The key to successful target specific #growthhacking

Reading Oliver Blanchard’s useful book ‘Social Media ROI’ which I bought when I was working at Sony on marketing leading up to the James Bond movie ‘Skyfall’ I tweeted a quote from page 18 earlier today – which was rewarded with 18 Favourites:

But then that begs the question, what is the key to successful target specific #growthhacking from the expert’s point of view? And the answer is finding a metric you can measure early in a user’s lifecycle, according to Alistair Croll and Benjamin Yoskovitz. Simply put the key to the growth hacking process is the early metric, which is also known as a leading indicator.

The extract below from their book ‘Lean Analytics’, explains in detail what that means for growth hacking.


Growth hacking
Most startups won’t survive on gradual growth alone. It’s just too slow. If you want to grow, you need an unfair advantage. You need to tweak the future. You need a hack.

Growth Hacking is an increasingly popular term for data-driven guerilla marketing. It relies on a deep understanding of how parts of the business are related, and how tweaks to one aspect of a customer’s experience impact others. It involves:

Finding a metric you can measure early in a user’s lifecycle (i.e. number of friends a user invites) through experimentation or, if you have the data, an analysis of what good users have in common.

Understanding how it’s correlated to a critical business goal (i.e. long-term engagement.)

Building predictions of that goal (i.e. how many engaged users you’ll have in 90 days) based on where the early metric is today.

Modifying the user experience today in order to improve the business goal tomorrow (i.e. suggesting people they might know), assuming today’s metric is causing a change in tomorrow’s goal.

The key to the growth hacking process is the early metric, which is also known as a leading indicator—something you know today that predicts tomorrow. While this seems relatively straightforward, finding a good leading indicator, and experimenting to determine how it affects the future of the company, is hard work. It’s also how many of today’s break-out entrepreneurs drove their growth.

Attacking the leading indicator
Academia.edu founder Richard Price shared stories from a recent Growth Hacking conference at which several veterans of successful startups shared their leading indicators.

Former Facebook growth team leader Chamath Palihapitiya said a user would become “engaged” later if they reached seven friends within ten days of creating an account. And Josh Elman, who worked at Twitter, said the company had a similar metric: When a new user follows a minimum number of people—and some of those follow back—the user is likely to become engaged. In fact, Twitter has two kinds of users: “active” ones who’ve visited at least once in the last month; and “core” ones who’ve visited 7 times in the last month.

Onetime Zynga GM Nabeel Hyatt, who ran a 40-million-player game, said they looked at first-day retention: if someone came back the day after they signed up for a game, they were likely to become an engaged user (and even one that paid for in-game purchases). Hyatt also underscored the importance of identifying one metric that matters, then optimizing it before moving on to the next one.

Dropbox’s ChenLi Wang said the chances someone becomes an engaged user increase significantly when they put at least one file in one folder on one of their devices.

LinkedIn’s Elliot Schmukler said the company tracks how many connections a user establishes in a certain number of days in order to estimate longer-term engagement.

User growth isn’t everything, however. You may be trying to hack other critical goals like revenue. Elman told us that early on Twitter focused their energy on increasing feed views because they knew their revenue would be tied to advertising—and that advertising could only happen when a user looked at their Twitter feed. Number of feed views was a leading indicator of revenue potential even before the company hit the Revenue Stage.

What makes a good leading indicator?
Good leading indicators have a few common characteristics:

Leading engagement indicators tend to relate to social engagement (links to friends), content creation (posts, shares, likes), or return frequency (days since last visit, time on site, pages per visit).

The leading indicator should be clearly tied to a part of the business model (such as users, daily traffic, viral spread, or revenue.) After all, it’s the business model that you’re trying to improve. You’re not just trying to increase number of friends per user—you’re trying to increase the number of loyal users.

The indicator should come early in the user’s lifecycle or conversion funnel. This is a simple numbers game: if you look at something that happens on a user’s first day, you’ll have data points for every user. But if you wait for users to visit several times, you’ll have fewer data points (since many of those users will have churned out already), which means the indicator will be less accurate.

It should also be an early extrapolation so you get a prediction sooner. Recall that Kevin Hillstrom says the best way to understand whether an e-commerce company is a “loyalty” or an “acquisition”-focused organization is to look at how many second purchases happen in the first 90 days. Rather than wait a year to understand what mode you’re in, you look at the first three months and extrapolate.

You find leading indicators by segmentation and cohort analysis. Looking at a group of users that stuck around, and another group that didn’t, you might see something they all have in common.

Correlation predicts tomorrow
If you’ve found a leading indicator that’s correlated with something, you can predict the future. That’s good. In the case of Solare, the Italian restaurant, the number of reservations at 5PM is a leading indicator of the total number of customers that dine on any given night—letting the team make last-minute staffing adjustments or order additional food.

UGC site reddit has been fairly public about its traffic and user engagement – after all, it derives revenue from advertising, and wants to convince advertisers it’s a good bet. About half of all visits to the site are logged-in users, but these users generate a disproportionate amount of site traffic. reddit’s engagement is good. “Almost everyone who makes an account comes back a month later,” says Jeremy Edberg. “It’s a couple of months before people stop coming back.”

Is there a leading indicator in reddit’s site traffic? The table compares logged-in users (those with accounts) to anonymous visitors by the number of pages they view in a visit.

Table: reddit’s page views for logged-in versus non-logged in users

reddit_data

Click for full-sized image of table of data.

This data suggests that loyal, enrolled users—those that return each day to the site and have an account—view a higher number of pages per visit. Is that high number of page views by a first-time visitor a leading indicator of enrollment?

Causality hacks the future
Correlation is nice. But if you’ve found a leading indicator that causes a change later on, that’s wonderful, because you know how to change the future. If a high number of page views on a first visit to reddit causes enrollment, what could reddit do to increase the number of page views, and therefore increase enrollment? This is how growth hackers think.

Consider what Circle of Friends’ founder Mike Greenfield did when he compared engaged to not-engaged users—and found out that many of the engaged users were moms. Whether or not someone was a mother was, for Mike, a market-focused leading indicator of that person’s future engagement. He could decide how many servers to buy in six months’ time based on how many moms signed up today. But what really mattered was this: he could target moms in his marketing, and change the engagement of his users dramatically.

Mike’s hack was market-related, but growth hacks come in all shapes and sizes. Maybe it’s a change in pricing, or a time-limited offer, or a form of personalization. The point is to experiment in a disciplined manner.

Product-focused growth hacks—what Chamath Palihapitiya calls “aha moments”— need to happen early in the user’s lifecycle in order to have an impact on the greatest number of possible users. That’s why social sites suggest friends for you almost immediately.

You can use promotions and experiments to try and identify a leading indicator, too. Music retailer Beatport ran a Cyber Monday promotion to maximize total purchases. A week before the holiday, they sent all their customers a 10% discount code. Those customers who purchased something with the code were then sent a second, personalized code for 20% off. If they used that code, they were sent a final, one-time-only, time-limited code for Cyber Monday that gave them 50% off their purchase. This approach increased purchase frequency, and encouraged customers to max out their shopping cart each time.

While we don’t have data on the effectiveness of the campaign itself, it’s clear that the company now has a wealth of information on who will respond best to a promotion and how discounts relate to purchase volume—and they’ve made their loyal customers feel loved as well.

Growth hacking combines many of the disciplines we’ve looked at in the book: finding a business model; identifying the most important metric for the stage you’re at; and constantly learning and optimizing that metric to create a better future for your organization.

Or for a concrete illustration simply see page 35 of the startup metrics slideshare below:

Lean startup metrics

It’s about startups “picking a single metric that they can literally bet the company on,” says Suhail Doshi, Co-Founder of Mixpanel. Click the video to jump to the 14 second quote, or check out Mixpanel for free to see how it can help figure out that all important specific metric for your business!

Interviews will teach you how to sell

The hardest part about creating a successful company isn’t building your product.

It’s selling your product.

It’s easy to spend months working on features, but how are you going to sell those features?

  • How will you describe your product to ensure customers are interested in it?
  • Where will you find enough customers to tell about it?
  • How will you differentiate your product from the competition?
  • What features should you talk about most on your landing page?

The answer to virtually every marketing and sales question you have can be found in…

Customer interviews.

Interviews will Teach you How to Sell

You know customer interviews are an indispensable tool for tech startups, but I wanted to show you just how universally powerful they are by telling you about Dr. Emily.


Dr. Emily was a School Psychologist working intense hours at elementary schools in urban areas. She loved the work she did, but she thought she could have more impact if she worked outside the confines of schools.

She wanted to start a company to assess children for learning disabilities, but one major obstacle stopped her:

She didn’t know how to sell her services.

Dreading having to become a sales-person, which felt uncomfortable and a little sleazy, Dr. Emily tried interviewing her customers hoping to find an easier way to start her company.

What she found, not only shocked her, but her competitors too.

What Did Dr. Emily Ask?

As I mentioned in my last article, Dr. Emily focused on interviewing customers who were already trying to solve the problem she wanted to solve.

Her Early Adopters were parents who already had their children assessed for learning disabilities, but were still searching for answers.

The first question she asked these parents was:

Q: What’s the hardest part about being the parent of a child with a learning disability?

To her surprise, their answers always included at least one of the following:

  • “I don’t know where to start.”
  • “I don’t know how to get support from the school.”
  • “I’m not sure if my child will ever learn read.”

Notice how the answer to just this one question provide extremely powerful marketing copy.

Instead of listing her credentials on the first line of her website (e.g. “PhD, LEP, ABSNP, BICM, PPSC, etc.”) like most of Dr. Emily’s competitors do, she says something relevant to customers, like:

“Is your child struggling to get the support he or she needs in school? Together we’ll take the first step to understanding how to help your child make the most of their reading ability.”

No mind games, no sleaze and no hard selling. Dr. Emily just asked her customers about their problems, and restated the services she provides using their words.

If you listen to your customers…they’ll write your marketing copy for you.

Stand Out from your Competition

Another one of Dr. Emily’s most fruitful questions was:

Q: What’s not ideal about your previous assessment?

Again, to her surprise, when parents talked about assessments received from Dr. Emily’s competitors, the answer was uniformly:

A: We got the diagnosis, but don’t know what to do next.

With the answer to this question, Dr. Emily learned how to differentiate herself from her competitors.

When talking with potential customers, she now tells them:

“When we work together, you won’t just get an assessement, you’ll get an action plan so you’ll know exactly what to do next.”

If you listen to your customers…they’ll tell you how to beat your competitors.

The Results

Simply by interviewing her customers, Dr. Emily accomplished what none of her competitors had:

  • Her competitors typically took 3 – 5 years to fill their client list. Dr. Emily did it in 18 months.
  • Dr. Emily now has a 4-month waitlist for her assessments.
  • And that’s after doubling her price over the last 18 months.

With the power of customer interviews, Dr. Emily was able to build a successful company in a crowded space, with absolutely no sales experience at all.

Interviews will Increase your Sales Too

Whether you’re at a high-tech accelerator in Asia, a social enterprise in Seattle, or are simply a service provider:

Interviews will teach you how to sell.

Remember that building your product is the easy part…selling it is the hard part; and interviews will do the heavy lifting.

Interviews will help you:

  • Describe your product to ensure customers buy it
  • Find enough customers to tell about it
  • Differentiate your product from the competition
  • Decide what features to build first

The answer to virtually every marketing and sales question you have about your business can be answered with…

Customer interviews.

Don’t do it Alone

You can get help creating your sales strategy. The first workbook in the FOCUS Framework will walk you through every step of the interviewing process.

And, if you want hands-on, immersive workshops on mastering customer interviews, join me and the 300+ founders who have already registered for FOCUS Con:

FOCUS Con: Mastering Customer Interviews - A Digital Conference

This first FOCUS conference is December 1st and it’s dedicated to Mastering Customer Interviews.

At FOCUS Con you’ll learn:

  • Who to ask for interviews
  • How to ask for interviews
  • What to ask during interviews and
  • How to turn their answers into a sales strategy

All with live workshops, networking and personal mentoring (and without the expense of plane tickets).