2.3 Strategizing and Prioritizing Experiments

Growth Strategy Cycle

This post is part of the Growthzilla Book series, which is an online draft of the print edition that will be available in 2018.

When you model your business, you will likely find that there are many ways that you can potentially improve growth. On one hand, this is great news because you have many opportunities to grow your business. On the other hand, this is very challenging because you have two factors working against you: limited resources and a finite market size. Moreover, every change that you try will not work. This is why following a more scientific approach that includes forming hypotheses and measuring results is fundamental to growth science. Each experiment requires capital and human resources investment, and creating a well thought-out strategy and continually prioritizing experiments will be pivotal to your growth development efforts.

 

2.3.1 Brainstorm Growth Optimization Opportunities

As you begin to engineer your company’s growth, you will iteratively brainstorm new optimizations to try, create a strategy to guide your efforts, and constantly prioritize your growth experiments based on that strategy. Luckily, you have already created a framework that will help you to brainstorm and evaluate experiments. The customer journey map and growth model that you created will help guide your brainstorming. The journey map will highlight key actions in the customer interactions with your product and company, and can be juxtaposed with your growth model to understand how these actions affect overall customer and revenue growth.

Growth Strategy Cycle

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2.2 The Customer Lifecycle

Events Customer Lifecycle

This post is part of the Growthzilla Book series, which is an online draft of the print edition that will be available in 2018.

Let’s review the customer lifecycle before we dive too deeply into strategy since it will serve as the basis for a lot of the concepts in this book. A typical customer lifecycle consists of five parts: awareness, acquisition, engagement, activation, and retention. The journey through the conversion funnel is not always linear and could jump stages. For example, an individual might use a product (acquisition), get tired of the product and contemplate abandoning it (retention), and fall back in love with the product (engagement). Notwithstanding what journey an individual might take, we need to have a game plan for each stage.

 

Customer Lifecycle - Awareness, Acquisition, Engagement, Activation, Retention

2.2.1 Customer Awareness

It all starts with awareness. One study performed by McKinsey & Company indicated that it can take five to eight exposures to an advertisement for it to make people truly aware of a product. People can learn about your product in many different ways such as through traditional marketing, through friends and acquaintances, and through organic news stories. What might be less obvious to the reader is that the product itself can help spread awareness. For example, a social sharing feature can help current customers recommend your product to your friends. Your operations can affect awareness too. For example, your customers can learn about new products that your company is offering when they call customer support.

 

2.2.2 Customer Acquisition

After a person learns about your product, they might decide that they want to try or buy it. This begins the acquisition period. It might seem that acquisition should not be a phase but rather a short point in time, but that is rarely how people become customers. For mobile apps, a new user might have to sign up. That can be a long and complex process involving filling out a registration form, validating their email, and completing their profile. Potential customers can leave the acquisition cycle in any of those steps, and it is not until they get through the whole process before they become active customers.

For other products such as enterprise software, the acquisition process can be extremely drawn out and can involve a sales team that pitches the product, a technical implementation team that helps to answer technical questions and sets up the product, a training team, and so on. The acquisition phase starts with the intent to try or buy a product and ends when the customer actually buys the product or uses the product for the first time.

 

2.2.3 Customer Engagement

Just because a person has used or bought your product does not mean that they are a valuable customer. Even popular apps like Twitter have scores of users that post a few things and then never use it again. Those are not engaged users, and having unengaged users is bad for business. Usually customers fail to become engaged because they either can’t overcome the learning curve or the product fails to meet their expectations. Luckily, it’s possible to systematically and predictably fix both.

Some products have much more compressed engagement cycles. For example, if you are in the market for a luxury yacht, you probably won’t be making a bunch of repeat purchases. However, that does not mean that all yacht owners are equally engaged. Some owners love their luxury yachts, and it shows as they merrily sail around the Mediterranean and extol their yacht’s virtues to their friends. Those are the kinds of customers that you want!

 

2.2.4 Customer Activation

Activation is a big jump in the customer’s level of engagement. The anecdote that I like to tell is my relationship with Amazon. I became an Amazon customer in 2001, when I was a college student. I realized that buying textbooks on Amazon could save me a ton of money, so every term I bought a bunch of books on Amazon. I was a pretty engaged customer. I liked that I could save money, which was tight during my college years, and I was generally happy with the service.

Fast forward a few more years, and Amazon’s offerings broadened. At that point, I was a young professional, and I would occasionally buy a DVD or a book. Once again, I was a solid repeat customer, but I would only buy things that were difficult to track down in a physical store and for which I could wait a week to be delivered. I still preferred to run down to my local BestBuy to buy electronics, DVDs and videogames since I could get it right away.

Fast forward again to 2009 when I went back to graduate school, and Amazon gave me a free Amazon Prime membership since I was a student. That year I bought my textbooks on Amazon, but my purchase behavior started to change radically. Suddenly, I was buying everything on Amazon: DVDs, video games, electronics, clothes, household items, you name it. On reflection, my Amazon Prime subscription annihilated a huge deterrent: having to wait a week for my orders. I didn’t realize at the time what a big roadblock the shipping time was, but now that I had free two-day shipping the floodgates were open. In fact, there was a time when my sons were still babies, when I’d get Amazon shipments multiple times a week filled with diapers, baby clothes, household items. That is what I call Activation!

Activation is a phase in a customer’s lifetime when they become super engaged. Many customers never get to that stage, but that is where the biggest growth can happen.

 

2.2.5 Customer Retention

Unfortunately, all good things must come to an end. Even your most activated customers may get frustrated with your product or company and will choose to leave at some point. More likely, those customers that never got very engaged will abandon your product. The good news is that abandonment does not usually happen instantaneously. There are often signs that a customer is unhappy, and you will likely have ample opportunities to make your customers happy. Even better, you can take steps during customer acquisition and engagement that will prevent your customers from becoming unhappy with your product once they convert to active customers.

I was recently trying a new online project management app. The app and the company behind it did many things right to make sure that I would not get frustrated or disappointed as I became an active user. First, when I signed up for the app, they sent me a personalized email from an individual on their team thanking me for registering and letting me know that I can contact her at any point if I have any questions or issues. Second, when I logged onto the app for the first time, they had a great video tutorial giving me an overview of the features and best practices. On top of that, they had little contextual tutorial messages as I explored the app for the first time.

I set up a simple project to test out the software and invited one of my teammates. It was a pretty solid project management app, but there were a few little things that irked me, and I stopped using it with time. The company saw that I hadn’t used it in a while and they sent me a couple emails (automated, I’m sure, but signed by my customer service representative) asking me if there is anything that they can do to help me with the app. I finally relented and replied to the email and set up a call with my dedicated customer service representative that addressed each of my complaints in turn. She couldn’t solve all of them, but she did help me find other ways to get things done. The company not only did its best to avoid abandonment, but they also successfully retained me when I was not totally happy. I’m still a loyal customer.

 

2.2.6 Engagement Versus Retention

Not everyone will agree with defining retention as simply a measure of keeping customers. To some retention means the act of keeping customers coming back, while engagement is a measure of how intensely they use your product at any one time. For example, they would consider Google Search to be a product with low engagement and high retention given that users use Google Search briefly, but then keep coming back.

Consider a student that is writing a term paper, who uses Google to help them find resources and information, and then never uses Google again. Because they were doing a ton of queries while writing the term paper, we would say that their engagement was high but their retention was low because they never used Google again. I think the majority of people would not consider this person to be highly engaged even if they did submit dozens of searches in a day. Wikipedia users are similar. They use the online encyclopedia intensively but infrequently.

I find it more useful to think of engagement as a measure of how much a customer is using a product, which is a function of intensity and frequency, whereas retention indicates if I am still an active customer. For example, which user is most engaged, one that uses your product once every day or another that uses your product ten times a day every ten days? What about a customer that uses your product twenty times over the span of two days but never touches it again? I would say that the user that used it twenty times and never again is not engaged because he is not an active customer while the other two are roughly equally engaged.

It’s often very ambiguous whether to consider some customers as being active or having abandoned your product, and every company has it’s own cutoff point depending on the nature of your product. For example, many years ago, I signed up for Flickr to share my photos with friends and family but stopped using it after a while and have not logged on for over four years. I still have an account, so am I still an active Flickr customer? It depends on Flickr’s definition of what they consider to be an “active customer.”

 

2.2.7 How Acquisition, Engagement, Retention Work Together

In 2007, a recent Yale graduate, Justin Kan, came up with an idea to stream every minute of his life over the internet. With the help of Emmett Shear, Michael Seibel and Kyle Vogt, he created Justin.tv, which would become the world’s first prominent livecasting service. The team grew Justin.tv to be a fairly solid business employing about twenty-five people, but at some point the founders realized that their idea had hit a ceiling. There were only so many things that it made sense to livecast, and they had tapped out all of them.

Justin.tv rose to about 30 million unique visitors per month, but the majority of their users weren’t super engaged, except for one tiny segment. Emmett Shear made the realization that video gamers, which made up just 3% of their user base, were fanatical users. They would sometimes spend hours streaming themselves playing video games and others would watch them playing for long stretches of time. The four founders decided to focus on addressing just the video game market and created a new version of Justin.tv called Twitch, which became one of the hottest startups in Silicon Valley and sold to Amazon for $970 million.

Justin.tv had the perfect product all along, but they were distributing it to the wrong customer base. Not too many people were super engaged by watching Justin sleep or others sit around in front of the computer, but the video gamers were completely hooked. Once they focused on acquiring the video gamers their product growth exploded. This is one of the best examples of how acquisition, engagement, and retention are related.

Many people forget that the concept of product-market fit is composed of two parts and focus, instead, on just the product. However, it’s not just about building the perfect product. Finding the right customer whose needs your product meets most adeptly is just as important.

If you target the wrong customer, it does not matter how good your product is, you will always have problems engaging those customers because they won’t really have the problem that your product is trying to solve. It’s like selling goose down parkas in Miami Beach. You might have the most stylish, warmest goose down parka in the world, but if you sell it to folks in a place that is constantly hot, your customers won’t love your product and will eventually shove it in their closet or give it away to Goodwill. On the other hand, if you sold that same amazing down parka in St. Paul, Minnesota, your customers would wear it all winter long and would love it for years to come. Their engagement and retention would be off the charts.

To put it simply, if you are effectively targeting and acquiring the right customers for your product, they will appreciate it and will be highly engaged. Customers that are highly engaged, are very unlikely to abandon your product. How much do you like Google? I bet you’re a highly engaged Google user. Are you very likely to stop using Google. Probably not unless another even more amazing search engine comes along.

 

2.2.8 Key Points in the Customer Lifecycle

At the beginning and end of each phase of the conversion funnel are key events that demarcate the end of one and the beginning of another. These points are hugely important because you can influence these events to supercharge your growth.

 

Events Customer Lifecycle

The First Time Someone Hears About or Sees Your Product

A good first impression is trickier than you might think, and it will set the stage for the rest of your relationship with you customer. First, you want to make sure that you’re reaching the right people — those that have the problem that your product is solving. You also want to make sure to communicate how your product is better at meeting their needs or solving their problems. Finally, you should tell them how to get your product or what to do next. Without meeting these three fundamental awareness goals, acquisition becomes an uphill battle. Even engagement, activation and retention can be adversely affected by a poor first impression.

The First Time Someone Uses or Buys Your Product

Usability and customer onboarding make the biggest difference when it comes to creating a great first experience. There is not much that you can do if your product doesn’t have the right features to meet the needs of a customer. Certainly, you can add important missing features with time, but by that time many of the dissatisfied customers will be long gone. Not only that, as soon as you add a new feature, customers will want others, and you will be constantly playing catchup. However, I have found that for a significant set of the customers the right features do exist, but they are hard to find or understand how to use. Moreover, bad usability often forces customers to abandon products long before they learn their full utility. Both of these problems are preventable, and addressing them will go an extremely long way to improving your engagement and retention.

The Customer Uses Your Product More or Buys More

A user will very rarely discover how great your product is in their first use. It often takes many interactions to find out if and how well it will work for the customer. Using or buying a new product is an awful lot like moving to a new city. It takes a while to learn where the good restaurants, parks, and hangout spots are.

Often times we are pleasantly surprised about what the city has to offer. Other times we are disappointed to find that there is not much more to the new place than initially meets the eye. It’s not that the place has changed in the time since you moved; you just have learned it more deeply. Often people discover new things with the help of their friends or colleagues. With your product, you want to be that friend that guides their discovery. Your marketing, product, and operations should be aimed at helping the user discover and learn your product as quickly as possible, so they appreciate it for what it really is.

Customer Becomes a Habitual User or Buyer

The holy grail of growth is the point at which an individual becomes a habitual user or buyer. This is when they enter the activated phase of their customer lifetime. We all are very familiar with this concept. Earlier, I told my story about how Amazon was able to activate me, though free two-day shipping, to become a weekly shopper. If you are on Facebook, you are very likely a habitual user, checking your account at least a few times per week.

On the other hand, there are also many products that I use sporadically. For example, there is a personal finance software that I have been using for the past five years, but I only log onto it when my spending really gets out of hand. According to many reports, there are a great number of Twitter users that are like that. Folks sign up, write a few tweets, follow a few users and then hardly do anything else. On the other hand, there are many Twitter users that post seemingly every minute. The latter are the kinds of customers you want to cultivate with great product experiences, effective marketing, and world-class operations.

Customer Becomes Unhappy with Your Product

Even the best products in the world have unhappy customers. For example, the average customer satisfaction score in the United States is 87%.  That means that about 13% of customers are unhappy at any one time. If your product is a social media app, your customer satisfaction score is likely around 78%.

Disappointment and frustration can be factor of both product experience as well as marketing. You can have the best financial management tool in the world for middle income customers, but if you have high net worth or very poor customers, they will likely become unhappy with your product. On the other hand, you could be reaching the perfect audience, but perhaps your product is difficult to use. This will also not work in your favor.

There are also times when customers simply haven’t been able to figure out how to use your product to truly meet their needs. Luckily, that’s something that you can fix by systematically listening to your customers, experimenting with better ways to help them get the best of your product, measuring the impact that those changes have, and keeping only those that move the needle in the right direction.

Individual Stops Using the Product

Social scientists believe that the last impression is more important than the first. That is why you should make sure to end on a good note as much as you can. If you can do a good job saying goodbye to a customer, you might still get them back in the future. Perhaps they stopped using your product because it was missing a key feature, and when you finally build that feature you want them to try it again! Just as importantly, ending on a good note might mean that they will refer your product to their friends and colleagues. The might say, “It didn’t have this one thing that I really wanted, but it’s still a great product and a caring company!”

 

2.2.9 Marketing, Product, Operations through the Customer Lifecycle

Marketing, product design, and operations can each affect all stages of the customer lifecycle. It’s obvious that marketing can drive awareness, but we also saw with the above examples that product features and even customer support can drive awareness as well as acquisition. Conversely, how good a business is at turning interested folks into customers depends greatly on their ability to market to and draw the right customer. It is important to remember that marketing, product implementation, and operations could potentially affect all parts of the customer lifecycle as we consider how to engineer growth.

 

Marketing, Product, Operations over Customer Lifecycle

Be sure to check back tomorrow to learn about strategizing and prioritizing experiments. New sections of Growthzilla are published every weekday.

2.1.1 Understanding Your Customers’ Journey

This post is part of the Growthzilla Book series, which is an online draft of the print edition that will be available in 2018.

To identify the opportunities for growth along the customer lifecycle, it is first important to understand the customer’s experience engaging with the company and its product or service. A customer journey map is an illustration of exactly these experiences. The map can tell the full story covering the entire customer lifecycle from initial contact to activation, engagement, and beyond or focus on only a part of the story that lays out interactions or touchpoints critical to a subset of the customer’s experience.

There are actually several forms of journey maps, all defined by the scope of the investigation. The different types are:

  • User Experience Journey Maps: to chart the digital experience
  • Sales Journey Maps: to chart the path through the sales funnel (awareness to purchase)
  • Customer Journey Maps: to holistically examine the full experience

We will focus on the last of these as it is the most expansive, most used, and often the most efficient in identifying big impact areas, and understanding your consumer’s full experience.

Customer journey maps can be further broken down by the stage of the product or the customer perspective. They can be either:

  • Retrospective Maps: in the case of existing products with actual users. These map observed behaviors, or
  • Prospective Maps: in the case of new products where we map expected ways that the consumer will behave

For our purposes, we will be focusing on retrospective maps that are built upon more concrete data.

What makes customer journey maps unique to traditional funnels is that they focus on the customer’s points of view, questions, feelings, and motivations. These all blend together to explain and provide insights on the customer’s behavior. Customer journey mapping is a critical step in understanding your customers’ needs, desires and pain points. They allow you to stay focused on the consumer, and to identify the ways that you can better serve them.

Before we get into the specific steps to building out the customer journey, remember that a customer journey map does not have to be a work of art, but it does need to communicate the critical things that illuminate the customers’ behaviors, thoughts and frustrations, and where the opportunities lie. Although adding pictures and making these more visual are nice, it is more important to be substantive.

Assemble a Cross-Functional Team to Build the Map

The journey mapping process should involve stakeholders that represent a key cross-section of functions. If selected carefully, these team members will be able to offer unique perspectives in understanding the customer. For instance, product marketing and business representatives can bring key behavior metrics and market factors, while customer support can best illuminate customer pain points with both qualitative and quantitative evidence. Having a diverse team as part of the process throughout can speed the ability to identify both organizational gaps in knowledge to drive the research phase, and opportunities for improvement throughout the lifecycle.

Define the Goals and Scope of the Customer Journey Map

With a cross-functional team in place, the next step is to create focus and alignment within the group. As such, the mapping process must start by clearly articulating the goals and identifying the scope of what will be mapped. The scope is defined by two dimensions: who the primary target is and what key experiences need to be traced.

First, the assembled group of people in your business must agree on whose experiences are being mapped. Like a protagonist in a story, these subjects will be the ones whose perspectives, behaviors and experiences are being captured. The chosen persons should map one-to-one to a target customer segment or persona. (Personas are fictional characters who represent a specific target segment, that is, a group of customers that share key attitudes and behaviors.) Be sure that your groups are well-defined by being truly distinct and homogenous. For instance, if you are a company such as Uber offering a ride-sharing service, your personas may be a typical rider and a typical driver. These could be even further narrowed down based on usage of the application (possibly influenced by spending patterns, propensity to travel, geographic density, employment, etc.). To keep the exercise targeted, personas should likely be limited to no more than three.

Second, the cross-functional team must decide on what experiences should be included in the map. The customer journey map should include paths that may be critical to the success of the business and its growth potential. Again, if your offer a ride-sharing service, critical paths for a rider could include first ride or usage, paying for a ride, various repeat ride scenarios, rating a driver, requesting a refund, sharing a location, referring a friend, deleting the app, etc. The chosen set may be influenced by the businesses priorities, however it is important to remember that some of the internal biases are meant to be challenged in this process, so a more expansive view is always better. Undoubtedly, insights can be uncovered in unlikely places.

Create an Initial Map Based on Current Knowledge

Once the scope has been clearly defined, the process usually starts by going through the steps of mapping using existing knowledge. This allows us to understand the internal ways we think about our customers before seeking out external information.

The cross-functional team should bring together their own knowledge and data gathered to date in their area of focus. For example customer support could bring analysis reports of support calls and emails. Marketing could bring prior satisfaction surveys, brand perception, and analytics. Sales could provide data from the field from partners and direct customer contact. All of this can be supplemented with stakeholder interviews to capture as much institutional knowledge as possible. The information that we should be collecting at this point includes:

Empathy Maps:

The empathy map (see below) further elaborates on the personas by capturing the feelings gleaned from all the surveys and customer observations. It serves as a good tool for helping to put oneself into the frame of mind of the customer and understand their challenges.

 

The elements included in the empathy map are, what the personas are:

  • Thinking and Feeling: How do they feel about the experience? What anxieties, joys, and hopes do they have? For example, for shopping online: “I hope I don’t have to wait to get this order” or “I’m confused and can’t find what I’m looking for.”
  • Seeing: What do they look at while using the product, in what order and why? For example, for online banking, they may look at their account summary first to see their balances before doing any task.
  • Hearing: What do they hear from friends, family, and the masses that influence their thoughts
  • Saying and Doing: How do they behave? What are the words that they use to describe the experience?
  • Pains: What obstacles and frustrations stand in the way of accomplishing their goals?
  • Gains: What are they hoping to accomplish?

Touchpoints and Channels:

What touchpoints does the user have with the company? Direct sales, email, support, in-person events, social media etc.? The team can start considering additional touchpoints that could be used to enhance the experience.

With this internal knowledge captured, the team can now lay out an initial draft of the map. This first pass will expose gaps in the knowledge of the journey, for example, what drives repeat behavior or how the customer overcomes problems with using the product. The team can now articulate theories regarding how to improve the experience or turn pains into opportunities. For example, at the end they may determine that there are not enough touchpoints or that the onboarding is failing to drive users to use the product (i.e. to activation). The goal of the next steps will be to validate, adjust and fill gaps in the journey. Additionally, we will test these theories based on research.

Gather and Analyze Research

Now that we’ve collected some internal insights, we need to conduct research to fill gaps and to test any of the theories from the internal mapping exercise. This should be done with a combination of qualitative and quantitative measures: talking to and surveying customers, prospects, former customers etc. Key tools at this point are research methods that allow us to see how the user behaves in their natural environment and while using the product in the real world. These include, contextual inquiry and ethnographic research.

Both contextual inquiry and ethnographic research rely on observation and building and in-depth the story directly from the customer. For the latter, the person conducting the research will observe users in their day-to-day or arrange for participants to create detailed diaries over a set amount of time. Often these two approaches are used together.

For contextual inquiry, the researcher observes participants individually, while using the product or service in their regular context, i.e. in their home, office or other environment. There is an additional component of unstructured interviews that can happen throughout the observation period to aid in understanding what the user is thinking and why they perform certain actions.

At the end of the research step, we should be able to articulate the key elements of the journey map: who, what, where, how, and why?

Who

Who is the customer is for whom you are mapping the experience? There may be a couple that may warrant more than one map, but personas should not be ambiguous or a large number.

What

What are your personas goals are and what they are doing throughout their engagement with your company?

Where

Where are they in the journey and where all the touchpoints in each of these steps?

How

How they achieve (or don’t achieve) their goals, and how important each of the steps may be along the way? Their feelings should also be drawn out here

Why

Why they behave they do and use your product/service? This is the crux of what motivates them and the things they do!

Illustrate the Customer’s Journey

Based on all the data you have gathered, you should now be able to map out the stages by which you can define the customer experience and the facets of what they entail for the customer. The key touch-points within each of these stages should be catalogued although they may not all be detailed in the final distilled map. As with the empathy map, for each step we want to immerse ourselves in the persona’s experience. Therefore, for each step you will catalogue:

  • Stage: What stage of the journey does this represent?
  • Key Activities: What is the persona doing? What is the online and offline behavior?
  • Touchpoints: What touchpoints are employed to try to accomplish the steps?
  • Thinking: What questions do they have? What opinions?
  • Feeling: Are they happy? Sad? Frustrated? Confused?
  • Opportunities: What areas for improvement have we identified?

A simple example map is shown below:

Distill Areas of Opportunity

Once the journey is mapped out, and areas of opportunities identified, it’s time to act. The ideal way to focus on the most critical areas is to prioritize within the context of the business model. This will be the focus of the next section.

1.3 Growth Science Pillar 3: Optimization Across the Entire Customer Lifecycle

Optimize across the entire customer lifecycle to reach the greatest growth.

The biggest mistake that business leaders make in trying to drive growth is focusing on just customer acquisition through marketing. This is a problem because their customer retention and engagement are usually suboptimal, which means that the resources that they leverage to increase acquisition are squandered when those hard-won customers abandon the product right away. This is called the “leaky bucket problem,” which perfectly captures the futility of this approach. For this reason, the third building block will be learning how we can drive growth by optimizing each stage of the customer lifecycle– the third pillar of growth science.

Exclusively focusing on optimizing acquisition through marketing is unfortunate because it has led businesses to miss out on the full potential of growth optimization. The main thing to understand is that the effects of growth optimization are multiplicative and improvements compound. This means that you can often accomplish greater total growth by making many little improvements rather than just one big one. In particular, it’s better to optimize the entire customer lifecycle including acquisition, engagement, and retention. Let’s explore how this works.

Let’s imagine that you are a very good marketer and are able to improve your customer acquisition by thirty percent by experimenting with various marketing messages and different channels such as online advertising and inbound marketing. That’s great progress, but you can do better.

Diagram showing limited effects of optimizing just acquisition and retention.

You realize that many of your hard-won customers are abandoning your product right away, so you talk with the customer support folks and realize that many new customers have trouble with the initial setup. You work to improve the customer support for new customers and you are able to increase how many customers your business retains, which translates to another thirty percent growth. Since those two optimizations are compounding, you will increase your overall customer growth by a total of eighty-two percent. You don’t have to stop there. You can try optimizing customer engagement with better product design, retention with more targeted marketing, and so on.

If you look at the diagram below, you can think of the full universe of possibilities as having nine dimensions:

  • Improving customer acquisition through better:
    • marketing,
    • product design and implementation such as sharing features, and
    • operations such as sales support.
  • Improving customer engagement through:
    • marketing such as more accurate targeting,
    • product design and implementation, and
    • operations such as training.
  • Improving customer retention through better:
    • marketing such as promotions,
    • product design and implementation such as fewer usability problems, and
    • operations such as pro-active customer support.

 

Diagram showing the effects of optimizing across acquisition, engagement, and retention.

If you had made even modest gains along all nine dimensions, those gains would accrue to tremendous total growth. For example, even if you improved growth by ten percent in each of the nine areas, that would result in 136% total growth, which is a lot higher than improving just acquisition by thirty percent.

Growth science is iterative, data-driven experimentation to optimize the entire customer lifecycle through marketing, product design, and operations.

Fortunately, some companies are starting to realize that growth optimization spans far beyond just marketing and product design as well as beyond just acquisition or retention. Those companies are systematically applying iterative experimentation to marketing, product development, and operations to improve customer acquisition, engagement and retention. All three of these pillars together is what makes up modern growth science.

Be sure to check back tomorrow for the next section: 1.4 What Kinds of Growth Can You Engineer? New sections of Growthzilla are published every weekday.

1.1 Growth Science Pillar 1: Iterative Experimentation

Meme: Never stop testing, and your growth will never stop improving.

The origins of growth science could be traced back to David Ogilvy, one of the most well known ad men of the twentieth century, who proclaimed back in 1963, “Never stop testing, and your advertising will never stop improving.” Ogilvy’s statement embodies two important concepts–continually test and improve–that have paved the way to modern growth science.

The idea that advertising is not a static creation is critically important because challenges one to continuously improve tactics. Although this philosophy was popularized in advertising it is just as relevant in product development, operations, and even sales. Since the 1960’s some marketers have embraced this ethos by iteratively trying variations of tactics, channels and messaging. Moreover, the practice of iteratively implementing improvements has become more commonplace in other business functions such as product development, customer support, and sales. However, It’s not enough to keep trying different tactics and implementations.

The second key concept that Ogilvy proposed is actually testing new variations and improvements by carefully measuring associated outcomes. Once again, this practice is not just limited to marketing activities, and one can test variations of product implementation, operations, and sales. It’s not surprising that many business leaders have adopted both iterative experimentation and rigorous testing across business functions, and it’s now just as common to test variations of product design (particularly in the digital realm) as it is to test different advertising messages.

This paradigm shift has been supported by an ever burgeoning ecosystem of data collection and analysis tools that have allowed companies to track key performance indicators for new customer acquisition, such as click-through rates on online and email marketing, as well as for engagement and retention of existing customers. Now, one can easily test variations to marketing emails or to webpage designs to see which ones lead to the greatest gains in key metrics such as the total number of new sign ups or daily active users.

What was once driven entirely by intuition can now be informed by experimentation and testing. Leaders across marketing, product development, and operations are forming hypotheses and conducting experiments to see which tactics yield the most positive results. This rigorous methodology is the first pillar of growth science and underlies the entire field allowing us to call it a “science.”

What is shocking is that after more than half a century, most marketers still do not make data-driven decisions according to a survey conducted by Google in 2017.  I can empathize with those that do not put this philosophy into practice. While the field has burgeoned, it has also become a lot more difficult to navigate. There are now countless tools that allow people to experiment with marketing and product design. The scope of growth science has also greatly expanded across disciplines–the second pillar of growth science– from marketing to product implementation and operations. The application of this methodology has also expanded to include not only new customer acquisition but also to engagement and adoption. The optimization of the entire customer lifecycle is the third pillar of growth science.

We will cover the other two pillars of growth science in subsequent sections. Hopefully by explaining the three elements of growth science and providing a comprehensive guide, we can empower you to successfully employ growth science to supercharge your business.

 

Be sure to check back tomorrow for the next section: Growth Science Pillar 2: Optimization Across Disciplines! New sections of Growthzilla are published every weekday. 

Chapter 1: An Introduction to Growth Science

I remember looking at a picture with colorful tiles overlaid over a mock webpage. In the upper left there was a red-orange tile and another one right below. Across the top and down the left-hand-side of the page there were more orange and bright green tiles. As my eye gazed across to the right and down the mock page, the tiles got blue and finally purple. I was at Google in 2005 where my job was helping website owners figure out how to implement Google AdWords ads on their site. The picture that I was inspecting was a heatmap, which was derived from aggregate statistical data showing which ad placements resulted in the highest number of clicks.

I was astonished. I realized that design on the web was a big statistical game. Users had tendencies such as where they tended to look first on a screen and what colors tended to catch their eye. It was just a matter of using experimentation to figure out what those tendencies were and designing products that played to those preferences rather than worked against them.

This idea that we can test the effectiveness of product design resonated with me. Having studied physics and economics in college, I had a strong preference for proof and hard numbers over subjective intuition. My academic background led me to adopting a data and research-driven approach to designing user experiences for interactive products like websites.

I soon discovered testing tools such as eye-tracking, which allows one to track what a user is looking at on the screen, as well as A/B testing, which allows one to compare how effective two versions of a page are in relation to each other. I also read results of experiments that others were performing with headlines such as “Placing the security logo on the upper left between the search box and the navigation bar increased conversions 8.83%.” 

Later, during my tenure as director of user experience in a Silicon Valley startup in 2007, I decided to use experimentation to drive product design. The startup was a document sharing site that was one of the most visited web properties in the world. I suggested to Senior Director of Product that we should try experimenting with the registration button on the home page. He laughed and told me not to waste my time, but luckily the founders were supportive of the idea, and we did it anyways.

One of the senior engineers (a brilliant gentleman that later became a very successful entrepreneur) developed our in-house A/B testing platform. First we figured that maybe moving the registration button to a more prominent place might help our conversions–the proportion of people clicking through to the registration page. So we moved the button from all the way on the right of the menu bar to the center. Lo and behold, our conversion rate increased by more than 70%! I was stunned that simply moving the button to the left of the page by a few hundred pixels (effectively about two inches on a monitor) made such a huge difference. I think we all were.

Given our initial success, we decided to keep going to see what other optimizations we could make through testing variations. We next decided to change the design of the button itself. Originally the button was a bland shade of blue, so we decided to try making it bright green based on the hypothesis that users would more readily notice a brighter color and would, thus, be more likely to click it. Another round of A/B testing revealed that the green version gave us about another 50% increase in conversion rate. This moment in time changed my life. At that moment, I thought that soon everyone would be experimenting and testing product design because it had such unbelievable potential to help businesses grow.

Over the next decade, two important trends occurred. First, leaders figured out ways to experiment with changes to not only product implementation but also to marketing and operations such as customer service. Second, many new tools appeared in the market allowing businesses to experiment with things like marketing messaging and even customer service process. Some companies have taken full advantage of the methods and tools to dominate their competitors. Unfortunately, these exciting advances have not yet reached a mass audience, and many businesses continue to fall behind.

In speaking to friends, clients, and colleagues, we heard the same refrain: the possibilities seem so numerous and the methods so opaque that many folks simply do not know where to start. In addition, many people had heard of terms like “growth hacking,” and incorrectly believed that they should replicate hacks that other businesses have used rather than adopting a broader process that they can contextualize to their business and implement to reliably grow their customer base and revenue. Our aim in writing this book is to give everyone an overview of the three pillars that make up growth science as well as practical tactics for growing your business.

 

Check in tomorrow for the next section of Chapter 1.

What Is Growthzilla About?

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Do you want to grow your business? Who doesn’t? We wrote Growthzilla to not only get you started but to give you a comprehensive guide that you can use to make your business thrive in an increasingly competitive landscape.

Growing a product or business is not a “hack,” which is a term that implies a trick or crude way of doing things. Instead, creating growth has become a science over the past decade, enabled by meticulous methodologies as well as technology that allows leaders to test tactics with near-scientific rigor. Companies in various industries ranging from tech to financial services are starting to employ those methodologies to out-maneuver their competitors, while the laggards are falling to the wayside. In the coming decades companies will have two options: either jump on the bandwagon and engineer growth or endure a steady decline as growth science becomes a serious competitive advantage.

Not only have companies such as Google and Amazon been systematically applying growth science to further solidify their market leadership, the scope of what they are doing has dramatically increased. Growth science now includes using marketing, product implementation, and operations to drive growth along the entire customer lifecycle from acquisition to engagement and retention. The modern field of growth science can be characterized by:

  • An iterative approach to testing and refining tactics,
  • Leveraging marketing, product implementation, and operations to drive growth, and
  • Optimizing growth over the entire customer lifecycle from acquisition to engagement and retention.

We felt that we had to write Growthzilla to give both new innovators a chance to compete with sophisticated incumbents such as Google and Amazon as well as to give existing companies a chance to adapt how they do business in this quickly changing landscape. Our hope is that the book offers a great overview of the methodology, the scope, and practical tactics that anyone in a leadership position can immediately apply to grow the product and business.

Moreover, we thought that in creating Growthzilla we should put our money where our mouth is and actually apply the lessons we present to actually making the book. Practice what you preach! That is why we are making the draft of Growthzilla available online on this site to learn from your comments and questions and create a better book for all readers.

We encourage you to read each section as we publish it and tell us what you agree and disagree with as well as what’s confusing. And if you like what you read, help us deepen our impact by telling your friends and colleagues!

We hope you find Growthzilla informative, practical, and truly transformational for you and your business! Most of all, thank you for your interest and support.

Warmly,

Sergio and Kimmy