The document outlines six principles for sustainable growth:
1) Growth is a methodical process that requires testing different growth levers, not "silver bullets."
2) Growth involves optimizing the entire customer funnel, from acquisition to activation to retention and revenue. Companies need an advantage in other parts of the funnel besides just acquisition.
3) Sustainable growth comes from optimizing the long-term retention and lifetime value of customers, not just short-term gains.
4) All users have a cost, whether direct acquisition costs or indirect costs of employees' time, so companies must understand costs and benefits.
5) Companies need to know if they are in the traction stage, focusing on product-
3. 3
Principle One:
Growth Is A Methodical Process
There are no silver bullets, single “hacks,” or
magical solutions. Finding growth levers is a
methodical process.
4. 4
Principle Two:
Be A Pirate (via Dave McClure)
Growth is more than just “Acquisition.” Growth is
about the entire funnel...
5. Credit: Dave McClure “Startup Metrics For Pirates”
AARRR
5
Revenue
Referral
Activation
Retention
Acquisition
This funnel helps you understand the
most important comparison in
growth...
CPA to LTV
6. Where Is Your Growth Advantage?
6
Over time, all advantages at the
acquisition phase of the funnel get
competed away....
so you need to be better than your
competition at some other part of
the funnel...
Revenue
Referral
Activation
Retention
Acquisition
1
2
to turn the CPA to LTV equation in
your favor.3
7. They competed in the same acquisition channels (Facebook ads
and feed) but....
Example: Zynga vs Kixeye
7
Zynga Kixeye
RETENTION: 2 Months
REVENUE: 2.4% Conversion
RETENTION: 7 Months
REVENUE: 6% - 9% Conversion
LTV: 10X + Higher
Result: Kixeye could outspend/outcompete Zynga in the same acquisition
channel with the same techniques.
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Principle Four:
There Is No Such Thing As “Free” Users
Every user costs money whether you paid for them
directly, or indirectly with your time. Know the cost
of both.
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Principle Five:
There Is A Time For Traction And A Time
For Growth
Know what stage you are at. It dictates the goals of
your growth process.
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Traction vs Growth?
Credit: Sean Ellis - Authentic Growth
Understand Must
Have Experience
Macro Optimization
Micro
Optimization
Product/Market Fit
Turn On The Faucet
Focus On Retention
Start Getting Data
Turn Up The Faucet
Focus On Activation/
Acquisition
Faucet Full Force
Add More Channels
Optimize CPA/LTV
Velocity = Payback Period
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Principle Six:
More Tools ≠ Sophisticated Growth
Growth does not require a magical combination of
tools. There are 4 basic things that will take you
surprisingly far....
15. Growth does not require sophisticated tools
Four Foundational Pillars
15
Analytics Excel
Basic SQL Skills Basic Statistics Skills
Google Analytics + Mixpanel (or KISSmetrics) Your Best Friend
Statistical Significance, Correlation vs Causation,
Regression, Mean/Median/Mode/Distribution
Analysis
There will always be certain analysis you can’t do
in your analytics tools.
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Why Build A Growth Equation
‣ Math Doesn’t Lie
‣ Focus, Focus, Focus
‣ Predictability
‣ Prioritization
‣ Provides A Compass For The Business
18. 5 Steps To Building Growth Equation
18
Define
Success
Metric
Drill Down
Choose A
Channel
Basic
Equation
Define
Funnel
19. Example: SaaS Business
Step 1: Define A Success Metric
19
‣ Success Metric = X + Y + Z
• It’s the variable that you are solving for
‣ What Drives Revenue For The Business?
‣ Always Include A Time Period
• i.e. Not just Active Users, but DAU’s or WAU’s
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‣ What are you optimizing for?
• Learning? Volume? Cost?
‣ What are you constraints?
• Time? Money? Legal?
Step 2: Your Channel Hypothesis
How do you choose the right channel?
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Cost Targeting Control Input Time Output Time Scale
Perfect World
SEM
SEO
Viral
Low High High Low Low High
Medium High High Low Low High
Low Medium Low Medium High High
Low Low Medium High Medium High
Sales Very High High High High High High
Channel value depends on business. For example, SEO input time could be high for one business
and low for another depending on how competitive the terms are.
Step 2: Your Channel Hypothesis
Build A Channel Matrix For Your Business
22. Example: SaaS Business
Step 3: Define The Basic Equation
22
Success Metric = New + Retained - Loss
(Define what New, Retained, Loss Means)
23. Example: SaaS Business
Step 4: Define “New” Funnel Per Channel
23
Success Metric = New + Retained - Loss
New = Visitor * Acquired * Activated
Note: Funnel may vary on channel
24. Example: SaaS Business
Step 5: Drill Down On Funnel Variables
24
Success Metric = New + Retained - Loss
New = Visitor * Acquired * Activated
Visitor Channel = A * B * C
Acquired Channel = A * B * C
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Growth Process Goals
‣ Establish A Rhythm/Cadence Of Testing & Improvement
‣ Forces You To Learn About Your Customer Over Time
‣ Tests Become More Predictable Over Time
‣ Establishes Accountability Among Team (No HiPPO)
‣ Provides Focus Among Team
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Build Your Growth Pipeline/Backlog
List Of Growth Experiments
Example: Growth Backlog Template
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Predict
‣ In the beginning, you will be dead wrong. This is good.
• It means you don’t really understand your customer/
product.
• Over time you will improve. Understand the “why” behind
the success/failure of each experiment.
‣ Use Both Qualitative and Quantative Evidence To Back Up
Predictions
• Qualitative: Customer Dev Interviews, External Lessons
Learned, etc
• Quantitative: Previous Experiments, Surrounding Data, etc
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Prioritize
‣ Focus On 1 - 2 Channels At A Time
• A channel rarely works out of the gate.
• The depth of knowledge on an individual channel becomes
a competitive advantage over time
• Most big companies have been built off the back of 1
channel.
‣ What Stage Are You At? Traction or Growth?
• Need big results? Don’t focus on the micro (i.e. Button
Color)
‣ What Variable Are You Optimizing For?
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Test
‣ What is the MVT (Minimum Viable Test)?
‣ Segment/Isolate Your Test
• i.e. Test a change on a portion of your keywords, not all of
them at once
• Segment large enough to get close to Statistical Signficance
‣ Define The Test Period/Goal
• The number/date when you stop a test
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Analyze
‣ Owner Should Analyze Results
‣ Understand Why They Were Right/Wrong
‣ Averages Can Be Misleading
• Use distribution analysis to get rid of outliers
‣ Understand The Macro and Micro
Source: http://www.kaushik.net/avinash/excellent-analytics-tip-13-measure-macro-and-micro-conversions/
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Team Review
‣ Transparency Is Key
‣ Why Was The Prediction Right/Wrong?
• Drill Down
‣ What Were The Lessons Learned?
• Feed these lessons back into the experiment
‣ Are There Any Repeatable Best Practices?
• Extract the repeatable best practices to inform and gain
consistency of future marketing initiatives.
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Thanks & Resources
‣ Me - http://brianbalfour.com and @bbalfour
‣ Growth Masters: Andy Johns, Andrew Chen, Sean Ellis,
Mike Greenfield, Gustaf Alstromer, Chamath Palihapitiya,
Noah Kagan, Mark Roberge
‣ Stats/Analytics: Avinash Kaushik, Udacity/Coursera/
Boundless
‣ Quora/Twitter