Growth hacking: Low-cost Marketing

What do Hotmail, Airbnb, Pinterest, Uber, Dropbox and Instagram have in common, besides becoming huge hits? The fact that they’ve begun their stunning growth with one of the latest Marketing tools, that has been increasingly proven, success after success: growth hacking. In a more and more competitive world, where the problem is to get a spectacular idea to the right audience, rather than coming up with it, growth hacking is a way of looking at things differently, in which achieving success doesn’t mean spending a lot of money on Marketing, but following the most radical, creative and innovative ideas.

What is growth hacking?

Although the term “growth hacking” is relatively recent, having been invented in 2010, the tool itself is used informally since at least 1996, and, despite the name, it has nothing to do with the most known definition of “hacking”, nor is it based on just programming (even though it helps). In fact, growth hacking is essentially applying a “hack” on the market- a new, disruptive idea, very specific to the target audience, usually low-cost, and innovative as well- that allows you to make your product or service reach out to the right public. In this case, “the right public” is actually a key word, since growth hacking always seeks the Product/Market Fit, i.e. to ensure that the product in question meets a real market need.
The ultimate goal of growth hacking is purely growth, which makes it ideal for startups, since one of the main problems that plagues them in the beginning, in addition to lack of funds, is the need to grow rapidly and to reach new audiences. However, growth hacking isn’t just for start-ups, it’s advantageous for all types of companies due to its efficiency and value.

Where does growth hacking fit into Marketing?

Growth hacking isn’t exclusively digital, given that it isn’t a list of tools and instructions but rather a mindset; however, many of the tools of Digital Marketing can be applied creatively, and at a low cost, through the mindset of growth hacking, so they fit together like two pieces of a puzzle.
Digital Marketing alone, although it remains an excellent toolbox for companies to reach the target audience and achieve sales, has some disadvantages, particularly for small and medium-sized enterprises, such as:

The required investment. Digital Marketing isn’t cheap, and the investment in Search Engine Marketing, Display Advertising, E-Mail Marketing, Content Marketing, Social Media Marketing, Public Relations, Mobile Marketing, and so on, quickly accumulates costs that many businesses can’t bear;
The difficulty of escalating results when there’s no money to invest. In general, the results of a Digital Marketing campaign are proportionate to the investment. In order to achieve more results we have to spend more money, making it difficult to achieve economies of scale.
All the competition’s doing the same. When all the companies are using the same Digital Marketing tools and techniques, the only winner is who invests more to make a first, or more often appearance- and still, there’s no guarantee that the target audience has an interest, this is because no one has an interest in always seeing the same obsolete techniques, over and over again.

It’s for these reasons that growth hacking is so useful: because, usually, it doesn’t mean spending more, but rather investing the resources better, or even discovering ways to do things without spending any money; because, all the same, the scope and success don’t depend on how much money you spend, but on creativity and virality; and, finally, because the mindset of growth hacking implies that even if everyone tries to do it, everyone will have different and new ways of achieving it, because growth hacking is disruptive by nature.

What does it take to be a growth hacker?

Becoming a growth hacker doesn’t require a degree or specialized training; as already mentioned, it’s a mindset, so, the base to be a growth hacker is to think the right way and in the perspective of someone who seeks to create something new, not just the same, again and again. However, there are certain characteristics that a good growth hacker should have, namely:

Be extremely creative;
Have good communication skills;
Have a good analytical capacity;
Have design skills, or at least, aesthetic sensitivity;
Have minimum knowledge of programming;
Have research and investigation skills;
Have planning skills.

In a growth hacker, these characteristics are combined in a profile conductive to innovation driven by results. A growth hacker starts by trying to answer the question “How do I get my product/service to reach consumers?” through research and analysis of the target audience and of what is already being done by the competition, designing new ideas and experiences that haven’t yet been tested, and the capacity of planning and testing to meet the requirements of the idea and confirm if it works.

The growth hacking process

Regardless of whether it’s based on disruptive and innovative ideas, there’s still a proven process for growth hacking, consisting essentially of a five-stage cycle:

The definition of the intended goal, including the metrics and key performance indicators (KPI) that will be followed to determine success;
The conceptualization of growth hack and its strategy;
The implementation of growth hack, including the tracking configuration of the above metrics;
The continuous analysis of the results that growth hack is achieving, always taking into account the metrics that measure these results;
The continuous optimization of growth hacking, taking into account tests for small samples to determine the impact, positive or negative, of each change.

Being a cycle, this process is continuous, always looking to analyze, test and improve growth hack, in order to achieve increasingly better results.

AARRR: The Pirate Metrics

As mentioned above, it’s important to follow metrics that allow you to follow growth hacking’s success and create opportunities for continuous improvement. For this purpose, the recommended methodology is to use Pirate Metrics, AARRR: an acronym for Acquisition, Activation, Retention, Revenue and Referral.

Acquisition, as the name indicates, is the acquisition of new customers, that is, how the customers find us. In this context, it’s important to bear in mind that “new customers” means not only more users, but also, and more importantly, more sales. For example, in the context of a game app, Acquisition is when a new user downloads the app;
Activation is the first time the user has used the product; in the game example, it’ll be the first time they use it. First impressions are important, so this metric is vital to understand if the consumer has had a good first experience with the product. To do so, user experience (UX) is vital in growth hacking to ensure not only that users have a highly positive first impact, but also that they’re guided subtly in their first use through elements such as calls-to-action;
Retention is the withholding of users, that is, the customer continuing to use the product after the first experience. In a game, it’ll be measured by the players who keep playing in the future. Realistically, 100% retention is an impossible data, with 20% to 30% being a fantastic score in this metric. In extreme values, like 70%, it means that the Product/Market Fit was essentially perfect, as was the case with Instagram
Revenue is the output of the product- in layman’s terms, measuring whether it makes money. In a game app, there are several ways to monetize the game, from freemium to micro-transactions. It’s important that a product is self-sustaining, so it’s essential that this metric is carefully monitored and measured;
Referral is when a customer enjoys a product so much that it recommends it to other people. The marketing term for this is Word-of-Mouth Marketing, and is generally considered the best possible type of Marketing, since it’s more credible than simple advertising. Growth hacking uses certain tricks to boost referrals, and expand the number of users; continuing the example of an app game, giving certain valuable elements of the game in exchange for inviting friends to participate.

Essentially, these metrics function as a funnel, for example:

Let’s say the app we use as an example is downloaded by 1000 people;
Of those 1000 people, only half actually use the app at least once- that is, in terms of Activation, we have 500 users;
Of those 500, 20% come back a second time, that is to say, we have achieved a retention of 100 users;
The app is designed to be free to play but contains optional purchases, so of our 100 users who have used the app more than once, only the most addicted- say 5%- are actually going to shop, so our Revenue comes from 5 users.

The exception to the funnel will be the Referrals, since any of the 500 users who used the app at least once, could theoretically recommend it to other users.

One of the assumptions of growth hacking is that we should strengthen each of these phases by using various hacks to achieve this growth. To name a few examples: in terms of Acquisition, we may consider an exclusive private beta or free content; for Activation, we can rely on tests of landing pages to improve conversion rate, include testimonials for credibility, consider trials, onboarding, etc.; to promote Retention, gamification, e-mail marketing, and an exceptional support are potential tools to use; to increase Revenue, we have the already mentioned ways to monetize services, such as freemium, subscriptions, discounts on annual subscriptions and others; finally, for Referral, features to invite friends, social network shares, and relative matters, serve as a way to allow, and even encourage, users to make recommendations to friends.

Good growth Hacking practices

Being a mindset, there aren’t exactly rules for growth hacking, but there are good practices to take into account to achieve better results:

Observe other companies, including (and mostly) in other, completely different areas, and learn from the techniques they use;
Constantly trying out new ideas;
Measure and compare everything through the above-mentioned metrics;
Don’t lose sight of the goal, which is always the priority;
Looking for low investment techniques but with the possibility of high return.

Growth hacking success cases

Growth hacking has already enabled numerous companies to achieve success in their respective market, proving its effectiveness, from its origin in the 1990s, to modern start-ups. Below are just a few prominent examples:

Hotmail: created in 1996, at a time when growth hacking didn’t even have that name, Hotmail’s service reached 12 million users in just a year, thanks to a very simple growth hack: the e-mail signature of all users included the phrase “PS - I Love You! Get A Free Hotmail Account.” At a time when e-mail services were rarely free, this provocative message led users to join the new service, and made it grow rapidly. Due to the dimension Hotmail reached with this technique, in 1997, Microsoft acquired the company for $400 million.
Airbnb: a success story built thanks to growth hacking, one of the most creative and prosperous ways that Airbnb, originally Airborne & Breakfast, used to increase its user base was to resort to integration with Craigslist. Initially created as a competitor of Craigslist with a better, more legitimate, and more personal service, Airbnb couldn’t compete with the latter’s community, so creatively it adopted the motto “if you can't beat them, join them.” To this end, Airbnb offered its users integration with Craigslist, providing the option to publish it with the incentive to “increase the earnings by $500/month on average.” Not only did this allowed Aribnb to reach a much wider audience, but the fact that it provided a much more appealing and profitable service meant that these new users attracted by Craigslist also had a very positive retention.
Tinder: the Tinder dating app also used growth hacking to achieve success, having started to settle in several universities. To do this, Tinder’s team members visited the university sororities to convince girls to join the app, offering them rewards in exchange for their participation; and having got these users, the same team addressed the male members of the university, presenting them the app and showing the girls already using it in their university. Thus, the community began to expand rapidly until it spread to various universities and eventually spread to other contexts.
Uber: knowing it was essential to enter the main cities ahead of competitors to be able to conquer the market, Uber has sought to encourage the acquisition and rapid activation of users, so that, to effectively create and retain a network of users in the city, it was virtually impossible for an adversary to compete in the same market. To this end, by launching the app in a new city, Uber offered free travels and encouraged users to offer free travels to their friends as well. Thanks to this system of Referrals and this initial incentive, Uber’s user base in each city became so strong that it was the only attractive choice for users, reducing the impact of new competitors.
LinkedIn: this professional social network also started using growth hacking creatively, notably through the intelligent use of Search Engine Optimization (SEO). Although LinkedIn users have the possibility to make their profile private, LinkedIn ensured that at least part of the profile would always be publicly accessible. The impacts of this were that any Google Search or other search engine for a specific person would invariably lead to their LinkedIn profile, as it publicly presented the most relevant content for that person. This way, LinkedIn gained an increasingly stronger position in search engine queries, which led to the rapid acquisition of more and more users.
Dropbox: one of the classic examples of intelligent use of Referrals as a tool of growth hacking, the file storage service Dropbox has ensured the rapid expansion of its user base, ingeniously in its misleading simplicity: although the free storage space for each new user was only 2 GB initially, this space could be increased up to 16 GB through invitations to friends to join the service. Each friend who joined not only provided 500 MB to the user who invited him, but also had the additional 500 MB in his new account, making this system a Win-Win for both parts.
Twitter:Twitter is a growth hacking case in which analytical data and A/B testing allowed to implement an improvement that, while seemingly small, had an astronomical impact on the results. By testing the Activation metric, Twitter’s team realized that user retention was much stronger if users followed a minimum of three accounts after the first experience with the service. As such, Twitter began to make automatic suggestions that encouraged users to follow at least three accounts, thus applying the analytical data collected in a simple and effective growth hacking strategy.
Instagram:cross-posting to almost all platforms. Anyone who posted on Instagram had, for example, the option to post the same image on Facebook with a link to Instagram. This led users of other social networks to being exposed to the platform and being curious to experiment, subsequently rapidly expanding the user base.

Conclusion

As demonstrated by the success cases mentioned, growth hacking is a tool that allows exponential growth without necessarily having a high cost, proof of what can happen when creative responses are applied to the problems faced by all new businesses in the first place. It isn’t enough to simply create the perfect product, it’s also necessary to lead it to the right audience and, however important Digital Marketing may be, sometimes it’s enough to be a hacker to achieve success.
Do you also want to be a success story for growth hacking? Contact us and find out what BloomIdea Master Growth Hackers can do for you!