Growth lead
  • Product manager
  • Software engineers
  • Marketing specialists
  • Data analysts
  • Product designers
  • At start-ups and small established companies, a growth team might comprise only one staff member in each of the abovementioned areas, or even just a few people, each of whom takes charge of more than one of these roles.

The How

  • The process is a continuous cycle comprising four key steps:
  • (1) data analysis and insight gathering;
  • (2) idea generation;
  • (3) experiment prioritization; and
  • (4) running the experiments, and
  • then circles back to the analyze step to review results and decide the next steps.

Chapter Two: Determining If Your Product is a Must-Have

  • You must not move into the high-tempo growth experimentation push until you know your product is must-have, why it’s must-have, and to whom it is a must-have: in other words, what is its core value, to which customers, and why.
  • aha moment. This is the moment that the utility of the product really clicks for the users; when the users really get the core value—what the product is for, why they need it, and what benefit they derive from using it. Or in other words, why that product is a "must-have."
  • Thus the key to knowing when it’s time to start the high-tempo push for growth is simple: Can you identify an aha moment that users love?

To Determine If Your Product is a Must-Have

How disappointed would you be if this product no longer existed tomorrow?

  • a) Very disappointed
  • b) Somewhat disappointed
  • c) Not disappointed (it really isn’t that useful)
  • d) N/A—I no longer use it

If 40 percent or more of responses are "very disappointed," then the product has achieved sufficient must-have status.

If it’s less than 40 percent, then you know you need to focus on increasing this number by tweaking the product or the language used to describe it and how to use it.

In these cases, a set of additional questions on the Must-Have Survey will help to point you toward your next steps:

  • What would you likely use as an alternative to [name of product] if it were no longer available?
  • I probably wouldn’t use an alternative
  • I would use:
  • What is the primary benefit that you have received from [name of product]?
  • Have you recommended [name of product] to anyone?
  • No
  • Yes (Please explain how you described it)
  • What type of person do you think would benefit most from [name of product]?”
  • How can we improve [name of product] to better meet your needs?
  • Would it be okay if we followed up by email to request a clarification to one or more of your responses?

Another indicator is if your retention rate is good compared to other competitors in your space, and stable over time.

Chapter Three: Identifying Your Growth Levers

  • Small companies in particular need to focus on high-impact, high-potential tests first. Testing small changes like button copy is unlikely to have the kind of big impact they need, and tests will take too long.
  • You need to identify the levers of growth for your company, to summarize in a fundamental growth equation.
  • The way to determine your essential metrics is to identify the actions that correlate most directly to users experiencing the core value of your product.
  • To hone your growth equation and narrow your focus, it’s best to choose one, key metric of ultimate success that all growth activity is geared toward.
  • The North Star should be the metric that most accurately captures the core value you create for your customers.
  • Dashboards are great, but they should report only on the most important metrics that map to your growth levers.
  • Metrics should be reported as ratios rather than static numbers.
  • They should also have an indicator as to whether they are above trend, on par, or below past performance.
  • Use cohort analysis based on various demographic or behaviour to gain insights into certain groups of users.

Chapter Four: Testing at High Tempo

  • Small teams can start with 1-2 tests per week, while larger growth teams might manage up to 20-30 tests per week.
  • Whatever the size, it’s important to follow a highly disciplined process that allows a pipeline of ideas, and efficient processing.

The process should go as follows:

Stage 1: Analyze

  • Formulate some questions to guide analysis, then start digging into the data and conducting user interviews.
  • Summarize into a report for the next meeting (weekly or bi-weekly).

Stage 2: Ideate

  • After the meeting, all team members should submit as many ideas as possible for hacks to try and improve the chosen area of focus.
  • Ideas should be submitted using a template:
  • Idea Name: We’ve found that giving each idea a brief name makes the discussion of them easier and more efficient. At GrowthHackers, to force brevity and clarity, we limit them to under 50 characters.
  • Idea Description: The best way to think about what the idea description should look like is along the lines of an executive summary. It should address the who, what, where, when, why, and how of the idea.
  • Who is being targeted?
  • What is going to be created, such as new marketing copy or a new feature?
  • Where will the new copy or feature be implemented?
  • When will it appear during the customer’s use?
  • In addition, the description must include the why—the rationale behind the idea—and the how—a recommendation of the type of test to be done, such as an A/B test, or new feature to be built, or a new ad campaign to be launched.
  • Hypothesis: Like in any other type of experiment, the hypothesis should be a simple proposition of expected cause and effect.
  • A hypothesis might be: "By making it easier for shoppers to view and reorder previously purchased items, the number of people who make repeat purchases will increase by 20 percent."
  • Some teams may elect to state an expected gain in their hypothesis while others will not. The pro of doing so is that it gives the team a clear idea of what success looks like. On the other hand, predicting the results of a test ahead of time is an inexact science at best, and so some teams forgo it. 
  • Metrics to be Measured: The metrics that should be tracked in order to evaluate the outcome of the test must be specified. Most experiments should measure more than one metric because sometimes, improvements in one metric come at the expense of others.
  • Identify metrics to be tracked by looking at the metrics “downstream" from the experiment that will be impacted.

Stage 3: Prioritize

  • Score using a system.
  • You can use ICE: Impact, Confidence, and Ease - rate across a ten-point scale for each, and then averaged.
  • Impact: This is the expectation about the degree to which the ideas will improve the metric being focused on.
  • Confidence: This is a measure of how strongly the idea generator believes the idea will produce the expected impact.
  • Confidence should be higher if a test is an iteration of a previously successful test, which is a good practice and is commonly referred to in the growth hacking community as doubling down.
  • Ease: Ease is the measure of the time and resources needed to run the experiment.

Stage 4: Test

  • Two rules of thumb for testing;
  • Use a 99% statistical confidence level
  • Control always wins if the results are inconclusive
  • Back to Stage 1: Analysis and Learning
  • Analysis should be done by growth lead if they have expertise, and written up in a summary.
  • This should be shared with growth team and added to a database where all learnings are stored.
  • Some ideas for communication:
  • A “wins” email distribution email list
  • Creating a channel in chat software for sharing of test results and discussion about them
  • Publish test results to company dashboards.

The Growth Meeting

  • Hold on Tuesdays
  • Agenda:
  • 15 mins: Metrics review and update focus area
  • 10 mins: Review last week’s testing activity
  • 15 mins: Key lessons learned from analyzed experiments
  • 15 mins: Select growth tests for current cycle
  • 5 mins: Check growth of idea pipeline

Part II: The Growth Hacking Playbook

Chapter Five: Hacking Acquisition

  • The first phase of work in scaling up your acquisition of customers should be devoted to achieving two additional types of fit:
  • language/market fit, which is how well the way you describe the benefits of your product resonates with your target audience, and
  • channel/product fit, which describes how effective the marketing channels are that you’ve selected to reach your intended audience with your product, such as paid search advertising or viral, or content, marketing.
  • Talk to your customers, run A/B tests, and talk to customer support teams. You’ll get ideas about language to use from all of them.

Finding Channel Fit

  • You should be seeking to find fewer, sustainable channels of acquisition, not spreading yourself too thin across many.

Narrowing the Field

  • You can usually narrow down possible channels by the demands of your business model.
  • A next step in narrowing options is to consider the characteristics and behaviors of your users, and this means identifying the behaviors that they’re already engaged in, such as the types of Google searches they are doing, the places they are shopping, and the social networks they are using.

Experimenting to Get Channel/Product Fit

We advise a prioritization method based on one devised by Brian Balfour, HubSpot’s former head of growth, who created a simple scheme for ranking channels according to a set of six factors:

  • Cost—how much you expect to have to spend to run the experiment in question.
  • Targeting—how easy it is to reach your intended audience and how specific you can be in whom your experiment reaches.
  • Control—how much control you have over the experiment. Can you make changes to the experiment once it’s live? Can you stop it easily or adjust it if it’s not going well?
  • Input time—how much time it will take the team to launch the experiment. Filming a television ad, for example, has a much longer input time than setting up a Facebook ad.
  • Output time—how long it will take to get results out of the experiment once it’s live. For example, search engine optimization experiments or social media may have longer output times than a radio ad does.
  • Scale—how large an audience can you reach with the experiment? Television has a much larger scale than advertising on topical blogs.
  • Score each channel by factor from 1-10, and then average the results, and rank them.
  • Keep testing and trying new channels as you continue to eliminate ones that don’t work.

Designing Customer Loops

  • For most other products, though, incentivizing users to send out and accept invites is a good deal trickier, and most often, triggering anything even approaching truly viral growth requires a great deal of initial experimentation and then lots of continuous optimization.
  • When you do focus on instrumenting virality, it’s important that you follow the same basic principle as for building your product—you’ve got to make the experience of sharing the product with others must-have—or at least as user friendly and delightful as possible.
  • Here are a number of best practices for experimenting with creating loops that will help you avoid such pitfalls.
  • Consider the Potential to Tap Network Effects
  • Create an Incentive That’s in Synergy With Your Product’s Core Value
  • Make the Invite to Share an Integrated Part of the User’s Experience, Not an Add-on
  • Make Sure the Invitees are Given a Good Experience
  • Experiment, Experiment, Experiment

Chapter Six: Hacking Activation

  • Improving activation is at its core about increasing the rate at which you get new users to your aha moment.
  • The first step in improving activation is identifying each point in the customers’ journey toward the aha moment, and the conversion rate between each step.
  • You should also consider the channels that have brought customers, and how their journey varies between different sources.
  • Look for differences between active customers, those who activated but went cold, and those who never activated.
  • To recap, those steps are:
  • map all of the steps that get users to the aha moment;
  • create a funnel report that profiles the conversion rates for each of the steps and segments users by the channel through which they arrive;
  • and conduct surveys and interviews both of users who progressed through each step where you’re seeing high drop-offs, and those who left at that point to understand the causes of drop-off.
  • You can then use this information to create new, highly targeted, and high-impact ideas to experiment with to improve your results.
  • To improve activation, you can either increase your customers’ desire or reduce the friction they experience. And making a product more desirable is generally much harder.
  • Single sign-on is a great way to reduce the friction of signing up.
  • You can also flip the funnel, allowing users to experience value before asking them to sign up.
  • Adding some positive friction can be good, as users make a small commitment and get to activation with more reliability.

The Art of the Questionnaire

  • Asking customers about their interests or about the problems they are seeking solutions for immediately creates a form of commitment, as they must invest a little time in responding, while at the same time they have forged a deeper personal connection with you and your product. It also conveys to them that you are interested in them individually and in providing the best service for them you can.
  • The tactic works best if it’s clear to the customer that customizing the product to their needs and desires will be to their advantage.
  • A key caution here is that you also don’t want to ask too many questions. Patel recommends no more than five, and making them multiple-choice rather than open-ended, with no more than four possible answers each. Including images and visuals will also likely improve engagement. And as with all hacks, these mini questionnaires should be put through the process of rigorous experimentation.

Triggers

  • 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.
  • Make sure to test with a holdout group, which is a group that isn’t subject to any of the experiments.
  • Some common types of notification triggers to experiment with are:
  • Account creation—encourage users who have downloaded an app or visited a retail website to complete their account
  • Purchase messages—encourage users to make a purchase with a short-term discount
  • Reactivation campaign—encourage users who haven’t been to your site or app in a while to come back and reengage
  • New feature announcement—share the news about updates to the product
  • Top user incentives—for heavy users of the product, let them know they’re special and encourage greater affinity and use
  • Activity or status change—such as a friend taking an action or an item in a shopping cart changing price.

Six Principles of Persuasion to Keep in Mind

  • Reciprocity—whereby people are more likely to do something in return of a favor, regardless of the favor done and the ask now presented to them
  • Commitment and consistency—people who have taken one action are likely to take another, regardless of the size or difference in action
  • Social proof—in a state of uncertainty, people look to the actions of others to help them make their own decisions
  • Authority—people look to those in the position of authority to decide which actions to take
  • Liking—people will do business more readily with people and companies they like over those they don’t or are indifferent to
  • Scarcity—people will take action when they are worried that they will miss out on the opportunity in the future

Chapter Seven: Hacking Retention

  • Brian Balfour, whom we’ve met earlier, highlights that retention breaks down into three phases: initial, medium, and long-term. The initial retention period is the critical time during which a new user either becomes convinced to keep using or buying a product or service, or goes dormant after one or a few visits.
  • 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.
  • Then, we’ll move on to the tactics for long-term retention. This is the phase in which growth teams can help to assure that a product keeps offering customers more value. Teams must experiment with ways to keep improving the product, helping product development teams to determine the timing for introducing enhancements of existing features or entirely new features. The key here is to keep refreshing the customer’s perception of the product as must-have.

Identify and Chart Your Cohorts

  • Once you’ve determine the metrics you’ll use for your retention rate, the next step is to break your retention data into cohorts.
  • You should break down cohorts based on entry date, channel, and other factors.

More Value Coming Soon

  • Communicating to customers that some new features or product offerings are just around the corner, and telling them how they’ll benefit, can be a powerful inducement for them to stick with you.

Long-Term Retention

  • Here we recommend a two-pronged approach that involves (1) optimizing the current set of product features, notifications, and subsequent rewards from repeated use; and (2) introducing a steady stream of new features over a long period of time.
  • Another important element of long-term retention is figuring out how to move your users along a learning curve.
  • They should gradually be introduced to new features and new ways of using them as they become more familiar with the tool.

Resurrection

  • When teams notice that a customer’s purchasing or a user’s activity has dropped to zero, after some designated time—which the team should experiment to determine—these people should be added to a resurrection flow, which means that they should be sent a series of email communications or targeted ads designed to win them back, often by reminding them of the aha moment, or core value that once drew them to the product.

Chapter Eight: Hacking Monetization

  • When it comes to monetization, analysis starts by returning to the basic mapping of the entire customer journey.
  • The goal at this stage is to highlight all of the opportunities in the journey—from acquisition to retention—for earning revenue from customers.
  • The next step after doing this basic mapping is to analyze where in the customer journey the company is making the most money, and where there seem to be pinch points, meaning steps where potential earnings are lost, which vary by model.
  • For SaaS businesses, the pages displaying the options for plans and their prices are often underoptimized, hurting rates of purchase.
  • If a product or service is offered internationally, companies should also be sure to look at monetization by country, since different countries have different norms about the types of payment options, and also the fees charged, for services.

Patrick Campbell, CEO of Price Intelligently, offers a wealth of advice about best practices for finding the pricing sweet spot for SaaS products, and suggests starting with, as we’ve recommended with many other growth initiatives, sending out a survey that asks the recipients not only what features are most important to them—but also how much they are willing to pay, by asking the following four questions in the following order:

  • At what price point does [your product] become too expensive that you’d never consider purchasing it?
  • At what price point does [your product] start to become expensive, but you’d still consider purchasing it?
  • At what price point does [your product] start to become a really good deal?
  • At what price point does [your product] start to become too cheap that you’d question the quality of it?

To determine your value metric, Campbell recommends asking yourself three questions:

  • 1. Does the value metric align with where your customer perceives value?
  • 2. Does the metric scale as the customer uses the product more?
  • 3. Is it easy to understand?
  • Pricing is often seen as a proxy for value, so lowering prices may not help increase your volume or sales.

Chapter Nine: A Virtuous Cycle of Growth

  • Growth teams need to be constantly innovating, diving back into the data, and coming up with new experiments.
  • Push yourself to make the most of what is working, not only finding new things to try.
  • Opening up the ideation process to the whole company can help push through stalls or being short of ideas.