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November 5, 2024
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The Growth Approach in Business: A Trend or a Proven Tool?
Why is Everyone Talking About "Growth"?
Successful companies are increasingly relying on growth teams instead of traditional marketing approaches. But is this always the right choice? Let’s examine the main differences between growth and classic marketing to determine whether this approach truly benefits a business or if it’s just a temporary trend.
If a company is planning its future trajectory and is ready for strategic decision-making, the growth approach could indeed be a viable direction. When a business is focused not only on profit but also on improving the product, boosting customer loyalty, and enhancing its marketing efforts, a growth team can help strengthen competitiveness, accelerate the launch of innovative products, and meet customer needs.
Successful cases are often seen in tech companies, which pioneered the growth approach. Companies like Dropbox, Airbnb, and Facebook—alongside many other tech startups—required resilience in the early stages and quick results to attract investment. Growth strategies combine innovation, flexibility, and a willingness to experiment. For startups, this approach allows for rapid testing and implementation of ideas, fostering growth, especially in the early stages. Growth marketing teams aim not only to expand the user base but also to continuously improve the product, testing various approaches to increase its value to customers.
Growth teams are often composed of specialists from various fields—marketing, product development, analytics, and technical experts. Each member's skills are focused on identifying potential growth points across all stages of user or customer interaction. From acquisition and retention to monetization, the team examines the customer journey to pinpoint areas for improvement. Unlike static marketing strategies, growth strategies employ dynamic approaches: numerous experiments are conducted, and only the most effective solutions are implemented.
As the founder of the term "growth hacking," Sean Ellis highlighted successful examples like Pinterest, LinkedIn, Spotify, Evernote, Facebook, and Uber in his book Hacking Growth. He describes growth hacking as "a clear methodology that enables companies to discover new opportunities through rapid collaboration across teams. Relying on data analysis and experimentation, it shows how businesses can effectively leverage their large volumes of accumulated data." Ellis emphasizes that growth methods are fundamentally built on processing substantial data insights. But while many look to market leaders for inspiration, how can companies implement a growth approach in their own organizations?
Differences and Advantages of the Growth Approach
Growth-команди відрізняються від Growth teams differ from traditional teams in that they focus not only on profitability but also on continuous experimentation, with an emphasis on improving the product and enhancing user experience. As Chris Miller, founder of HubSpot's growth team, states, growth can only be achieved through a deep understanding of customer behavior and fostering an inclusive culture that supports innovation.
The primary advantage of a growth team over a traditional team lies in its high adaptability to market changes. This approach is particularly well-suited to tech companies that can flexibly respond to rapid shifts. However, it may not always be as effective for businesses operating in less dynamic markets or in highly regulated industries, such as finance, where adaptability is constrained by regulatory requirements.
Applying Sean Ellis's Growth Framework: Core Components of the Growth Approach
1. Acquisition. Growth teams optimize methods for acquiring new customers by experimenting with different channels and messaging to maximize visibility. This strategy enabled rapid growth for companies like Facebook and LinkedIn, which focused intensively on brand recognition.
2. Retention. Attracting users is only part of the challenge—retaining them is essential. Sean Ellis emphasizes that data analysis plays a critical role in understanding customer needs and quickly adapting to their expectations, which is particularly vital for apps and digital services.
3. Increasing Loyalty. Growth teams develop strategies to keep customers engaged with the brand. This involves providing a personalized experience and enhancing the product to deliver value at each stage of customer interaction.
4. Monetization. Growth teams test different business models and revenue mechanisms, always with a focus on the user experience. They assess customers' willingness to pay and design monetization strategies that integrate seamlessly into the user's routine.
While traditional marketing teams typically have a narrower scope, growth teams can drive significant changes in product development. Rather than focusing solely on profit or advertising campaigns, growth teams work across all stages of the customer journey. Instead of relying on conventional advertising, they experiment and test ideas like user referrals, loyalty-building strategies, and product improvements that enhance the overall user experience.
This approach extends beyond marketing by placing the customer at the center of all team efforts. For sustainable growth, companies must be prepared to innovate and make transformative changes, investing both in the growth methodology itself and in the resources needed to support it.
Key Stages in Developing a Growth Strategy
At the outset, growth teams analyze data to identify untapped growth opportunities. For example, Spotify discovered that offering personalized playlists significantly boosts user loyalty. Dropbox effectively leveraged referral marketing, offering extra storage space to customers who invited new users. Similarly, Uber used friend-based special offers in its early activation strategy, giving new users a first free ride, which helped convert new customers into loyal ones.
The next step involves creating and testing hypotheses. The team formulates ideas on how to attract new customers or improve retention of existing ones. Frameworks are often used to guide these strategies. In 2007, Dave McClure introduced a growth measurement model known as the "pirate funnel" (AARRR or the modified version, RARRA). This framework segments the process into key stages:
1. Acquisition – attracting new users.
2. Activation – converting new users into active participants.
3. Retention – ensuring repeat use of the product.
4. Revenue – monetizing customers.
5. Referral – encouraging users to bring others on board.
Using the AARRR framework, Facebook identified that "activation" of new users increases significantly when they connect with 10 friends within their first 7 days. This insight led to a focus on helping users find friends, greatly improving user retention.
Various metrics are used to evaluate and quickly adjust hypotheses if needed. Some of the most popular include:
1. LTV (Lifetime Value) – the long-term revenue generated by a customer.
2. CAC (Customer Acquisition Cost) – the cost of acquiring a new customer.
3. NPS (Net Promoter Score) – a measure of customer satisfaction and loyalty.
These metrics allow growth teams to make data-driven decisions, continuously refine strategies, and optimize the user journey.
When to Choose a Growth Strategy vs. a Traditional Approach
A growth strategy is ideal for companies aiming to expand their audience or capture new markets. This is particularly relevant for startups and young companies that need to adapt swiftly. Through a growth approach, they can achieve exponential growth, as demonstrated by companies like Dropbox and Uber. But what about situations where simply maintaining the current position becomes challenging? Jill Zucker, Senior Partner and Co-Lead of Global Transformation Services at McKinsey, explains: “It takes courage to act decisively, even in times of economic uncertainty. In past decades, you could afford to pause growth in temporarily challenging conditions. However, during financial crises, the gap between companies that chose growth and those that focused on maintaining core operations was narrow; yet, as the economy stabilized, this gap widened significantly.”
According to a November 2023 survey by Harvard Business Review, 96% of respondents agree that creative ideas are essential for an organization’s long-term success and efficiency. Furthermore, 94% believe that companies embracing creativity achieve more strategic growth. In the long term, companies that continued experimenting outperformed those that adhered strictly to traditional approaches.
On the other hand, Sean Ellis argues in his book that companies in conservative industries operating in less dynamic markets would benefit more from traditional marketing approaches. Rather than rapid experimentation, they may favor proven strategies that prioritize stability and reputation. For consumer goods or financial services brands, where consistency and trust are more crucial than dynamic growth, traditional marketing provides more predictable outcomes. Procter & Gamble, for example, has successfully sustained steady growth through traditional marketing, remaining one of the world’s largest advertisers and winning Cannes Lions as “Brand Marketer of the Decade” in 2020. Therefore, a growth approach cannot be deemed an absolute must-have.
The decision to adopt a growth strategy should depend on the company’s goals, development stage, cultural readiness for experimentation, and resources available for deep analytics.
Author: Iryna Zhdanyuk
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