Transcript of Why Everybody is Growth Hacking
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John Jantsch: Growth hacking – it’s not just for a little startup SaaS companies anymore, nope. Everybody’s doing it. We’re going to talk to Sean Ellis author of “Hacking Growth” – check it out.
Hello and welcome to another episode of the Duct Tape Marketing Podcasts. This is John Jantsch and my guest today is Sean Ellis. He is the CEO and co-founder of growthhackers.com and he’s also the co-author of “Hacking Growth” – how today’s fastest growing companies drive break out success. So Sean, thanks for joining me.
Sean Ellis: Thanks John, you have me on.
John Jantsch: I think that going back about a year ago, I was on growth hackers, like an AMA or something.
Sean Ellis: I think you are.
John Jantsch: Do you do this every week?
Sean Ellis: We often did 2 of them in a week. It’s great. It’s a great opportunity for the community to ask questions of interesting people and get the learning real time you.
John Jantsch: Yeah, that was fun for me because I’m sure your community skews a little younger than my community sometimes and certainly younger in their ambitions for starting a business, so it’s kind of fun energy.
Sean Ellis: Yeah, I’ve done a few AMAs myself and you definitely get some writer’s cramp by the end of, lot of keep pounding.
John Jantsch: So let’s define the term – growth hacking. Because I think it’s probably abused and misused.
Sean Ellis: Absolutely. It’s defined about a 100 ways by a 100 difference people. But as the guy who coined the term, I think my definition maybe a little bit more, hopefully. So it’s a rapid experimentation across all customer journey. Marketing traditionally is very acquisition focused but growth hacking takes that and takes really all steps of the customer journey – increasing engagement, even revenue experiments but really running experiments across the customer journey to grow customers and ultimately revenue.
John Jantsch: That expanded, well, it’s not expanded because like you said, you created. But I think unfortunately a lot of people have a tendency to shrink that definition to being about some clever way that they trick people into subscribing or sharing their content or something that wouldn’t have happened organically.
Sean Ellis: The output of all of these experimentation as often pretty creative, it clever things but most the time what you think thing’s going to work doesn’t work and the only way to know what’s going to work is to do experiments. And the more experiments you run, the more likely you’re going to come across something that’s really game changing for your business.
John Jantsch: Let me push back a little bit from somebody who is a long time marketer. Are we really just to finding good marketing?
Sean Ellis: I think we probably are. I think you’re right. I think that unfortunately marketing for a lot of people has become primarily about customer acquisition and branding. If you think back on the 4 piece of marketing, one of them is product. But product as a means of growth, there’s something that most companies don’t put a lot of investment in and they should.
John Jantsch: Yeah, I’ve said a long time ago, I think I wrote it in my second book that the greatest source of customer acquisition is a happy customer.
Sean Ellis: Absolutely. The fastest growing company, so when I was at LogMeIn and the Dropbox. By far our leading source of customers was other customers.
John Jantsch: So with that definition or with that sort of conclusion, I suppose, I think we could then also conclude that growth hacking is for everyone.
Sean Ellis: Absolutely. I think it’s done differently in really small companies or in big companies. But people should be holistically looking at the customer journey and think about the levers of growth is being multiple areas of that journey instead of just buying another advertisement or testing another advertisement. And things you do to activate new customers are often way more powerful than just running another advertisement somewhere.
John Jantsch: And I think that unfortunately, it’s got a little bit Pigeonhole to SaaS premium models like Dropbox.
Sean Ellis: Yeah, I think part of the reason that’s Pigeonhole bears that in SaaS, it’s really clear that if you’re not experimenting across that full customer journey, you are not going to be successful because if you can’t retain a customer in SaaS, I mean, all businesses should focus on retention. But when you have a recurring revenue model where you’re getting a subscription each month, when you lose those subscriptions; if you have a 1000 customers and a 5 percent monthly turn rate, that means every month you lose 50 customers. And so if you don’t add more than 50 customers, you didn’t grow, you’re shrunk. So it’s just a little bit more obvious in SaaS but I think it does apply to all businesses. It’s just SaaS’s grabbing onto a probably faster than other areas.
John Jantsch: So if I’m that more traditional business, maybe a lot of my transactions are actually face to face across the desk, how would I unpack this idea of bringing this mindset into a business like that, where would we just start?
Sean Ellis: What you just talked about earlier, you said that customer referrals are a really important part of growth in a lot of businesses. And what drives a customer referrals? A great experience. And so I think that starting point is to understand what that experience is. To understand, first of all if you don’t have it. So some products have marketing and something that’s trying to make up for a an undifferentiated or not just very valuable customer experience. That’s the first place, I always start just understanding – does somebody consider this product a must have and if so, how are they using and what’s the benefit they’re getting from it and how can I build my customer acquisition and conversion engine to get people to that experience. So that’s the starting point, just understanding the people and the experience that they’re having.
John Jantsch: I think that is such an easy thing actually for a lot of businesses to do but it’s an afterthought so often because I interview a lot of customers of customers. It’s a process that we do to help them develop strategy. And 90% of time they don’t know what their customers actually value and think as unique and there are often surprised when we come back and say well here’s what we keep hearing. It’s such an easy thing to do.
Sean Ellis: It is and that’s a lot of what I used to do in shorter term in BP marketing roles was just – you find products that you have some passionate customers and really just try to tap into what makes a passionate customer and how do we build an engine of growth around, getting more people to that great experience, get more the right people to that great experience.
John Jantsch: Okay, this is a fill in the blank question. You can’t to growth hacking without?
Sean Ellis: Without must have customer value.
John Jantsch: You’re close, I was going to say without measurement.
Sean Ellis: That as well, part of that then becomes measuring impact on that customer value. That’s another really important part of actually building that engine is one, how do you quantify that value? It’s a pretty touchy feely thing to just say we need more value. But what the fastest growing companies like Facebook have done is that they’ve actually put a in metric on that value, a metric on the number people who experience that value. So Airbnb has done it, Uber has done it and the entire company then is optimizing their day to day activities on increasing the experience that quantified experience that leads to more sustainable growth.
John Jantsch: Yeah and that’s a really interesting point because I like the times when people start talking about measurement which unfortunately a lot of marketers don’t do at all. But you certainly have a lot of people jumping on the big data train and it’s like look at, everything we can measure. And I think quite often the real challenge is measuring what matters.
Sean Ellis: Yeah and in growth hacking in particular, there’s one metric that we refer to as the Norstar metric which is that quantification of value and once you have that metric, now you can start to think about all the other activities that you do and how they impact that metric. And through the experiments that you then start to run, if I do it this way or this way, which has the better impact on my Norstar metric? So that’s where the experiment piece comes into play.
John Jantsch: So I can hear the wheels turning in listeners right now. How do you find that thing?
Sean Ellis: How do you find the Norstar metric?
John Jantsch: Yeah.
Sean Ellis: That’s really what I was talking about, I’m first trying to find the most passionate customers and I do it through surveying personally. I ask a single survey question which has been really powerful for me which is how would you feel if you could no longer use this product? And I find out more powerful than just a satisfaction question and when I ask that question, I’m looking for people who say they would be very disappointed without the product. When I can see those people, I can set a benchmark and say that the passion is really low on this product, so as a marketer maybe I don’t want to try to grow that product. But assuming that it’s relatively high, then I want to find out what is the most common benefit that these really passionate customers are finding from the product and that’s what I then start working outward into my messaging now, really tried that set that right expectation and promise for what the product is going to do and then fine tune the delivery of that experience for all new users.
John Jantsch: Do you think you could apply this then to a non-product company, so could the question be something like how would you feel if you could no longer acquire the service or do business with this company? It is that possible?
Sean Ellis: I think so. I mean ultimately if you’re going to keep working with the company or if it’s a service, it is a benefit that you’re getting from that and so in sense you’re productizing that service but you want to understand what is the collection of experiences that ultimately deliver that benefit and how do I make sure that one customer or potential customers are aware that those experiences exist and they’ll get this benefit and then what are all the things that stand in the way, where’s the friction that prevents new customers from actually getting to that point. If you can get them to that point, you’re much more likely to having to stick around long term.
John Jantsch: One of things that I’ve been preaching for years or something I call the marketing hourglass which was really my model of the journey and they’re 7 stages and no like, trust, try by repeat and refer. And I find that most people are focused on the front end of that. No like to trust. The interesting thing that so few people are saying in marketing is this idea that the stages I call by and repeat, maybe refer are really where we should be spending as much energy in how to we get them to click on the.
Sean Ellis: Absolutely. And that challenge with that is that most of those levers of growth actually don’t fall within marketing sphere of influence. They actually fall within the product theme.
John Jantsch: So how do you then take growth hacking and say, okay that’s going to be marketing, it’s going to be in sales, it’s going to be in customer service, it’s going to be in engineering. Is it possible to have an umbrella department of growth hacking?
Sean Ellis: Yeah, that’s the hard part, that’s really I think Facebook deserves a lot of credit for coming up with this idea of a growth team that is a cross functional team that basically, I think the best way to think of it as the interface between marketing and product. But essentially marketing people are used to using data and iteration to drive a result, product people not as much. And so, it’s kind of using that marketing approach and applying it in the product part of the business and particularly in that first user experience and it tends to work best when you have a growth team, so like a “head of growth” and some dedicated resources to run that experimentation. But clearly, if you start impacting the core product experience, then the head a product is going to take a pretty keen interest in what’s going on and often they’re going to be pretty involved in the process. And if they’re not, they’re going be trying to block the process a lot of time. Small company, it’s maybe not so hard; but as the company gets bigger then there’s a lot of just territorial situations where people are less comfortable when someone starts to get into their area of control.
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So, a lot of businesses today have grown to the point where they are by being good at a couple of channels, maybe it’s sales, maybe it’s word of mouth. But growth for them, socially acquisition or new acquisition, is going to come from maybe jumping into some new channels . So how do you recommend that people, I mean, when I first started my business, maybe there were 5 or 6 places we could get the word out; now there’s about 18 channels. How do you prioritize, pick, decide where you’re going to put your energy. Obviously the place where we can get the most return but how do you figure that out?
Sean Ellis: Yeah and so do you mean just on channels or do you mean on both channels and within that user journey?
John Jantsch: Well, we could spend a lot of time defining but just like even if I were a company and I’m sitting out there and going oh gosh, should I be in Facebook or should I do add words or should I do content marketing? How do you make a determination? There are so many companies that I work with anyway that are very sales driven. They’ve got to know the point where they are because they went out there knocked on doors. And they’re finding that that’s kind of drying up now or it’s getting harder. So now they want to go into some of these new places where they might be able to get some exposure. But they really they don’t know where to start.
Sean Ellis: I mean just I’m picking the external channels, I like to start with the users themselves, my existing users and find out how did they discover services like mine? A lot of times you’ll find out about channels that you may not even be aware of from your existing user base, so I spent a lot of time speaking with my existing customers. But the other thing is that getting that channel to work for you is often where the real challenge is, it’s not just kind of a few best practice a few best practices you need to really really understand how that channel works and this is where actually getting that customer journey right and experimenting through that journey and I do have a really simple example from LogMeIn that originally when we were trying to grow LogMeIn, I took the normal marketing approach which was maybe fight for landing pages. I did a little fighting for control of landing pages which was not easy even in my organization. But I got out sub-domain to be able to do experiments on landing pages. When I started testing primarily in Google adwords and was able to scale to about $10000 a month. But when I tried to spend beyond that $10000, I kept losing money on every additional dollar I would put in there. But when I actually looked at what was happening after these people clicked over to my site and signed up for the product, majority of the people like over 90% of the people were never actually using the product. And so, if they didn’t use the product, my ability to generate ROI on that investment basically disappears. And there’s no positive word of mouth, there’s nothing, they’re not going to keep using and more up sell opportunities. I was fortunate that we were fairly small at that time to take the data to my C. E. O. and say, “hey, we’ve got to do something about increasing the sign up to usage ratio. This is going to make a really hard finds channels to scale this business.” He looked at the data and to his credit said, “we’ve got to optimize that first user experience and get more of these people using the product.” In about 4 month period, we were able to get a 1000% improvement in the sign up to usage ratio. And what that actually meant to the channels was that for Google adwords that previous to scale the $10000 a month, now it’s scale to over $1000000 a month with the 3 month pay back on investment and it was no new creativity, no new channels to be tested that we were just so much more efficient in what we did after the people signed up that a whole bunch of words that weren’t going to work for, now suddenly worked for us and the ones that previously worked, worked really well now. I think that to me was my big aha moment in saying, if these things aren’t integrated, I’m not going to be able to effectively compete. And that’s what I repeated at Dropbox and Eventbrite and some other companies, we’re just smelling that if you can get that first user experience right and then drive ongoing engagement and work some of these other lovers, suddenly so that all the pieces start to work much better.
John Jantsch: What’s so great about that example is that it would also been easy for you to conclude “oh, I guess adwords doesn’t work.”
Sean Ellis: Exactly and that’s why I say it as a cautionary tale of deciding which channel to use. You have to make sure that most channels are going to be not very effective until you get that full customer journey integrated and optimized, you’re going to probably have a real hard time in the channels. It used to be that you could get away with it, but I think today enough companies are working under the hood a little bit more. So those are the ones who’re competing within those channels who are or increasing those bids to a point where it’s not effective for you anymore.
John Jantsch: That part of the customer experience, I mean, you really almost just have to take some customers by the hand and lose money on it and walk through.
Sean Ellis: Right. That’s where I laid out with startups that there’s kind of a 3 step process to bringing a company to market. The first step is just to make sure the product actually has anybody who is passionate about it. And then the next is to get that initial user journey right, to get the business model right, to get essentially the messaging right, each of those pieces that are going to make it possible to scale the business and then there’s the ongoing growth hacking that you do from there where you’re simultaneously testing channels but also looking for ways within product to driver referrals and better ways to engage and convert user. At that point you’re just looking for the highest leverage place to invest your time and money and resources.
John Jantsch: And as I listen to you lay those out, a lot of companies just flip that right around, don’t they?
Sean Ellis: Yeah, they did. And I think it’s just because most of us as markers intuitively know, we should be doing those things, but it’s just so hard to penetrate deeper into the product because of all of the battles that you would have to fight. You have complete control out in the channels to run the experiments you want to run. So it’s a hard change to go through. I definitely understand that but that’s what a lot of why we wrote a book to help people navigate that.
John Jantsch: I think a lot of companies are actually waking up to that idea where they need this where they call “the growth team” or whatever they call to have sort of an autonomous approach where they can fiddle with things without maybe having to break it.
Sean Ellis: Yeah and you do not want to do it behind the back of the product team, you want to do it in conjunction with the product team. So they are in the loop as you’re doing it and that’s why I think a lot and you actually see these growth teams reporting into the Head of Product rather than the Head of Marketing. The best in my opinion is that report into that into the CEO. But not everybody can get that benefit. So the second best would be into the Head of Product because that’s usually the hardest battles to fight.
John Jantsch: So, Hacking Growth will be available pretty much everywhere, you can find books.
Sean Ellis: yeah, hopefully it’s the guide that people have been looking for being able to take this more integrated approach to marketing and growth.
John Jantsch: Great work and what I love about this is we’re starting to see people who were more traditional businesses that are embracing this idea not as something that’s just for a start up product company.
Sean Ellis: Yeah, it’s super powerful. I mean, Dropbox just hit the $1000000000 revenue run rate and that’s was does a first company where I really from the very first day, tried to put this in place and built an organization really around us and they continue do really well since I moved on.
John Jantsch: Well, I know they get a little my money every year.
Sean Ellis: Mine as well.
John Jantsch: Thanks Sean, hopefully we’ll see out there.
Sean Ellis: Thanks John.
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