The first to use the term growth hacking in 2010 was Sean Ellis , who helped Dropbox, among other things, to grow immensely. Ultimately, however, it was mainly Andrew Chen who started the current hype with his article “ Growth Hacking is the new VP Marketing ” in April 2012. Ryan Holiday’s book “Growth Hacker Marketing” became a top seller on Amazon in 2013 immediately after its publication. There are already several portals in the USA dedicated to the trend. This includes growthhackers.com or growthhacker.tv . As so often, Germany is lagging about two years behind. But here, too, a small scene can be seen, for example on the portal growth-hackers.de .
What is growth hacking anyway?
First of all: not a single measure, but a strategic approach. The principle originally comes from the startup segment of the software-as-a-service industry and is closely related to “lean marketing”: the greatest possible marketing effect should be achieved with the least possible effort – in terms of time, money and manpower.
For example via a viral video or other measures that create a stir and thus increase brand awareness. Growth hacking goes beyond lean marketing and has long since ceased to be limited to startups. Today, corporations and the world’s most valuable brands employ growth hacking principles. Their goal is not only growth, but also a better understanding of their customers and users.
To understand the growth hacking approach, it helps to take a look at the development stages of a startup. Generally speaking, there are three challenges:
- Problem solving: The definition of the target audience and the problem to be solved. The startup’s product must relate directly to the problem and solve it as simply, precisely and efficiently as possible.
- Product-Market-Fit: It ensures that the product offered exactly fulfills the intended purpose – in the eyes of the target group. It is the basic requirement for successful company growth.
- Scaling: In this phase, the startup drives the number of users – and thus sales – up.
Growth hacking can only work on the basis of the right product market fit. Because only when the quality is right can the quantitative approach take effect, which takes up and reinforces the principle “if the product is overwhelming, I just have to get it out to the people”. The product market fit is the prerequisite for successful growth: If you neglect it, you may put your growth hacking measures in the wrong place and burn a lot of money.
Anyone who struggles with the product market fit should take a look at the bestseller “The Lean Startup” by Eric Ries [6] , entrepreneur from Silicon Valley and author. There Ries writes: “If you have to ask whether you have Product-Market-Fit, the answer is simple: you don’t.” In other words: The solution must be so obvious that the question of whether the Product-Market-Fit is achieved, no longer represents. Anyone who tests their product on a test group and does not get excellent results has not yet completely done their homework.
The stages in the growth hacking process
Once the product-market fit has been achieved, scaling is “only” about one thing: growth, growth, growth – as quickly and cheaply as possible. This is essentially achieved through data-driven, quantitative experiments and systematic testing. Growth is measured by five metrics:
- Acquisition: How do users find my product?
- Activation: Do users have a good first experience with the product?
- Receipt: Are users coming back?
- Revenue: How much money do users spend?
- Recommendation: does the product go viral?
The goal of a growth hacker is to support these metrics and drive them steadily upwards. To do this, he identifies concrete measures, implements them and learns in the process. This procedure is the so-called growth hacking process, which is divided into five steps: define goal, measure, test, learn, scale.
The goal definition
Goal definition is about accuracy: the goal must not be too broad. An example: Instead of “more sales”, which is an imprecise and therefore bad goal, a good target definition could be: “Double the sales per user within a week.” In order to know which goal you should work towards, you can approach the following hierarchy:
- User growth
- Increase in DAU (Daily Active Users)
- Maximize user return
- Increase usage rate
The order of these goals corresponds to their prioritization. That means: If the first goal is not fulfilled to a sufficient degree, it makes no sense to deal with goal number two. Only those who have enough users should be concerned with motivating them to use the service or product as long and as often as possible.
A wide variety of channels and formats can be used in each phase: social networks, e-mail, SEO, SEA, display, affiliate, videos, content marketing and much more. The possibilities are endless – and that means: the growth hacking process never stops. An important part of the target definition is the identification of a “lever” through which one’s own strengths can be optimally exploited.
For example, if you already have a broad database in the form of e-mail addresses, an e-mail campaign is ideal. If a talented designer works in the company, you could work with her to create a graphic medium, such as an infographic or a cartoon, that would be distributed virally across multiple channels. In order to be able to evaluate the results optimally, one has to find the right key figures and set up a functioning analysis system. If the turnover per user is to be doubled within a month, it is therefore important to measure the turnover and the time.
For example, it is important to determine whether the generation of sales equates to a conversion within a web analysis platform – such as Google Analytics or Adobe Site Catalyst – or to the outgoing e-mail for invoicing. This can make a huge difference. Different key figures can result from different web analysis platforms. Therefore, one must precisely define all the conditions for performance and success measurement.
Much sought-after growth hackers
Once the goal and the key figures to be measured have been defined, the planned measure can be implemented. For the sake of efficiency, a test is usually only carried out by the growth hacker. Staff from the specialist departments (product development, conversion optimization, design or SEO) are only rarely used for support. That’s why growth hackers are in great demand: They have a very diversified skill set (more on this in the section “What you can learn from growth hacking ”) and are able to make a big difference as a single force.
In the fourth phase it becomes apparent how exactly you worked in the first three phases, because now it is evaluated. If you have messed around with goal setting, measurement or implementation, you cannot learn anything from the attempt and it has failed. If the result corresponds to the expected objective, the experiment can be scaled up in the fifth step.
If this is not the case, the experiment is first optimized. Steps one to four are repeated with changed parameters: For example, you can select a different channel or address a different user base. If that’s not enough, the goal setting may be too high and should be corrected.
What you can learn from growth hacking
Growth hackers are particularly characterized by their ability to implement test chains completely on their own. Her knowledge spans areas as diverse as programming, design, online marketing, psychology, sales, product development and community management. Statistical knowledge and creativity also play a role, for example in correlation analyzes or brainstorming.
The Growth Hacker Skillset corresponds to the so-called “T-Shaped Model”: A broad basis of knowledge across all relevant areas and – based on this – special expertise in individual specialist disciplines. The first learning therefore means: Stand up broad.
The second important learning is: Make all decisions based on data. Growth hackers risk money and image to achieve growth. In order to secure your investment, your decisions are basically data-driven. The growth hacking process shows this very clearly. In many areas of the company, the principle of growth hacking could therefore be given greater consideration. Some big brands and companies have already done this successfully, as the following five examples illustrate.
Five legendary growth hacks
The following growth hacks are already legendary and give a good overview of what is possible:
- One of the very first growth hacks was invented by the Hotmail email service in the 1990s. The trick was simple: every email automatically got the attachment “PS: I love you. Get your free email at “Hotmail” with a link to the homepage. This started a viral wave that brought the company 12 million new email accounts within a year.
- Instagram is an example of effective cross-posting: Instagram users were able to share their pictures on Facebook very early on. The photo startup thus benefited from Facebook’s considerably larger user base, whose profile perfectly matched its product. Airbnb has also used this growth hack in the past to attract users: the startup allowed its users to automatically use the Craigslist advertising portal via a self-built interface and thus suddenly gained a lot of attention.
- Through intelligent user analysis, Twitter found that users are most active when they have at least 30 followers. Therefore, the company implemented a suggestion function and multiplied the DAU (Daily Active Users) by more than four times in just a few months.
- One of the best-known growth hacks is the suggested friends principle. Facebook, for example, learned through analyzes that the fewer friends they had in their network, the lower the activity of users. With suggestions for further friends, it helped its users to network more quickly and to feel comfortable. The result should be known to everyone.
- A major factor in YouTube’s immense growth has been the ease with which the videos are distributed. With just one click, these can be embedded or shared on Facebook, Twitter or Reddit. YouTube videos were suddenly everywhere – and the platform filled with users very quickly.
Hype or growth driver?
Growth hacking is often dismissed as hype, which in principle doesn’t really bring anything new. Many critics also accuse growth hacking of a destructive nature that accepts growth “at any price”. Airbnb is often cited as an example, whose growth hack brought the startup tremendous attention, but was not compliant with Craigslist’s guidelines, which did not offer an open API for third-party providers.
However, the sophisticated approach in the examples and current developments show that growth hacking is no longer just a buzzword, but an effective approach for rapid growth. The entrepreneurial successes of the former startups that have made use of growth hacking methods – such as Airbnb or Facebook, but also Dropbox – are impressive.
Conclusion: Growth hacking is also becoming a trend in Germany
In Germany we will see more growth hacks in the future. Most of the developments in this area will probably continue to emerge from the startup scene, as startups are smaller, more flexible and less bound by guidelines – in addition, the employees there are often all-rounders and more broadly based.
In large corporations and corporations, there is only one way to grow hacking: autonomous teams of experts with the greatest possible authority. Because in order to achieve significant growth through growth hacking, the limits of politics, bureaucracy and hierarchy often have to be pushed to the limit or even bypassed.
Regardless of this, online marketers will position themselves more broadly overall, similar to what is already the case in the area of SEO: Since the emergence of the content marketing trend, the areas of social, design and viral marketing have been expanding more and more.