Hey everyone!
This is the 1st version of a post I always wanted to write.
Essentially, today I want to emphasize that most companies focus mainly (perhaps only) on acquisition, whereas the best opportunities for healthy growth mostly come from everything else than acquisition.
This is the achievement of years of passionate work for dozens of startups.
But also years of endless learnings from the most brilliant ‘growth folks’ around the world, across thorough Twitter & LinkedIn stalking, article reading, online courses, and IRL discussions.
If you’re a CEO, a CMO, or even a head of growth, thinking about prioritizing acquisition: please think about it twice, and read this article.
I genuinely hope it will be useful for you, your team, and your company.
⚠️ This article mainly assesses B2B SaaS & fintechs, which are also the customers I mainly serve with my productized service. ⚠️
There are always exceptions/specific use cases depending on companies, and this is only my subjective opinion on things!
Happy to chat with you guys if you have any different thoughts. Comments are open. 😉
In today’s post:
Acquisition is simple, easy, and dumb
Retention is the foundation of growth
Retention improves acquisition
For any business model, improving retention will increase revenue
Growth is product, product is growth
Best growth folks are (also) product folks
Growth loops, & Product-led growth
Data: the building block of product-led growth
Product = data. Data = growth
Having good data is crucial
Aligning teams
Have a nice reading,
Victor
Acquisition is simple, easy, and dumb
Funnily, I am starting to write this article on June 20, 2022. Do you know what birthday we celebrate today? AARRR framework has just turned 15 years old.
Yes, 15 years. How old are 15 years in the tech world?!
To give you some ideas, 15 years ago:
The 1st iPhone was just presented by Steve Jobs
Internet Explorer was the #1 browser in the world (82% market share).
YouTube was 2 years old; Facebook was 3
Snapchat, WhatsApp, Dropbox, Zapier… didn’t exist
Yet, we often still see this framework as something vital for any growth team, and as the basis of anything we do.
The worst thing with the AARRR framework is that ‘acquisition’ comes 1st. Thus, humans forget about everything else.
However, if you think about it, acquisition is pretty simple.
Across companies, having a customer ‘acquired’ can mean different things:
The customer has heard about our company and our product
The customer has visited our website
The custom has signed up to our SaaS/product
And you know what? You actually don’t really care about things like these.
Moving people from one place to another on the internet is remarkably easy, and cheap. Website traffic is your best vanity metric.
If you think having more website traffic is your problem, please create some Google Display ads, at $0.01 max CPC. I guarantee you’ll have more traffic. But I also guarantee you won’t be happy either.
Even collecting emails, and getting signups is not that hard.
If you think getting more signups is your problem, just scrape LinkedIn, send some mass emails, and you’ll surely have 0.5-1% of the people interested in your product (please don’t do that).
Long story short: acquisition is simple, easy, cheap, and dumb — when you think about it from its definition given… 15 years ago.
→ Your problem is not acquisition.
Actually, when you think about acquisition, you’re most likely not thinking only about acquisition:
You don’t just want to acquire ‘new users’.
You want to acquire new users that will become active, and use your product for as long as possible — and give you as much money as possible.
Retention is the foundation of growth
In its 2018 essay, Brian Balfour (ex VP-Growth at Hubspot, growth advisor for Loom, HelpScout, Reforge’s founder…) basically demonstrated that retention is the foundation of growth.
I won’t re-write his article today, but let me just quickly quote 2 examples:
Retention improves acquisition:
The 1st one is Pinterest. The longer users use Pinterest, the more they’ll share pins.
With more pins indexed on Google, more new users are likely to sign up on Pinterest… And this creates an acquisition loop.
For any business model, improving retention will increase revenue:
Your priority should not be acquisition, but retention. Having good retention will unlock everything else.
I highly encourage you to read Brian Balfour’s original article, as well as “retention is the silent killer” if you want to learn more.
Please note that the last article finishes with this sentence: « retention will make or break your company ».
Now, that’s nice being said. But how do you actually work to improve your retention as a growth person?
Growth is product, product is growth
What I hate about the AARRR framework, is that it creates silos by design.
We imagine “product” and “growth” teams as 2 separate teams, working on different things.
However (still from Reforge):
When building a new product, the most common approach we see is to “build a great product” and then test a lot of different channels to see what works.
This is exactly the wrong way to approach it.
Best growth folks are (also) product folks
The ideal scenario would include growth & product folks in the same team to work together and make the company grow, leveraging the product 1st.
And actually, we’re not doing different jobs: the best way to grow a company is to make a good product.
Big players have been understanding that for a while. A couple of days ago, I was stalking (again) leaders in my industry on LinkedIn, searching for some trends & ideas.
Here are some examples I found out:
Jamie Quint (former Head of Growth at Notion) wasn’t just doing acquisition:
Out of the 5 mentioned points, only one has anything to do with acquisition. Everything else is product and data.
That is also true for Darius Contractor:
And for Elena Verna as well:
Long story short: growth is product, product is growth. We should stop seeing these as separate things.
Growth loops, & Product-led growth
You’ve probably heard about those, too.
Basically, the idea is that your company’s growth model should mainly rely on your product.
→ You offer a “self-serve” product (where people can signup by themselves) and start using your product within the next 5-10 minutes. You don’t generate leads. Your product is your “lead generation machine”.
You don’t think about a funnel anymore. You don’t need to hire 150 sales reps, or to spend as much as possible on paid ads to fuel the top of your funnel.
Instead, you’ll focus on your end-users — and on your product — to grow your company.
Here are some visual examples, to help you get a better idea of what product-led growth means:
Dropbox originally grew thanks to its (famous) referral program: at the beginning of your journey, you would have some free storage. But to get more, you’d have to invite your friends to keep using Dropbox for free.
Loom is also a great example of product-led growth & virality. Once a colleague shares a video with you, you’re likely to signup — and to share again a video with another colleague, which is also likely to signup (and share with another colleague, and so on).
Same story for Calendly: once someone shares a Calendly link with you, you’re likely to live a smooth experience (by easily finding a slot in someone’s calendar) and thus you’ll want to sign up as well.
Notion has some product-led motions as well. When users create templates, they’re likely to share (or even sell) them around the web — thus making some free noise for Notion.
Essentially, in funnels, money flows from top to bottom:
Whereas in loops, your initial effort will bring you several outcomes, thus bringing you exponential growth (instead of linear).
Searching a bit on the internet, you’ll find plenty of resources about this.
There are even leaders claiming that any company not focusing on product-led growth right now will get disrupted (you have been warned):
Data: the building block of product-led growth
While I love the idea of Loops VS funnels, I happen to think it’s not the unique solution to growth, and it doesn’t necessarily work for any business (I am not alone).
And, let’s face it. What I spot with my clients/leads all day long is that growth/marketing & product teams still remain separated 90% of the time.
In other words, 90% of companies are not product-led.
→ You’re very unlikely to have full control of the product roadmap if you’re supposed to be a “growth folk”.
I also genuinely believe that working on product is not the only option to do product-led growth.
Product = data. Data = growth
In a self-serve approach, your product is very likely to generate a lot of data. I guarantee you there are opportunities from there.
If you correctly track user behaviors (with Segment for instance) you’ll learn a lot:
What are the key actions users do to become active?
Did the free trial users perform these actions?
Can you push them to do so? (email marketing, sales outreach…)
Who are they?
What is the size of the company?
What industry?
What role does the user testing the product have within his company?
Why would the company use your product?
Based on this, you’ll be able to prioritize your leads and have better conversion/activation rates — while being relevant in your messages, as you’re able to customize them thanks to the collected data.
That’s exactly how Halp (acquired by Atlassian) worked with Segment to x4 their activation rate by sending onboarding emails and Slack messages to their customers.
(Halp is a ticketing solution for support teams to handle & answer users’ requests from Slack in a message-based interface.)
They simply created an Autopilot flow leveraging Segment events to help users onboard, by giving them some personalized advice (depending on what they did/didn’t do with the product).
With good data (i.e: well-collected events from Segment in this situation) and some reflection, you can easily create super-personalized onboarding flows across channels, without even asking your engineers!
Imagine how your company changes when you multiply by 4 your activation rates. This is basically as valuable as having 4x more leads — and probably easier to work on.
(You can read the case study here.)
Product-led sales is already happening
Pocus raising a $23 million Series A during the recession is a to me true sign of what the future of sales will be: product-led, as well.
The big idea is to let users discover the product by themselves and to help them get the most value by outreaching them afterward. You’re not a seller anymore, but an upseller!
This is exactly what Notion has been doing with their reverse-ETL for instance. If you want to learn more, you can read my previous post on reverse-ETLs, or Pocus “product-led sales playbook”.
Having good data is crucial
Winners of tomorrow will be focusing on product-led growth & product-led sales.
While this is what I genuinely believe, this — as we’ve seen in this article — comes from industry leaders around the world.
In a product-led growth/sales world, acting smartly on data will become our main job.
To do so, you’ll need to have as many people as possible being able to read/understand data.
This starts with having good data.
Looking again at Pocus website, here’s what we can see:
Needless to say that if your Salesforce/Segment/BigQuery are broken, you’ll have a way harder journey to do anything product-led.
→ Having good data is crucial.
Aligning teams
Good data is crucial not only because otherwise you’re not able to do anything in growth, but also because it brakes silos within your company.
Having “a single source of truth” for data will make anyone in the company look at the same stuff for their work.
For instance, in our Halp ↔ Segment example mentioned above, those events are used for marketing/growth purposes for sure, but they are also sent to product analytics tools (such as Amplitude or June).
Product and growth teams are aligned by design. Things are beautiful.
Breaking silos within the AARRR framework:
What’s also wrong with AARRR framework, is that as it’s a funnel, it guides us to create silos for each step of the funnel:
Acquisition team is responsible for # of signups
Product team is responsible for retention
Sales team is responsible for revenue
But this is the best way to create organizational silos and frustrations as well, with each team only focusing on “its part of the funnel”:
Acquisition team increases # of signups without caring about activation/retention
Product team will only ship “pure” product features, never related to growth
Sales team will get frustrated because they don’t have much room to improve revenue
This is where data can help. Especially having a single source of truth for anyone in the company.
People might become more accountable, and really understand the impact of their job. For example:
Sending product usage data to ad platforms could allow Acquisition team to really know what campaigns are performing the best in the long run:
How many activated users? What retention?
How much revenue?
Product team measures the impact of new features using the same data marketing team is using to track campaign performance (think again about the Halp ↔ Segment case-study, and shared events between product & growth teams).
For Sales teams: instead of simply closing more deals, they can focus on increasing revenue by leveraging historical data (instead of external signals):
trying to upsell active users (as we’ve seen with Pocus, Notion & Co)
or even simply being more efficient by focusing on new “potential champions”, thanks to data pulled from previously signed deals that are bringing the most revenue.
Doing this kind of thing is simply impossible without a top-notch data stack.
You’ll probably need a data warehouse, that acts as a single source of truth for BI, product, sales, marketing…
Many people are really good at leveraging 3rd party data (scrapping LinkedIn/Google, jobs boards…) but relying on 1st party data is even more important/obvious — especially having the different regulations in mind. This is what big players are doing.
→ If everyone looks/uses the same data, silos are broken by default.
Data is the building block to getting product & growth teams aligned to work toward the exact same direction (and to have them working in the same team one day).
And thus to focus altogether on what really matters at the end of the day for your company: revenue.
That’s pretty much it for today guys! This summarizes (a bit) how I think about growth… and product and data. 😉
This article will probably be evolving as I had many new ideas while writing it. Hope you enjoyed it!
Please do not hesitate to share your thoughts in the comments below 👇
Best,
Victor