When you think of “growth,” what’s the first thing that comes to mind? Hacks, tricks, experiments, dark patterns?
I don’t blame you. Heck, we’ve even written about how growth hacking is manipulation. So yeah, we’re with you.
I’d like to introduce another way of thinking about growth: something we’ll call the Growth Matrix.
Copy/pasting hacks and tactics you see from others will likely fail you because they’re part of a larger strategy that doesn’t necessarily fit with your business. And you can’t copy/paste strategy. Strategy has to be custom-fit for your business and your team.
Besides that, most hacks and tactics are fads anyways — they work for a short-while until people catch on. And then they’re dead.
And contrary to what’s pushed in the tech echo chamber, growth is not just about acquisition and optimization.
How do you be more strategic about driving growth for your business?
There are two ways to think about what a business produces:
And there are two groups of people that innovations and optimizations can be applied to:
This gives us two spectrums to compare with each other:
In this article, we’ll explore how these two spectrums are combined to help you think more strategically and take a holistic approach to your growth strategy.
This strategy is founded on building new things for new customers, and distributing in new (and old) ways.
In the early days, this is the source of all growth for a business. The founders are shipping code, reaching out to their network, launching on Product Hunt, and hustling for every signup. You’re going from zero to one.
It’s also the main driver for sustainable growth over time. To keep growing, a business must keep innovating both in its product and in its distribution, which can take the form of new marketing channels, new features, new products, and new markets to attract these new customers.
A mistake many founders make is that they push hard for product and distribution innovations to make big leaps and strides until they “reach” product/market fit. Because things are working and it feels like they’ve figured out a winning combination, they stop innovating.
But this catches up to them later on when competitors’ products are now superior, marketing channels are saturated or disrupted, and all of a sudden, things aren’t working.
By taking your foot off the gas pedal, you can you lose precious momentum, which is hard to get back again.
So which features or products are you building to attract new customers? Which channels are you experimenting with? Which big new project are you giving team members autonomy to explore?
Tracking the efficacy of innovations for new customers is fairly straightforward:
This strategy is founded on building incremental improvements for new customers in your product and marketing channels.
It’s also the most traditional perspective of growth in the startup-sphere.
Optimizing for new customers means figuring out how to turn more website visitors into leads, more leads into customers, and each step along the way.
What many entrepreneurs and growth teams don’t realize is that they may be relying on optimization too much.
Focusing entirely on optimization and then expecting a big result will leave you disappointed because, by nature, optimization is about getting small, incremental wins. It’s rare that an optimization will make a drastic improvement that will unlock growth for a business.
The more likely scenario is that an optimization compounds over time to make a material difference over a year. But it’s still likely not going to have as much impact as an innovation.
Nonetheless, don’t discount optimizations. They’re still very important, but not the key to creating big wins.
The purpose of an optimization is to improve the efficiency of an innovation.
So which parts of your funnel perform poorly? What hasn’t been touched in months or years? How many small improvements can you make?
Metrics to track for optimizing to acquire new customers:
This strategy is founded on building new things for current (or past) customers, and distributing in new (and old) ways.
This is where we start to get into uncharted territories.
Most founders are only ever focused on acquiring new customers and will do whatever it takes to get them. But what about your current customers?
Most know that it’s a lot harder to acquire a new customer than it is to retain an existing one, but did you know it’s much more effective to sell to current customers than it is to sell to a new customer?
Here are some pieces of evidence from Invesp to back up that claim:
Innovating for your current customer base is a massively missed growth opportunity for most companies. You already have their trust, contact information, and credit card… you just need to figure out how to keep becoming more valuable for them.
A revised pricing model, add-on features, add-on products, integrations and partnerships, and new features can be huge growth levers for you.
Ignore upsells and expansions at your own peril.
Expansion revenue will help you:
So how can you justify doubling your prices? What other complementary tools are your customers paying for? What’s your current potential for expansion revenue?
Here’s a good place to start to track how innovations for current customers are driving growth:
This strategy is founded on building incremental improvements for current customers.
It’s ideally fit for products with at least one of these characteristics:
Now, every company can optimize for current customers by investing in support, gathering more feedback from customers, and fixing bugs. But your creativity will be limited unless you have one or more of the three characteristics mentioned above.
Really what it comes down to is volume. To optimize for current customers, you need volume. Otherwise, it’s either going to either be impossible or take far too long to come to a conclusion.
Products with a large number of freemium users should focus on optimizing the upsell path from free to paid account.
For products with a strong referral system, word of mouth, or virality, optimizing the referral system can actually have a huge impact since it naturally compounds. Increasing your viral coefficient even a couple of decimal points compounds into substantial gains.
Inside sales teams stand to gain from an optimization to increase the number of customers they can upsell. Doubling the amount of responses they get from an outreach campaign could double the amount of deals closed. Doubling the conversion rate with a new selling method could also double revenue from closed deals.
So how can you get more free users to become paying users? How do you increase the effectiveness of your referral program? Is there a new method or channel for upselling customer customers?
Metrics to track:
The next time you brainstorm new campaigns, experiments, or tests to drive growth, try to plot it in one of these four categories.
Or the next time you sit down to plan for the next quarter, figure out how you can diversify your growth strategy from just pure acquisition or optimization strategies.
Your next great growth lever might be from a place you don’t expect!