What is Growth Hacking?
Updated on February 29, 2020
If you run a startup or consider yourself an entrepreneur of any stripe, you’ve probably heard of growth hacking. To some it’s a way of life, to others it’s an overused buzzword.
In reality, it’s a little bit of both.
Growth hacking is both a noun and a verb, as well as a job title and action upon which some companies pin all their hopes.
Companies of all kinds are turning to growth hacking to improve their businesses.
You might be just starting out in this wild world of online business; maybe you’ve even been told that growth hacking is the only way you’re going to make it.
On the other hand, you may have been in this business for some time, and you know that many so-called growth hackers out there don’t really know how to grow a company.
Let’s go over what growth hacking is, bust a few myths about it, and talk about how you can actually incorporate it into your online business’ growth strategy.
Growth Hacking: A Definition
To define growth hacking as a concept, we first need to understand a bit of history.
“Growth hacker” was coined in 2010 by Sean Ellis. He had been advising internet startups, helping them build successful companies through fast growing user bases. Like any good consultant, he set up solid processes and systems that the people following him at the company could use to continue growing their users.
Before leaving, he would search for someone to replace him in this critical role at whatever company he was at, but he kept getting the wrong people. Not unqualified people, but they weren’t what these lean startups needed.
The job description looked like it was for a marketing person, but growing a user base isn’t traditional marketing (remember that idea for later on). The companies didn’t need a marketer, they needed someone who was laser-focused on one thing: growth.
In a blog post titled “Find a Growth Hacker for Your Startup,” Ellis wrote this: “A growth hacker is a person whose true north is growth.”
What Ellis found he needed in the job was someone hyperfocused on growing a user base, but drawing from different skill sets to meet that goal. All of their actions would need to be determined by their potential impact on scalable growth. Growth hacking is an interdisciplinary function, both in skills and actions on the job.
While the growth part is easy to understand, the hacking bit comes from a few places. You might hack a piece of technology — get it to do something it wasn’t built for. You might hack a system or a process (e.g. lifehacking) to make it work better for you. Or you might break into a computer system to take it apart, see how it works, or get some hidden piece of information.
Growth hacking does all of these.
It uses technology or online systems, for example social media, to accomplish the same goal as traditional marketing. It takes the traditional marketing process and pulls only what is useful, then builds something entirely different that works in an easier way. And it uses data and testing to find hidden bits of information. Everywhere today you see growth hacking techniques used throughout marketing tactics, SEO, and low-cost methods to create virality around new products.
It’s the tech and the data and the nontraditional methods that make growth hacking successful, sometimes in ways that defy all expectation.
Growth Hacking Examples
Many of the growth hacking examples are household names so ubiquitous it’s hard to think of a world without them, let alone that they used any kind of growth hacking process to become who they are today. But with the right growth marketers leading a strong marketing strategy, these businesses went from offering new products to go on to become Silicon Valley darlings.
One of the most well-known examples of growth marketing is Airbnb. Airbnb is famous for leaning on Craigslist as its initial channel of customer acquisition. The company used Craigslist to find customers in search of affordable accommodation and used their established platform to become who they are today.
Having your customer base promote your new product to their friends has been one of the growth hacking techniques to gain the quickest conversion rates. Hotmail was an early adaptor of this strategy when they added a line to their outgoing emails to encourage free sign-ups to Hotmail accounts. This allowed Hotmail to easily refine their product-market fit and improve customer experience by encouraging users to expand the product within their own network.
In a similar vein, Uber got their start by giving out referral incentives to new customers. By offering $5 credit through specific referral codes, a viral loop was born to generate ongoing customers and sustainable growth.
Now that you see how growth hacking works in the real world, let’s break down some core concepts and any myths that exist.
Busting Growth Hacking Myths
Because growth hacking has had some truly phenomenal success with companies like Dropbox (where they went from 100,000 users to 4 million in 15 months), it’s acquired this kind of mythological power. If you’re not doing growth hacking, man, you’re never going to make it in this world.
This misunderstanding of growth hacking has led to a few myths. Let’s dissect three of the biggest ones.
Myth #1: It’s the same thing as marketing, just online. Or it’s marketing on the “cheap.”
This myth gets busted simply by referring back to our definition. There’s marketing and there’s growth hacking. They’re different actions with different spheres of influence.
And it’s definitely not a “cheap” version of marketing. Your growth hacking strategy can cost as much and be as complex to execute as traditional marketing campaigns.
When you’re a startup, your goal isn’t traditional marketing. You may not even have a product to market yet, so you’re trying to create an audience around a potential concept. It’s hard to advertise an idea.
Growth hacking says, forget the ad and the campaign and the whole marketing process.
Growth hacking is about finding different, direct ways to reach your audience. For example, during the 2013 Super Bowl, Oreo aired an ad. Traditional marketing at its best. But no one talked about the ad the next day, or years later. But even now, most people remember the tweet the cookie company sent during the 30-minute blackout. 15,000 retweets and almost 7,000 likes — in 2013, when those numbers were only aspirational for almost everyone.
This kind of viral engagement is a good example of growth hacking. It was timely, authentic, and sharply witty.
Your relatively small startup business doesn’t have the money to create an ad and air it during the Super Bowl. But here’s the thing—that’s probably not what you need to do to meet your startup growth goals anyway.
You need strategies that are focused on your specific customer, audience, and platform. Spend smarter, not necessarily more, and keep your focus on the singular goal of growing your audience.
To emphasize a point, growth hackers are not doing the same thing as what is taught throughout digital marketing and content marketing, and chances are hiring a marketing expert won’t get you where you need to go with growth hacking.
Myth #2: Growth hacking is the only thing you need to do and it always works.
Sorry, no. Growth hacking is not a panacea. It doesn’t fix every issue your startup is having, nor does it guarantee that your business will be successful. It’s also not a quick and easy solution, and it’s certainly not the only thing your business should be focusing on.
If you don’t have a good concept, no amount of growth hacking is going to help you. And once you have an actual product, if you can’t get the product to your customer on time and in a manner they appreciate, you’re not going to be able to gain more customers.
It’s not as simple as setting up a Twitter or Instagram account and watching the follows roll in. Even if you’re creating authentic content and making an effort to engage with your customers, growth hacking still takes time to succeed.
For every PayPal or Dollar Shave Club, there’s another company out there that had a great idea and a YouTube video that didn’t go viral. Sometimes your first idea doesn’t work, which is why good growth hackers trust testing and data.
Because growth hacking is so focused on data and testing, it’s not a job for just anyone. A good growth hacker will have skills in multiple areas, including data gathering and analysis.
Myth #3: Getting new users is all that matters.
The singular goal of growth hacking is growth. But bean counting new users isn’t the only important thing.
If you want your business to grow—and that’s why we’re all here, right?—you have to do more than simply increase your number of customers. You also have to retain your existing customer base and increase the revenue you earn for each customer.
Growth hacking is also focused on that retention and per customer revenue increase.
Getting new customers means little if your churn rate is high. If you’re losing more customers than you’re gaining—for example, signing up 1000 new customers every week but having 1300 people unsubscribe from your email list during the same time—that’s a sign that you’re not growing.
Or if you have a large, inactive customer base, it almost doesn’t matter what size your audience is. For example, if you have 10,000 individuals signed up for your email list, but only 100 of them open and read those emails, and then only 25 of those people act on what’s in your emails, your business isn’t meeting the real goal of growth.
Vanity metrics don’t really mean anything. Big numbers sound nice, but if they don’t translate into revenue, you’re not actually growing.
Growth hacking should really be focused on improving the experience for the existing customer, thus increasing audience loyalty. It’s also about getting the customer to do what you want them to do by incentivizing the action you need them to take so that you increase your revenue.
Okay, But How Do I Actually Do Growth Hacking?
Yeah, yeah, all this background and mythbusting is great. But, you may be saying, all I know is that I need to do it, so tell me how, please.
Hopefully by now you understand that growth hacking takes a specialized mindset, but you can find someone good at it or you can learn to do it yourself.
Let’s go over three basic actions that are the foundation of growth hacking. These actions will help you create a strategy that works for you, regardless of whether you’re new to the entrepreneurial world or have been around for a while.
Action 1: Start with the idea, not the finished product.
In traditional marketing, you’re selling a product or service that already exists. You know exactly what all the tangible characteristics of the thing are, so it’s easy to talk about in detail.
But when you’re launching a startup, you may not have all the details yet. You’re starting off with a great idea, either to make something unique and different, or to disrupt an existing product line or service and do it better.
Growth hacking done right starts with the idea, not with a completed product. Getting feedback on your minimum viable product or service idea is part of growth—you’re creating a customer base before you have a tangible product.
Starting your growth with the idea is part of the genius of crowdfunding campaigns. Tell people what you want to create, and if they like the idea, they give you money. You get the knowledge that you have people who will give you money for your idea, and in return they get the unique chance to be part of a new, cool thing.
This way is how you create an engaged customer base. They feel like they’re part of the team, like they have some ownership of the idea. People who feel engaged are more likely to be return customers and to tell their friends.
For example, remember when Gmail got started? During the beta phase of the program, the only way you could get an account was through an invite from someone already using it. And users only received a limited number of invites. Invites were actually sold on eBay.
By making it both exclusive and something that spread only by inviting friends to participate, Google made Gmail instantly cool.
They invited people to be a part of the beta testing process, and in doing so, built their customer base right along with the product.
Just because it’s best to start with the concept instead of a product doesn’t mean growth hacking is closed to you if you already have an established business or product, or if what you need is to focus on increasing customer retention instead of simply number of customers.
The same strategies work, but what you’re going to need to do is get back to the idea of your product, and then really focus on the next two actions.
Action 2: Target your specific audience.
It’s great to have a lot of people following your Twitter account. It’s less great if half those followers are bots.
It’s better to grow among your target audience rather than have a lot of social media followers who don’t care. Your audience should be the people who care and who will actively participate in your business. In other words, you want the people who are into what you’re offering.
Envision your ideal customer. What clothes do they wear and what kind of building do they live in? Do they have kids? Pets? Crushing student loan debt? What music do they listen to and how?
You also need to consider where your customers are. Your business may not need to engage across every single social media platform, but instead focus on the three or four actually used by your ideal customer.
Not everybody is going to use your product, and that’s okay. Focus on the ones who will, and figure out the best way to get them on your side.
Action 3: Gather data. All the data.
Data is everything in growth hacking. If you don’t have a handle on the data, including who your customers are, how they act, and what motivates them, you don’t have a handle on your customer base.
How do you get that data? Use the scientific method, young grasshopper: ask, theorize, test, analyze, repeat.
The question you ask to find the right data needs to be focused and detailed. It’s not: how do I get more customers, it’s: If I want customers to sign up for a year-long membership plan, what added incentive will result in more memberships? Or: Will free shipping affect the overall number of products sold?
State your theory: “I think if I offer a loyalty card and for every 10 widgets people buy, they get a free one.” Then test it. When you get the data back, you can analyze it to see if your theory was correct. Then you go through the whole process again.
Getting granular is the only way to do growth hacking. You want to A/B test emails and social media ads, as well as analyzing revenue numbers and customer satisfaction.
Yes, You Should be Growth Hacking
You probably already know that. Growth hacking has become the must-do for entrepreneurs, startups, and online business owners from SaaS to e-commerce.
Using these strategies, you too can use growth hacking, no matter where you are in your own business.
Don’t go into it blind. Keep in mind that it’s not traditional marketing, and it won’t necessarily be fast and easy. Also consider that need to worry about customer retention in addition to getting new customers.
However, if you start with the idea instead of the finished product, target the audience that will really connect with you, and gather all the data you can, growth hacking can take you far.
Photo credit: Wavebreakmedia