The basics of growth marketing

What is growth marketing?

Growth marketing, also known as growth hacking, has been on the rise since 2010, coinciding with the growth of tech start-ups after 2008’s global recession. You can see this fast rise in recognition in the graph below, and the term’s speed into the mainstream fits its definition. Growth marketing is all about rapid and iterative experimentation with the ultimate goal of growing sales, revenue, and profit for a business. It moves beyond the top of funnel metrics like awareness, website visits, and brand sentiment—the main focus areas of traditional marketing—and instead seeks to understand the data behind what drives the bottom line of the business.

Traditional marketing often focuses on short-term wins (like having a July 4th sale), running radio advertisements with the hopes of increasing website traffic, or putting a billboard on the side of the road. The image below illustrates the concept of traditional marketing at its finest.

Growth marketing applies a data-driven mindset to those same concepts. Now that you know what it means, let’s unpack what growth marketing is in practice by going step-by-step through each stage of the growth funnel: customer acquisition, onboarding & activation, retention, referral, and ultimately revenue growth.

What does growth marketing actually look like?

There is no one size fits all definition that applies to growth marketing. The same growth strategy techniques that helped Uber won't work for every business. But one constant among growth marketers is the drive to try new things.

If a sales team’s motto is Always Be Closing (thanks, Alec Baldwin), then a growth marketer’s motto is Always Be Testing.

Growth marketers ruthlessly experiment and try new things until they find something that sticks. Running the same July 4th sale every year doesn't cut it. Instead they opt to test ad creatives—marketing lingo for the visual assets in an advertisement,—to see if their audience prefers a male or a female image. Or a male or female voiceover in a YouTube commercial. Or a red sign-up button instead of a blue one.

Growth marketers are nuts about conversion rates, flywheels, and lifetime value. In SaaS businesses, like Mailgun and Mailjet, it's common to offer a free trial for users to get a feel for the product. Free trials are an incredible tool for exposing your product to the marketplace, but free trials don't pay the bills. You need paying users, and you need those paying users to stick around for as long as possible.

To get paying users you need to convince people to pay for your product. Users are willing to give you money if you help them solve a problem. In marketing strategy terms, this is called customer acquisition.

Step 1: Customer acquisition

Growth marketers have a few common areas today for getting customers through the top of the funnel:

• Organic Search. This traffic is free but there is an entire subset of marketing called Search Engine Optimization (SEO) with the sole purpose of getting as much of this traffic as possible.

• Paid Search. Also called Search Engine Marketing, this is the process of paying for keyword placements on the search result page of (typically) Google.

• Paid Social. This is advertising on social media networks like Facebook, Instagram, Twitter, and LinkedIn.

If you want to acquire customers in a short period of time, you’ll have to pay for it. Organic Search is a great tool but it takes a while to build up authority on a given topic, whereas Paid Search and Social are much more immediate.

Start-ups measure their ability to acquire customers into a metric called Customer Acquisition Cost, or CAC. The CAC represents the dollar value it takes to acquire new users, and growth marketers are (rightfully) obsessed with CAC.

To keep the math simple, say you average $10,000 in cost every month and you acquire 1,000 customers. Your CAC is $10. But then your boss comes to you and says hey Jim, to hit our profit targets we need to lower our CAC to $7. How can you do that?

This is where the experimentation side of growth marketing comes in. The easiest way to lower your acquisition costs is to increase the rate you convert window shoppers into purchasers. In digital marketing terms, that's your website conversion rate.

A/B testing is a core practice to successful growth marketers. Take the current version of your website, change something about it, then test the two versions with a statistically significant sample of website traffic to determine which one converts your visitors into customers at a higher rate.

There are many ways to do A/B testing, and you can even experiment with more than one variation at once through multivariate testing. Ultimately it’s the growth marketer’s job to decide what elements of a website to tweak and test. It can be as simple as changing the color of a button from red to green, all the way to a complete redesign of your homepage.

Back to Jim. Jim has designed an experimental version of their main landing page and after running an A/B test was able to lower their CAC to $7. Go Jim!

But now that you’ve acquired those customers, you have to onboard them to your product.

Step 2: User onboarding & activation

Having paid users sign-up for your product is great, but you can’t abandon them after they give you money. You have to teach them how to use your product to solve their problem, otherwise you risk them churning. Churn is a metric that shows the rate at which customers stop using, and stop paying for, your product. All that time and money spent acquiring new customers is worthless if you can’t get them to stick around.

This is where onboarding and activation sit in a growth marketers tool belt. Onboarding is the process of introducing your product and its features to a customer. This can be done through an in-app walkthrough of your key features, showing users where to click to access the tools they need, or an introductory email sequence. You can also onboard users over the phone by calling them up and verbally introducing them to your product. Superhuman, a new email client billed as “the fastest email experience ever made”, does a concierge 1-on-1 onboarding call with every new user. A good onboarding experience walks your new user through their first stages of using your product, and if done correctly gets them to complete the major hurdles.

Successful onboarding leads to user activation, which means the user has completed all the steps they need to actually use your product. Let’s take Mailjet as an example.

John signs up for Mailjet because he wants to create a cat-facts newsletter. This is the customer acquisition stage.

Before John can send his newsletter, he needs to complete a few steps first. He needs to add and verify his JohnsCatFacts.com domain. This can be complicated, so we’ve done our best to write how-to guides and make the process as simple as possible. Over the next few days John gets a series of emails from us, walking him through the exact steps he needs to take to get started using Mailjet sending that cat facts newsletter of his dreams. Once John has completed this step, he is Onboarded.

Then John can send his first cat facts email! After he sends his first newsletter, John completes the Activation stage.

The specific goals for Onboarding & Activation will be different for every business. Ask yourself what are the major steps a user needs to take before they can actually use your product?

Step 3: Customer retention

Remember Jim? After lowering his company’s CAC to $7, he’s the subject of every watercooler conversation. But there’s a problem.

The new users he acquired are only subscribing for a month and then they’re cancelling their account. Before Jim’s test, users would stick around for at least 3 months using the product. What happened? Churn.

There are many reasons users churn. Sometimes the product doesn’t live up to their expectations, or they found a better way to solve their initial problem, or they had a poor experience with your support team, or they just didn’t like your product. Whatever the reason, growth marketers need to understand the why behind user churn.

One way to do that is to offer an exit survey when a user cancels their account. Asking them a simple question of “Why are you cancelling your account?” with a few pre-written options for them to select is a great way to start understanding the drivers behind churn.

An exit survey can help you understand why users who have decided to cancel are leaving, but what if you want to predict churn before it happens, and prevent it from harming your retention rates?

A leading indicator of churn is customer satisfaction, or the CSAT score. It’s a simple measure of how satisfied customers are with your product. Another measure is NPS, or Net Promoter Score. Any time a company has asked you “how has your customer experience been on a scale of 0-10?”, that’s an NPS survey.

Whatever way you decide to measure customer happiness, it’s important to track it regularly so you can stay ahead of future churn. Give users an avenue to provide feedback on your product and you can start making improvements to retain more of your customers each month and create a better user experience.

Step 4: Referrals

Dropbox revolutionized referral programs with a 2-way referral. Invite someone to Dropbox and they’ll get extra cloud storage, and the person referring them will also get extra storage. It's a win for both parties, and it helped propel Dropbox to be the leading provider of personal cloud storage.

The important lesson to growth marketers there is that incentives can be a powerful motivator to grow your business. In Dropbox’s case, users are incentivized to invite their friends, because they receive more storage for free. Each referral had a cost to Dropbox, even if the additional storage is ultimately free for the end user Dropbox still needs to pay for storage themselves, but likely that cost was much lower than acquiring users through other channels.

Plus, word-of-mouth is often a more convincing type of marketing campaign. Who would you trust more, a big company advertising on Facebook or a close friend saying that you should really check a new product out?

Referrals don’t have to cost you anything. In fact, if you have a really great product then users will want to talk about you. Users will write blog posts, how-to guides, and create Youtube videos if they love your product. These are often created by power users, users that are digitally shouting your product from the rooftops. Growth marketers will identify those folks and start building relationships with them. Little things go a long way with your power users, such as sending them swag like company t-shirts, mugs, or colorful socks.  Make them feel like the company recognizes their contributions.

Wrapping up

To grow a business you need to nail the fundamentals. You need a good website, you need consistent sources of traffic, ideally from free channels like Google Search to help drive your CAC down, and you need to have a product that serves a need and that your users enjoy using.

Growth marketers serve an important role in today’s fast growing companies by optimizing every step of the user funnel through growth marketing strategy. Starting with customer acquisition, user onboarding and activation, retention, and referrals, they take a broad approach to marketing. Growth marketers will relentlessly test and tweak new ideas until something sticks, then they’ll rinse and repeat.

So, now that you know all about growth marketing, you can go out there and use it to your advantage. Lights, camera, action!

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This guide was written by Mailjet’s very own growth marketer, Nick Lafferty. Check out his website for more articles on marketing and growth.