Most of the advice given to start-ups is misleading, making it seem as though there is one simple trick you can use to either grow or resurrect a struggling company.
You cannot grow a product or service if there are not enough people who want it!
Every week, new entrepreneurs are given the same old information about successful companies in order to replicate their success. They take a generic value-added referral program, they create a generic waitlist on top of a generic landing page with no real innovation, and then they sit around waiting for customers who will never come.
The truth about creating a digital product is much harder than that. While real growth does have many secrets, it takes an intensive process of continual testing, failing, and measuring. Creating real growth takes a concentrated effort to fully understand the specifics of your business operations, a focus on operating within a strict budget, and a commitment to relying on true data.
The Risks of Learning from Victories
Entrepreneurs tend to want to copy what has already worked for others in the past. They look to the most successful businesses and think they can simply replicate their entire business model today. This is a huge error!
Universal Growth Tactics Are Generally Unsubstantiated
There are always numbers floating around the industry about how Dropbox went from 100K to 4M users in 15 months with a 500MB two-sided referral incentive and how they sent out 2.8M invites to achieve this.
By mid-2011, Dropbox had achieved an additional 25M users and saved $48M in advertising and marketing costs because of the referral program. Thousands of new start-up entrepreneurs want to create a similar product that offers free storage or some kind of discount, and they will not be successful!
They will fail because they are not taking into account the environment. The strategy that Dropbox used was highly effective due to the nature of cloud storage; this service has a natural network effect built into it.
Creating a highly focused B2B (business-to-business) application will not remedy low retention rates with a minimum discount referral program.
Transitioning from Parlor Tricks to Operating Systems
You must establish product/market fit before you start testing any channel. The traditional way to measure product/market fit is the Sean Ellis PMF Survey.
You survey people who are actively using your product, asking them how disappointed they would be if they couldn't use your product anymore; if fewer than 40% answer "very disappointed," then you do not have a growth issue, but a product issue.
Scale your business after you determine that your core user base requires your product.
Growth Hacking Early-Stage Digital Products
Hiring people at random to execute growth hacking ideas using your limited budget can result in frustration. You need to align your customer acquisition channels with your existing business model. You cannot apply the same methods for acquiring customers for a consumer application as you do for B2B business software.
The Experiment Stack for B2B SaaS
Business applications should have established activation goals. You do not require cheap traffic and a million clicks. What you need are high-intention users who will pay you monthly subscriptions for your service.
Focus on product-led growth loops by providing teams with real justification for involving their coworkers or colleagues in using your product, and closely monitor your churn metrics.
If a user signs up for your service but does not return after three days, stop spending money on advertising and update your original product before any more advertising efforts are made. B2B software products will succeed based on making work easier, not on implementing viral growth campaigns.
Diving into Viral Growth Loops with Consumer Applications
Consumer applications primarily rely on social sharing to create viral growth loops. Early on, Monzo’s initial users drove growth by showcasing the vibrant design of Monzo’s cards, and the company quickly reached the 2 million customer mark because customers saw immediate value in the product itself.
When developing a consumer-focused application, it is important that you launch it quickly, using modern coding tools available through AI companies such as Cursor, Lovable, and Bolt. This allows you to develop features in a matter of hours versus weeks.
You should launch an application and get it in front of users on Product Hunt so you can gauge how quickly a new customer invites someone else based upon the speed of the viral loop. If the viral loop is taking too long to get started, the application will likely die quickly.
The "Cold Start Problem" with Marketplaces
Marketplaces are one of the most difficult types of business to launch because the marketplace requires both buyers and sellers at the same time.
A prime example of this is Airbnb, which was able to grow its guest arrivals from 20,000 to 3 million annually by leveraging the 42 million users who visit Craigslist each month and connecting these users to the hosts on Airbnb.
This wasn’t a matter of luck; it was a strategic move that required creating technology that integrated with Craigslist.
As early-stage businesses launch today, entrepreneurs need to find similar existing audiences or networks where their potential customers are currently hanging out. You need to develop technology that allows users to cross-post content across different social media channels or to share content with groups or forums that relate to their industry.
Understanding What Acquisition Channels Work
Without being able to measure an idea, it will ultimately be worthless. You must create a clear framework that lets you assess how to continue to improve what you are doing.
Based on Actual Data, How Do We Prioritize?
The ICE framework allows you to score each of your ideas based on its impact, confidence, and ease. Don’t waste your engineers’ time developing complex functionality for your application if you can test the concept through simple email marketing campaigns.
Relate this scoring to the AARRR funnel: acquisition, activation, retention, revenue, and referral. Most beginners only see the first step. They purchase inexpensive ads and are happy with what appears to be many visits to their website.
Smart founders look solely at retention; they realize that a continued user is worth approximately 10 bounced users.
Going to Goodbye
You should have your quitting point established. Before you test any channel, determine your failure condition. If your channel does not achieve a specific measurable conversion rate within two weeks, move on to a different channel.
Too many founders invest excessive time, effort, and energy into testing and ultimately fail at building a strong test pipeline when they become emotionally attached to a failing concept.
Founders should accept when a channel is just not successful, apply this knowledge to future tests, and continue testing methods that show potential for growth.
Modern Tools for Success
The modern tracking stack is expanding rapidly. Agencies like GrowthExpertz, as well as platforms such as Zoomd and Affise, are providing marketing departments with the ability to accurately track the performance of their various marketing channels.
In addition, solo entrepreneurs are relying on automated validation pipelines created through solutions like MakerAI to provide more efficient and effective testing.
While these tools assist with the speed of getting a business to its initial minimum viable product (MVP), they cannot replace the founder's decision-making capabilities. Ultimately, even a well-tracked concept with poor demand will fail.
Understanding What to Test
To build a successful growth team, founders should have a tested understanding of the difference between imagination and validation. Building growth will require a great deal of patience; it is a strict discipline.
Success will be achieved by those teams that build and conduct the most accurate and efficient high-quality growth tests within the shortest time frame. All successful growth teams must be held accountable to their budgets through data-driven research and development.
If a tactic doesn't work, discard it and proceed to the next logical approach. Do not be deceived by meaningless statistics. Create a legitimate system, value your customers, and use factual information to determine your next steps.
FAQs
What is the sequence of your channel usage when you don't have a paid media budget?
You need to start with direct sales and engaging in manual outreach. Do not attempt to build an SEO engine on day one. It takes months for search engine traffic to develop.
Instead, identify precisely the digital communities your first one hundred perfect users are spending time in. Go directly to those communities and speak to those individuals. Once you have established a manual process for generating happy customers, use that process as a basis for building automated systems.
What are some signals that indicate your referral program is damaging your brand trust?
Keep track of spam complaints and social media mentions. If the referral incentive is too generous, some bad actors will create false identities to defraud you from the rewards. This results in the accumulation of worthless data in your database.
If your core customers believe your app resembles a cheap pyramid scheme, you need to terminate the program indefinitely. Brand loyalty can take a long time to rebuild, and is dependent on your overall product quality.
When should a founding team transition from manual validation to automated acquisition approaches?
You should begin automating only after observing an established flattening of your retention curves. This means you have a predictable percentage of users continuing to engage with your product month over month.
If you experience retention curve decreases to zero percent, throwing money at automated ads is equivalent to pouring liquid into a container with a massive opening on the bottom. Close the hole and manually demonstrate the value, so you may increase the machine's output.
Why do product-led growth loops break down during the activation phase?
As soon as you observe delays during the activation phase of your product-led growth loop, it is likely that your loop is breaking. In many cases, loops fail because the setup time is too long.
If a new user is required to fill out ten forms before they see the fundamental value of your product, that user is likely to leave. Therefore, you must shorten the time to value for the user.
The new user must perceive a substantial win within three minutes after activating the product. If you cannot provide that win in less than three minutes, your product-led growth loops will collapse completely.