Why should you use Growth Hacking to grow your SaaS?

Few marketing strategies have revolutionised the sector quite as much as Growth Hacking. Startups and SaaS (Software-as-a-Service) companies such as Facebook, Twitter, Reddit, Airbnb and Dropbox would agree, as they utilised this strategy to achieve success in their business models.  The first person to speak of Growth Hacking as a marketing concept was Sean Ellis, who in fact coined the term in 2010 in his blog article entitled Find a Growth Hacker for Your Startup, which became viral in a very short space of time.

The concept of Growth Hacking was initially used by startups as a way of getting users and creating rapid initial growth with limited marketing budgets through a combination of freemium subscription plans and viral marketing tactics that were often built into the product’s core programming.  However, the discipline has evolved in recent years to include many other marketing tactics and analytical measures, all of which help to create ongoing business growth and generate revenues in a way like never before.  Nowadays, the principles of Growth Hacking can be applied to any size of business, not just those in the early phase of its lifetime.

What is Growth Hacking?

We can therefore define Growth Hacking as a combination of analytics, creativity and skills, which drive users to the final conversion stage, by combining technology with marketing. In other words, it is the place where software and marketing unite to increase both the number of users and their lifetime value.

B2B SaaS Growth Hacking Success Cases: Dropbox and Slack

Two clear examples of successful Growth Hacking strategies are no doubt Dropbox and Slack.

In the case of Dropbox (a platform that allows users to store, administer, share and synchronise files in the cloud), it showed how to achieve growth by utilising its own visitor and subscriber base.  Dropbox combined a freemium pricing model, with a referral programme, social media and not to forget a great product, which provided astonishing results.  Therefore upon registration, each new subscriber received 2GB of free space, and then in order to obtain more space they could either pay or invite their contacts to use the platform (for each friend that registered the user would get 500MB of additional space).

Thanks to this strategy, Dropbox got 70,000 users overnight by creating a demo video of the product and releasing on social media, which became viral, then grew from 100.000 to 4 million users in only 15 months.

Slack, which is an internal messaging app, has been labelled as one of the fastest growing companies ever, reaching zero to $4 billion within only four years and currently have 4 million active daily uses. In a nutshell, they achieved this by first responding to a large gap in the market for a messaging app primarily aimed at B2B to help companies with their internal communication, so the product itself and being first-to-market was a major factor contributing to their success. Furthermore, the founder Stewart Butterfield built up a buzz around the product through word-of-mouth quite some time prior to its release, so the day they launched there were already thousands of people interested in it and ready to subscribe. Their first release was a beta version, not fully completed, or what we call a Minimum Viable Product, which they used to gain feedback from early adopters to improve the product, so that it could respond to all the features and functionality that their target market would require. This led their own customers to become advocates of the product and spread the word, helping to do their marketing for them. It also employs a very fair freemium pricing plan to allow new users to fully test the product with few limitations, from which they can easily upgrade once they’re hooked. Finally, Slack leveraged social media via a variety of clever and ingenious tactics to increase traffic and spread virality of the brand.

In fact, the secret to Slack’s success is in fact not a secret at all, as their product development and marketing was practically text-book with regards to how any SaaS company should deploy its growth strategy. It really was a case of launching the right product, at the right time, to the right market, with the right strategy. Genius!

The importance of metrics and the Growth Hacker funnel

One of the keys to Growth Hacking is its exhaustive use of data analysis.  Although nowadays no website should even exist if it doesn’t analyse the activity of each of its users, it is certain that there still remains a good majority of businesses that don’t do it, despite the fact that they are squandering an indescribable amount of business opportunities.

When we speak of the funnel we refer to the set of stages through which a visitor should normally have to pass before completing a desired action and becoming a loyal user or advocate of your product or service. The Growth Hacker funnel (also known as Pirate metrics from its acronym A.A.R.R.R) works in a similar way as the sales or conversion funnel, whereby as visitors are sent through each stage, their numbers reduce, but they become more and more valuable to the company.  In this funnel, the conversion happens much sooner in the ‘activation’ stage, as the remaining phases are more geared to producing rapid growth.

The Growth Hacker funnel consists of 5 phases.  Some frameworks only include the first 3, but the last two stages mentioned below, particularly the referral stage is just as crucial for your growth hacking strategy to succeed:

1. Acquisition: firstly we need to attract visitors to our brand website or product landing page to create awareness about our application, capture their interest and engage them.
2. Activation: once we have gained the visitor’s attention, we seek to activate them to become a subscriber or user of our product or service.  This is not always in the form of a paid transaction, but it could be exchanging content such as an e-book or PDF brochure, or giving them free registration to a limited version of software or requesting a free trial for example.  Once the visitor has been converted to a member and we have their permission to contact them in the future, this is where the relationship begins.
3. Retention: in this phase, we nurture the user to increase their loyalty so they become a repeat customer of our product, such as contracting them to a monthly subscription for example. We must also ensure that the user stays satisfied with the product and support, so that it stays with the company long term and doesn’t switch to our competitors.
4. Revenue: this is about how we make money from our users activity such as subscribing to a service or paying for premium content, as well as increasing the profitability of each client we’ve captured, such as upgrading them to a more premium package of our service, or cross-selling to promote other in-app add-ons or purchases.  We can also include here the lifetime value of our repeat customer, as well as revenues earned from them referring our product or service to others, which happens in the next stage.
5. Referral: as mentioned, this can be one of the most important stages for achieving fast growth (as in the case of Dropbox and Slack above), when our user or customer is now satisfied and becomes an advocate of our brand, so they speak highly of our company to their friends, or share us on social media, and bring new users to our website to purchase our product or contract our service.  This leads back to the Acquisition stage to begin the growth loop.

My only problem with this particular model, is that it doesn’t have a stage which is specifically designed to capture customer feedback, particularly during the initial phases of product development, but also ongoing as the needs and requirements of our users evolve. This should really come between the Activation and Retention stage, and the findings should be communicated back to the product management team to be designed and tested.

Finally it is very important not to forget to check your metrics!  We need to establish concrete objectives, ensuring that they are quantifiable and above all else, realistic to obtain, so that we can measure the success of our actions and prove that our strategy is in ‘good health’.

Why you should incorporate a Growth Hacker Marketing strategy in your business

There are many important elements any company can take away from this methodology.  One of the main strengths of Growth Hacking lies in the powerful data analytics used to measure this strategy, allowing us to know our target market and offer them what they are looking for at the right moment.  I will leave the many different growth hacking tactics to another article, however, in addition to just some of the points we have previously discussed you will also reap the following benefits.

1. Improve user insights

Through the continual tracking and data analysis that is required with any Growth Hacking strategy, you will as a result know your target market perfectly, how they navigate your website, their user behavioural patterns, what information interests them, which product improvements retain them, all of which will help you to lead them through the funnel thus increasing conversion rates.  Also, being open to customer feedback will let you know the true needs and wants of your users.  This information can then be used to improve your product or service to increase customer satisfaction and retain your users for longer.

2. Reduce product development and marketing costs

By getting feedback on the experiences your customers are having with your product, and what features they need to provide solutions to their problems, it can save a lot of time during product development. Perhaps avoiding spending large sums of money on features they don’t actually need or want for example. Furthermore, by defining measurable goals within your marketing strategy, you will know at any moment the profitability or ROI you are obtaining from each campaign, which will allow you to make better decisions and adapt campaigns that are not working. In this way, you will reduce the probability for error, thus reducing marketing costs and simultaneously improving campaign results, helping to achieve quick and sustainable growth within your business.

3. More quality leads

Growth hacking will not only allow you to generate more leads, but they will also be of greater quality, thus making it easier to convert them into paying users.  This is due to knowing your audience better, as previously highlighted, and providing content of interest to them, which is related to your product or service features and benefits.

4. Increase your user base and revenues

One of the most obvious examples of the advantage of growth hacking, as its name implies, is the rapid increase of a company’s users and customers, through growth hacking tactics such as the implementation of special pricing models, social media, viral marketing and referral schemes.   This will in turn increase sales, and combined with the cost efficiencies obtained from optimised marketing campaigns, the company should see significant increase in revenues.

In summary, Growth Hacking is a marketing discipline that has become increasingly popular in recent years, as it can achieve fast and scalable growth for any SaaS company, with less investment than traditional marketing tactics.  As we have seen in our examples of Dropbox and Slack, with company growth being the primary objective, Growth Hacking forces both company founders and marketers to find unique ways to get users through the funnel within shorter cycles, converting them to advocates of your brand so they share and refer your product to others, creating the growth loop (from acquisition through to retention and referral, then the process starts again when a new customer is referred to your website), with a strong emphasis on feedback throughout the process. 

As we have learned, all of this can only be achieved through gaining a clear insight into your user’s behaviour and interests, as well as constant data analysis to know which tactics or product improvements have worked, so we can concentrate on the most efficient and effective ways to grow our business.  But, never forget!  One of the most important requirements of Growth Hacking is to first create an outstanding product or service, and back it up with a full marketing strategy, without which achieving exponential growth would be an impossibility.