When we published our playbook for customer acquisition a few months ago, we explored the three primary “lanes” of consumer growth:
- Performance marketing
If you’re building a consumer business, these are your only three choices for long-term, sustainable growth. But picking the right “lane” is just one of many decisions on the way to building a winning business. In this post, we partnered with the Reforge team to expand on this framework and provide more practical advice on developing your holistic growth strategy.
Below, we’re going to help you:
- Understand how your product will grow
- Put this understanding into practice
- Avoid common growth pitfalls
Step 1: Understanding how your product will grow 🏎
If you ask ten people around your company “How does our product grow?” you’ll often get ten different answers. You might hear “by building an amazing product” or “PR” or “SEO.” This misalignment is a big problem, because it'll lead to your teams spinning their wheels on misguided projects, ill-timed bets, and low-impact work.
To avoid this, you and your team need to have a firm understanding of how your business will likely grow. We call this building a Growth Model for your business. With this, you'll know which growth investments to make right away, which can wait, and which you should avoid altogether.
Think about your business like a high-performance race car. The same components that help a car drive faster are also the components of your Growth Model:
- ⚙️ The (Growth) Engine
- 💥 Turbo boosts
- 💧 Lubricants
- ⛽ Fuel
Self-sustaining growth loops that drive most of your growth (e.g. virality, performance marketing, content, and sales).
One-off events that accelerate growth temporarily but don’t last (e.g. PR, events, Super Bowl ads).
Optimizations that make the growth engine run more efficiently (e.g. improved customer conversion, a stronger brand, and higher customer retention).
The input that your engine requires to run (e.g. capital, content, users).
All four of these components help your business grow faster, but understanding your Growth Engine is the most important part because it’s the only component with the potential to be self-sustaining. In other words, engines naturally create an output that can then be re-invested in more growth. At Reforge, we also refer to this as a Growth Loop.Below, we’ll summarize how to determine and scale your primary ⚙️ Growth Engine, and then we’ll explore 💥 Turbo Boosts, 💧 Lubricants, and ⛽ Fuel. Finally, we’ll talk through putting this conceptual model into practice and avoiding common pitfalls.⚙️ GROWTH ENGINE(S)Your growth engine will drive the majority of your growth, and so it’s critical that you get this right. As we’ve shared previously, companies grow primarily through four possible Growth Engines:
- Performance marketing: FB, AdWords, TV, etc.
- Virality: Word-of-mouth, referrals, inviting friends, etc.
- Content: SEO, shareable videos, or newsletters, etc.
- Sales: Outbound (and inbound) salespeople
There are two additional types of growth engines that we’ve seen — Partnerships (e.g. channel partners, affiliates, integrations) and Physical Space (e.g. retail locations, shelf placement) — but they are less common, so for simplicity, we’re going to exclude them from this post.
Using just these four core engines, we can explain the growth of every breakout success. Here are a few examples:
- Uber/Lyft: Virality + Performance marketing
- Snapchat: Virality
- Zoom: Virality + Sales
- Slack: Virality + Sales
- Salesforce: Sales
- Thumbtack: Content + Performance marketing
- Atlassian: Virality + Sales
- Airbnb: Virality + Performance marketing
- Eventbrite: Virality + Content
- Tesla: Virality + Sales
When a company is initially breaking out, it’s almost always getting most of its growth from just one engine. Companies that are able to reach mega scale usually figure out how to layer on additional growth engines over time.
In our previous post, we outline a 3 step process to determine which engine is likely going to drive your growth and operationalize it: Validate, Commit, and Scale.
The first step is to validate (as cheaply as possible) that a given lane is right for your business. There are two approaches to validating this. One, determining which lane is a natural fit for your business model. Two, looking at your data.
Once you’ve validated a channel, the next step is to commit to the lane. In our experience, most companies underestimate how large and disciplined the effort will need to be to turn any of these lanes into a superhighway.
Committing to a lane generally includes doing two things, both of which can be scary, particularly early in a company’s life:
- Dedicating a significant amount of cross-functional resources to the effort, including product, design, marketing, and engineering
- Influencing the core product roadmap and customer experience to optimize for the lane being pursued
Once you have committed to a lane and start to see meaningful results, the next phase is to become world-class at the lane. The hallmark of this third stage is overcoming diminishing returns. Virtually every customer acquisition channel becomes harder over time because you are acquiring lower and lower intent customers."
For more, don't miss our deep-dive on consumer growth engines.
💥 TURBO BOOSTS
Next, we have Turbo Boosts. Similar to a turbocharger in a car, these are tactics that can accelerate growth for a period of time but don’t deliver ongoing acceleration. They include things like:
- Brand marketing campaigns
These tactics aren’t “engines,” because in most cases they aren’t sustainable and repeatable at scale. In the Reforge Growth Series and Advanced Growth Strategy programs they are referred to as “Linear” efforts. For example, any startup that has received the “TechCrunch bump” knows that it can give you a nice boost in traffic, but it’s often not clear what to do next — it’s hard to use that initial press boost to earn more press.
However, Turbo Boosts can still be very valuable tools for kickstarting and accelerating your growth rate, particularly at important inflection points for your company, like lighting the initial spark, or launching a new product or market.
Lubricants don’t drive growth directly, but instead optimize the efficiency of your engine. Also, without enough lubrication, your engine will stop. There are three broad categories of lubricants:
- Conversion: Increasing the rate at which customers sign up for your product. This includes optimizing clickthrough rate on ads, the effectiveness of sales people, and increasing signup funnel conversion rates.
- Activation: Increasing the rate at which customers use your product for its core purpose. This includes everything related to the new user experience and how your customers learn about and begin to use your product.
- Retention: Improving the rate at which customers continue to use your product. This includes everything related to the ongoing customer experience.
Of these three categories, retention is the most important. As Brian lays out in this post:
"Retention is the core of your growth model and influences every other input to your model. This is important because if you improve retention, you’ll also improve the rest of your funnel." - Brian Balfour
Finally, we have Fuel. Without it, even the most optimized engine won’t run. The type of fuel required is specific to the type of growth engine you’re running:
- Paid marketing and sales engines primarily need capital, which can be invested in ads or salespeople. This is why payback is an important metric to measure marketing and sales engines: it determines how long it takes for enough cash to be generated to start the loop again.
- Content engines unsurprisingly need more content, which can be used to attract users. Often, this content is generated by users, in the form of things like reviews, photos, or videos. In other cases, this content is generated by the company itself.
- Viral engines require only more users, who in turn refer additional users. A common metric to measure virality is k-factor, or the number of new users each user refers. When this number is >1, the product will grow virally.
While every car needs fuel to run, loading up on too much can actually slow you down. For example, the more you monetize users, the more revenue you’ll have to re-invest in sales or marketing, but it will also impact metrics like conversion or retention. The more expensive a product is, the lower conversion is likely to be. Similarly, asking your users to refer their friends in-product can help increase virality, but too many interventions are likely to degrade the user experience and drive churn.
Step 2: Avoiding common pitfalls
Developing an understanding of your ⚙️ Growth Engines, 💧 Lubricants, 💥Turbo Boosts, and ⛽ Fuel will help you avoid the six most common pitfalls of growth.
"Most mistakes in growth are using the wrong growth method at the wrong time. You can think about where your product is on the S-curve of growth to understand where you should be focused. Transitioning to each stage gracefully is what separates great growth teams from the average." - Casey Winters, CPO @ Eventbrite
1. Focusing on ⚙️ Growth Engines when you actually need 💥 Turbo Boosts
Before you have users or capital, you need to find unscalable ways to “spark” the engine. This is done by focusing initially on Turbo Boosts (e.g. PR, events, direct reach-out) to get things started, and over time transitioning efforts to your primary engine(s).
This pitfall is most common in early stage startups, before an engine can drive your growth. All of the engines are a function of either the base amount of users you have or the capital you have. Early on, you don’t have either, so investing in Turbo Boosts makes sense.
2. MISTAKING A 💥 TURBO BOOST FOR A ⚙️ GROWTH ENGINE
The opposite of the above is startups investing too heavily in Turbo Boosts with no engine in sight, or failing to transition to scalable growth engines in time.
To get your initial customers you need to be weighted more towards Turbo Boosts, but at some point you need to transition your efforts to ramping up your Growth Engine and optimizing through Lubricants. A lot of teams fail to make this transition, and continue to try to scale by just firing off more and more Turbo Boosts. This doesn’t scale and will burn your engine (and team) out, because teams end up being spread across a lot of small low-impact initiatives rather than concentrating on a smaller set of high-potential wins.
"This is one of the most common mistakes among new product teams when I ask "How does your product grow?" The answer is typically a long list of turbo boosts. It is typically because there is no hypothesis on what the growth engine is, and as a result they are compensating by trying to cobble together a lot of little things." - Brian Balfour (Founder/CEO at Reforge, Ex-VP Growth at HubSpot)
3. FOCUSING TOO MUCH ON 💧 LUBRICANTS, WHEN YOU REALLY NEED A ⚙️ GROWTH ENGINE OR A 💥 TURBO BOOST
Conversion optimizing your way to growth is a common failure mode. In practice, the ROI on these initiatives will always remain low because you’re optimizing on a small flow of users vs. all of the potential new users out in the world. You’re often better off focusing on Turbo Boosts to drive more users than optimizing what you already have.
This is often a pitfall for later stage companies, too, because spending too much time here leads to hitting the top of the S-curve rather than using your resources to find a second engine that you can layer on to raise the ceiling.
4. FOCUSING ON A NEW ⚙️ GROWTH ENGINE WHEN YOU NEED 💧 LUBRICANTS
This failure mode happens when teams fail to realize the true potential of their current Growth Engine, and instead start to focus on a new Growth Engine prematurely. Focusing on a new Engine too early, and not realizing that building a new engine is really hard, leads to sacrificing a lot of remaining upside with their existing Engine. Instead, teams should strive to tune the current Engine to its full potential. A lot of this is done by going through The Adjacent User.
5. NOT UNDERSTANDING WHAT TYPE OF ⛽ FUEL YOUR BUSINESS NEEDS
Often startups get the advice that they should price higher. Similarly, we’ve seen success stories of companies pricing low or free and being willing to burn a lot of cash in order to win in a winner-take-all market. So, which is it?
The answer relies on what kind of growth engine you’re running and how this impacts the type of fuel you need. If you’re relying primarily on marketing or sales – which require a lot of cash in order to buy ads or hire salespeople – monetizing more heavily may be the route to faster growth. But if you’re growing primarily virally, you need less monetization to grow and want to reduce the friction of users trying and recommending your product as much as possible.
6. FOCUSING ON THINGS THAT AREN’T ALIGNED TO ANY OF THESE
Companies that hit PMF early often see strong organic growth without a clear sense of what drove their growth. This often leads to thinking the growth will continue to come, and getting undisciplined with priorities. Eventually when growth slows, and much of the work being done isn’t contributing to accelerating growth, trouble begins. Instead, look at your primary Growth Engine(s) and compare them to your roadmap – if you find that nothing or little on the roadmap is aligned to accelerating your engine, you’re likely going off-track.
Step 3: Put this into practice
Once you have an understanding of your primary ⚙️ Growth Engines (and the ⛽ Fuel, Lubricants, and 💥 Turbo Boosts that accelerate it), you can put the Growth Model of your business into practice to make better decisions about what to build, when to build it, and getting everyone aligned.
1. PRIORITIZING YOUR ROADMAP
When weighing the myriad of ideas your team has come up with for the year ahead, how do you decide which to prioritize and which to cut? Look to your ⚙️Growth Engines and understand what can make it run faster. Why? Because over the long term, you’ll need to be world-class at at least one engine in order to have a chance to stay in the race.
For example, if you believe that your primary growth engine will be Content (specifically, SEO), the more work you put into capturing high-quality content from your users, the faster your engine will move. If instead you’re focusing on having users invite their friends, you’re wasting your time.
Similarly, if you believe that your growth engine will be Performance marketing, it makes sense to prioritize experiments that help you monetize more effectively to drive profit to fuel this machine.
"In the early days at Thumbtack, so much of our growth was coming from SEO that it made sense for it to dominate our growth roadmap. We spent disproportionate time generating content, earning links, and optimizing conversion on SEO landing pages. Over time, however, it became clear that we were running into diminishing returns from these efforts, and we shifted resources to other levers such as performance marketing." - Dan Hockenmaier
2. ORGANIZING TEAMS
Again, look to your ⚙️ Growth Engines when considering your org structure. What are the most important inputs to your engine, and who’s going to be responsible for each part?
For example, say your primary engine was Virality (specifically, users inviting friends). You likely want a person/team responsible for the three core steps of this loop:
- New user acquisition
- Conversion through the funnel
- Friend invite rate
3. GENERATING IDEAS
Knowing which stage your business is in, along with your primary ⚙️ Growth Engines and ⛽Fuel, gives you clear buckets of ideation fodder.
If you’re an early-stage company, you want to spend most of your time exploring ⚙️ Growth Engines and 💥 Turbo Boosts.
If you’re a later-stage company, it makes sense to spend most of your time ideating on Lubricants and ⛽ Fuel optimizations.
4. ALIGNING STAKEHOLDERS
Aligning around this terminology gives your team a common language to talk about growth. You can now have conversations about which part of the race car you want to focus on, why certain opportunities don’t make sense right now, and most importantly align on what is likely going to drive your business in the long term.
5. SETTING GOALS
Finally, with this framework in mind, you can set better goals based on the inputs that are most likely to drive your growth. For example, if new users ⛽ Fuel your growth, you should set goals around new user growth. Alternatively, if revenue or content drive your growth, those should become primary KPIs.
"Until they understand their Growth Model, many teams are overly focused on big, difficult to move output metrics, instead of its key inputs. At Thumbtack, we ultimately wanted to grow the number of customer projects on the platform, but each team was goaled on a more granular metric that drove it. For example, the SEO team focused on metrics like new pages indexed and the uniqueness of content on those pages." - Dan Hockenmaier