Growth Hacker's Digest - Edition 12
For this week, we are revisiting the concept of premature scale. Earlier, we touched on CAC and how you can use this to manage your VCs better. Today, we look at the other component that can drive premature scale, which is CLTV (customer lifetime value). It’s great timing that Hubspot just released their playbook on transitioning from a startup to a “scaleup”. I'll talk more about it below.
I’m also uncovering the most controversial growth hacks done by today's startup unicorns, which produced both positive results (AirBnb, Reddit) and negative results (Zenefits, RapGenius). I'll share the principle which I think draws the line between the two.
As for other blog posts of note:
- In GrowthHackerKit, Mark from TigerTiger Agency goes through the basics behind calculating your target Cost Per Acquisition / Customer Acquisition Cost.
- How to arrive to a “minimum sellable product” with the right copywriting (by Julie of PageWiz)
- A definitive checklist for creating Compelling Content that Builds Traffic on its Own (by Siege Media via Ross's Blog) As a quick announcement, we will be migrating soon from the current Teachable platform to the Rainmaker platform. The simple reason is that it will allow me to complete the vision of Growth Hacker Kit — a proper toolbox that goes beyond just blueprints and manuals, to a toolbox that now includes single-feature apps and done-for-you services. Once I get the migrations done (~2.5k subscribers isn't easy to manage!), I will make the announcement. Watch out for it 🙂
Kenn from GrowthHackerKit | @kennyfrc
New at GrowthHackerKit
by Tam of The Hustle
You've been trying to grow the startup faster and you’ve spent time digesting all the best practices and case studies by other startups. However, there will be a point where you will need to evolve your distribution model in order to increase your key metrics. Many successful startups have pursued the “scrappy” route or, as Paul Graham likes to call it, the “naughty” route (http://www.paulgraham.com/founders.html). In this article, Tam shares the most controversial growth hacks ever made.
The key questions here are 1) what qualifies as a “scrappy” growth hack and 2) what qualifies as a “sketchy” growth hack? Personally, the principle that I use is if there’s a higher value add for partners & customers vs the value add for your startup, then it's "scrappy". Harming competitors or customers is considered “sketchy” for me. Given that, I would state that the growth hacks of Reddit, Tinder, Airbnb, Facebook, MySpace, BitTorrent, YouTube, Amazon, and Oracle are fine. Other companies in the list harm their partners or competitors (Zenefits, RapGenius, SalesForce, Bing, Uber, PayPal) and others disrespect user privacy (Circles and Glide).
There's another angle that you can argue for as well, which is deception. Deception for me, however, is a shaky premise because there's the 'white lie' type of deception and there are 'harmful lies'. "Net Value" is a better principle to decide on. To illustrate, fake users in Reddit are a "net value add" because it sets the tone for the types of conversations that should exist in Reddit. The whole Zenefits debacle is a "net value loss" because it prioritized availability of insurance over reducing customer risk .
How would you draw the line?
by Brian Halligan of HubSpot
In the previous newsletter, I’ve mentioned that premature scale is the #1 killer of startups. I’ve made a case of why you should know your CAC down to each activity (ie. You should know the CAC linked to X medium, with Y target market, using Z advertisement). Now we’ll look into the other piece of the puzzle, which is CLTV (Customer Lifetime Value).
Brian from Hubspot shares how he enabled his company to scale by making tweaks on the 3 main segments of CLTV: customer, product features, and product pricing. He chose a specific niche within the overall “marketers” customer target, a specific use case within Hubspot's large portfolio of tools, and a more comprehensive price card to accommodate broad types of enterprise customers. Click the link to know the model better.
by Ross Hudgens of Escaping the 9 to 5
Beyond traffic building via linkbuilding and PPC advertising, what really drives traffic is compelling content. It has been difficult for me to find a reliable checklist (Noah Kagan’s comes close -> http://okdork.com/2014/04/21/why-content-goes-viral-what-analyzing-100-millions-articles-taught-us/?hvid=41eiUq), but this one takes the cake so far. This is a great checklist to print out for your content work.
by Julie Ellis of Page Wiz
A product has 4 key stages in its lifecycle: a minimum scalable product (CLTV * 3x >= CAC), a minimum usable product (40+% retention rates), a minimum viable product (2% trial-to-purchase), and a minimum sellable product (2% landing page conversion). As you can see, it is mapped against an inverse funnel: from loyalty, it moves to repeat use, to initial revenue, and finally to customer interest. Too many startups jump in and push for the trial. You need to ensure that the value proposition is sellable first. And nailing the value proposition is an effect of nailing the copywriting. In this article, among the 10 tips, #4 is the most known yet the most overlooked part of the copywriting game. I dislike metaphors, but it’s akin to dental floss. You know you need to do tip #4 but you never built the habit to keep doing it.
Date: March 07, 2016