How To Validate PMF EffectivelyㅣSean Ellis, Hacking Growth

what I would say is that most companies fail with growth hacking it's unfortunate but it's it's the reality most digital marketers today are clever enough to know I need to do a lot of testing the the problem with it though everyone else has gotten very smart at that too if everyone's testing everything and optimizing on return on investment Facebook and Google and all of these other platforms are making it bidding every anytime someone gets good at these things the prices keep going up now it's harder and harder to find a profitable way to get people to the website and so so they get frustrated so then they stop trying to run experiments in the product want to run all their experiments on Facebook or on Google or some something external and then it's not growth acking anymore than they're just doing marketing and so but I don't think it's because they they have a hard time coming up with a hypothesis or or a hard time coming up with the right test idea I think it's because uh hi I'm Sean Ellis I am the author of hacking growth I'm also the person who coined the term growth hacking which has become pretty well known around the world over last 12 years I think or 13 years since I came up with the term what I'm really good at is getting people to to use good product when I'm uh responsible for growing them I did that for a number of years and that's when I went to Dropbox I joined Dropbox Dropbox was less than 10 employees at the time Dropbox became the fastest SAS company to reach a billion ion Dollar in Revenue so faster than any company before it soon after I left Dropbox was was when I coined the term growth hacking but really the techniques that I had used to grow these companies were the techniques that are are really what what we talk about when we say growth hacking today I also did a interim VP growth role with with Eventbrite also reached the billion dollars valuation right after event bright I went to Lookout also reached the billion dollar valuation I really think my my strength is is growing great companies and so you can read a book but when you actually try to do it it's really hard so I I do a lot of workshops that's a lot of what my focus is these days so in in the first company I told you I started in sales when they said you know we want you to do this and we'll make you the the marketing guy I never took Marketing in school I don't know what I'm doing so then I decided I would go back to school and take some classes in marketing and I went to New York university did really well got a got an A in the class and then and then I went back and tried to to do it and I got I was really bad at it after the class the class kind of broke me made made me think about it the old way of doing marketing I I became too kind of academic and so it was a very like I had to like okay get that out of my head now and go back to it so that was kind of the first time I realized like my Approach is a little bit different than and how they teach marketing but then I just kind of forgot about it and I was just focused on how do we grow these businesses how do how do we do our very best to grow these businesses I moved to Silicon Valley in 2007 I also had a lot of venture capitalists who were introducing me to Founders they said can you help this founder they're really having trouble growing and and so I said sure and then I would sit down with the founder and the first thing they would say is we really need your help to build awareness I've never focused I'm building awareness I want them to actually use the product and so for me it was like how do I get them to sign up for the product to use the product get value from the product pay me money for the product and then I take that money to get more customers and and create something that's much more sustainable so kind of this mis idea from the founders that they needed to build awareness you know just in general I just that's when I started to recognize that my Approach was different and so coming up with the idea of calling it growth in we need to stop calling this marketing because I Define growth hacking as a scientific approach to figuring out how to grow the business are testing and analyzing across all of the levers of growth from acquisition to activation retention and monetization most powerful lever of any of them activation is like the the most important one that I would generally focus on it's the first one that I focus on when I work with a company engagement and retention there's there's a sense entially what you're doing is what what brings someone back again and again to come in and use the product and so of course the most powerful thing to bring people back is a great first experience which is actually the activation so the biggest driver of retention engagement is a great activation step in the customer acquisition process then you can still be tactical about you know what are the what are the prompts what what do I do to bring someone back and then how do I make sure that every time they come back and use the product that even more likely to come back and use it again the next time how do how do I get them to actually invest something into the product so maybe do a little bit of customization that makes it a little bit more valuable each time and makes them feel like they they have some ownership around that experience so and and what I would say is that most companies fail with growth hacking it's unfortunate but it's it's the reality but I don't think it's because they they have a hard time coming up with a hypothesis or or a hard time coming up with the right test idea grow grow is cross functional growth is something that requires a product team to work with a marketing team to work with Engineers to work with designers to work with data people most companies aren't organized that way as they get bigger companies essentially have more and more specialist teams that become separated that's what causes growth hacking not to work in most businesses most digital marketers today are clever enough to know I need to do a lot of testing the the problem with it though every everyone else has gotten very smart at that too if everyone's testing everything and optimizing on return on investment Facebook and Google and all of these other platforms are making it bidding any anytime someone gets good at these things the prices keep going up now it's harder and harder to find a profitable way to get people to the website and so the only way to really be competitive on acquisition is to actually focus on the entire customer journey and so this is where growth hacking then becomes so marketing is more how do I just get them to come in growth hacking starts to look at the how do I get them to come in how do I convert them how do I give them a great experience once they come in how do I get them to come back a lot more often how do I get them to tell their friends what's the right way to get money from them and these are all areas that you can test so grow attacking is going to cover a lot more and and it turns out that probably the product team does more with growth hacking than even the marketing team because there's a lot of opportunities within the product to improve the value of the customer and retain the customer but half of their energy is spent trying to convince the product team to run an experiment that's inside the product they get frustrated so then they stop trying to run experiments in the product and so then they want to run all their experiments on Facebook or on Google or some something external and then it's not growth decking anymore anymore than they're just than they're just doing marketing and so the main point of why I believe companies fail with this is is because they can't get these different teams agreeing on how to work together effectively once you get the teams working together then some of the other challenges become important challenges so how do you identify what the best opportunities are how do you come up with the good ideas how do you prioritize between those ideas the biggest thing is that commitment to testing and the ability to test anywhere in the business that can accelerate growth is the part where most people get stuck it may be the brand design side of things that feels like all this testing is going to make our website ugly or our product ugly it could be the product side that said oh man these growth hackers they're going to come in and start making our product awful because trying to trick people to do things but that's a that's a perception thing the best growth hacks are not things that trick people they're finding where people get confused in the product to day and finding a way to make it easier and simpler for them and it's about improving the customer experience around the things that matter you know when you build something initially you're building it maybe based on some best practices but a lot of times it's a guess it's a guess that this this is going to be what's going to work the best and sometimes you did a pretty good guess but a lot of times it takes a lot of people going through there to realize like no this is actually very confusing and we need to understand why it's confusing so with a lot of usability testing and serving and the more that you can diagnose the problem then you come up with ideas maybe if we tried it this way maybe if we tried it that way and those new additional things can can make a huge difference so there's a great quote from Amazon's uh founder former CEO where he said our success in Amazon is a function of how many experiments we run per day per month per year and so volume of experiments really starts to matter and when we talk about the growth hacking process proc it's it's uh it starts with analysis and so that's really the first analysis I'm doing is is more of a qualitative analysis of who loves the product and why do they love it so the first thing that I do when when I validated product Market fit is I figure out why do I have product Market fit because if I don't understand why I have product Market fit you know then I'm not going to be able to grow very well let's say I think that people love the product for this reason but they really love it for this reason of my advertisements all of my messaging is pushing them to do something with a product that it's bad at doing then then I'm probably not going to keep those people it's really important if you have product Market fit to to understand what is the main benefit that those musthave users are having so it's really hard to improve something you don't understand so that's where the analysis starts then you start to say okay I have ideas to improve the situation and so that's the next step is to generate some ideas the next step is to actually prioritize which of those ideas you want to test first then you start to run the test and you analyze the results and it's just that that repeating process of you need to try a lot of ideas to figure out what's going to work and what's not going to work and so one of the most important things in growth hacking is just running a lot of tests a high velocity of tests I'm going to emphasize that over and over because it's really important and I think what we realized was that nobody knew consistently what was going to be the the best and so the only way to figure out what was the best was just to test a lot of things uh a great analogy is is one that comes from the sports world where you have there's a quote from a a hockey player Wayne Gretzky that essentially says you miss every shot that you don't take so but that also applies to soccer uh or or football as they call it in most of the world but essentially if you only take one shot maybe you make it but if you take 10 shots in a game or 50 shots in a game you're much more likely to win because every shot is an opportunity to score and it's the same thing with testing every test you run is an opportunity to find that one big test that ultimately is a lot more successful than everything else that you do and so it's a mistake often when teams are obsessed on trying to run one perfect test they get so excited about an idea that they they only want to focus on one it's much better to to make sure that every week we're running three different tests every single week or five different tests every single week depending on the size of the company you just don't know which one's going to be the one that that ends up being super high impact and and uh making a big difference in the growth of the [Music] business I think the most important part you can't grow something that people don't really like when they try it and so in the startup world we call that product Market fit a lot of times I'll tell people I got lucky and they'll they'll say oh you're just being humble no it really is like if if you give me something to grow and nobody likes that product I will fail every time what I focused on was we need to get people to experience the product in the right way if people don't like the product all you can do is get really good at getting people to try the product and then they disappear what we call product Market fit when when someone tries the product they enjoy the product they keep using the product so if you can't retain customers you can't grow so it's really you know validating that you have product Market fit is is really critical before you get obsessive on on growth hacking and and trying to grow the business for me picking product Market fit became really important so I came up with a question that really helped me which was I asked users on the product how would you feel if you couldn't use this product anymore I only asked people who had really used the product so they they've come in they've used it hopefully the right way and even more than once but then it's a a random sample of people who've used the product more than once hopefully recently when I asked that question if say 5% of the people said that they'd be very disappointed without it that's not enough I'm I'm not going to be able to grow that business was was really what I told myself what I eventually I had run that question across hundreds of companies so ones that I worked with and ones that I didn't work with and what I found is that about 40% of the users said they would be very disappointed without the product those companies were generally successful to some level whether I worked with them or not that question a good leading indicator of product Market fit the obviously more important thing is if people keep using the product and so that's what we call we call a retention cohort so if you get 100 people who start using the product and after you know 30 days zero of them are still using the product you do not have product Market fit but you're not going to have all hundred of them using the product that's that that would be nearly impossible and so usually what happens is 100 people start using the product one week later it's down to 70 and then down to 60 then down to 50 if it keeps going to zero you don't have product Market fit but if it goes down to 50 and then those 50 keep using it over the long term now you have a signal that for half those people it was something that was so valuable they keep using it that's product Market fit and you can grow that so uh we call that a retention cohort that plateaus so it essentially runs parallel to the x-axis at some number it depends on on the business so some businesses like Comm the uh the meditation app they they Plateau only about 5% of the users because they have to they have to develop a a habit of doing meditation which is hard for people where Instagram plateaus more like a 50 or 60% um part of it too Instagram is free and C costs money so that's another reason why people might stop using it so it's it's less important where it plateaus but if it if it always goes to zero eventually you're not growing you're just replacing you're replacing the original people who signed up and and so for a while you can grow but eventually you're going to flatten out and so product Market fit is something that you can quantify for me the best company for me to work on is one that has all the signs of product Market fit but no growth yet because the minute that it has growth is when the investors say wow this will be valuable and they start pouring money into it what I want is if I see ass signs a product Market fit it doesn't have the growth yet that stock is still very cheap and so I get my stock options and then then I can make good money off of that if I come in later like once the company's already growing really fast they they of course won't give me very much stock so for for me one of the important things is trying to pick after product Market fit but before growth one of the biggest impacts of growth hacking on the culture of a business is that everyone becomes less arrogant they if they used to think they had the answers and tests keep revealing that they're wrong a big part of the time they stop being so insistent that they have the right answer and they start being curious about what is the right answer and that to me creates a much better culture where where business starts people start working together to find the right answers in the business and and they work together more humbly there's less arguments about my opinion versus your opinion and more cooperation and how how do we actually uncover the truth

Channel: EO

Views: 29,337

Keywords: entrepreneurship, innovation, business, GrowthHacking, HackingGrowth, Growth, SeanEllis

Id: TDBXoIiYFdQ

Length: 17min 8sec (1028 seconds)

Published: Thu Mar 21 2024