Growth hacking: what does it involve and how can it help you expand?

Growth hacking: what does it involve and how can it help you expand?

Alberto Maestri Published on 4/6/2022

Marketing is essential if you want to introduce people to the main features of your products or services.

However, many new businesses with an excellent product or idea risk seeing their ambitions come to nothing due to a lack of funds or resources. The world of start-ups has therefore had to experiment with ingenious new ways to promote itself on the market, which generate the maximum impact for the minimum cost.

As digitalisation became widespread, growth hacking emerged as a new way to improve businesses’ scalability. Although the term is very fashionable in the marketing sector, few people really know what it means. In this article we will therefore delve into the origins of the process and explain how to make the most of it.

Growth Hacking: Data analysis is essential if you want to achieve rapid growth
Growth Hacking: Data analysis is essential if you want to achieve rapid growth

Definition and features of growth hacking

Growth hacking is a method that allows you to identify the most effective ways to expand your business by combining marketing techniques based on creativity, data analysis and a range of different disciplines. The name is self-explanatory: it aims to achieve growth using innovative techniques (hacking).

The term was first coined in 2010 by Sean Ellis, a renowned marketing and business development expert who has worked with companies of the calibre of Dropbox and LogMeIn. His key idea was that start-ups that want to achieve rapid and sustainable growth should turn to someone with analytical and creative skills and the courage to take risks. He described growth hacking as combining multiple fields, including science, data analysis and productivity, to test different types of strategy to work out which will achieve your goals most effectively. While traditional marketing is based on conventional channels such as television, newspapers and radio, growth hacking focuses on using innovative methods to obtain optimal growth for the funds available. And instead of looking at every aspect of the business, it concentrates purely on scalability.

Growth Hacking: Continuous testing and field trials can speed up processes
Continuous testing and field trials can speed up processes

Three principles to ensure constant improvement, and the origins of growth hacking

If you look at the world’s leading companies, you’ll see they have a scientific approach based on small but constant improvement, following three highly effective principles:

Principle 1: functionality over aesthetics

The first principle major brands adhere to is prioritising functionality over aesthetics in their design. Concentrating on aesthetics tends to come at the expense of helping customers achieve their goals, while focusing on functionality means using detailed research to help to understand people’s requirements and the needs of the business. Only when the data gathered shows an issue with aesthetics are the two concepts combined. The problems occur when businesses think that pure aesthetics is a substitute for research and testing.

Principle 2: testing

The second principle revolves around testing. Any change made by large companies stems from decisions based on data that is constantly monitored using tools like A/B tests. This type of method and business mindset allows companies to check rapidly what is working and what isn’t.

Principle 3: incremental optimisation

The third principle refers to making frequent, incremental adjustments. If you look at the websites, apps or physical stores of the biggest companies in the world, you don’t tend to see big changes from one day to the next – instead the firms make small changes on a daily or weekly basis. This has three benefits: you can see exactly what is and isn’t working, the improvement process remains agile, and decisions can be acted upon straight away. This stems from the mathematical principle of exponents: if an event is repeated constantly, its effect multiplies and the growth becomes exponential.

Growth hacking and agile marketing

Taken together, these three principles define the philosophy of agile marketing, a precursor to growth hacking.

Agile marketing is an approach inspired by software development that promotes reacting to change instead of following a rigid plan: rather than gambling with major changes, the aim is to run tests and analyse data on various opinions and rules, and conduct lots of small experiments. An agile mentality improves the productivity, effectiveness and transparency of marketing, and increases its ability to adapt to change. If done correctly, it leads to a way of working that offers faster growth and innovation through research and experimentation. Customers receive new products more quickly, new business ideas are tested before they require major investment, and companies can maintain a relationship with their customers in real-time as well as developing a larger market share.

Bringing together business departments and different skills fosters collaboration and innovation
Bringing together business departments and different skills fosters collaboration and innovation

The process underpinning growth hacking

To expand using growth hacking, a company must continue to test out its product development and marketing process. First of all, you need to develop a valuable product, one that people want and which is scalable: you will struggle to apply growth hacking to standard bars of soap, for example. To work out if your product is suitable, you need to take it outside the business by collecting feedback as quickly as possible, gather data and change your direction based on what it tells you.

Every new product also has a life cycle it must go through before it becomes established. The law of diffusion of innovation explains that to reach the majority of people you first need to win over the ‘innovators’ and ‘early adopters’. Essentially, these are communities or groups of people (defined in Eurisko’s large map of lifestyles) who tend to test out new items early and who always want to stay up to date with the latest market news. They are also sometimes known as opinion leaders, because they can influence trends. Growth hacking applies the Pareto 80/20 principle, which states that 80% of results stem from 20% of actions. In this case, a small initial group ends up influencing a much larger number of people.

Working out the right audience and how to engage them is no simple matter. Luckily, a framework called AARRR (also known, for obvious reasons, as the pirate framework) can help you to identify the key users and how to optimise the process by monitoring certain key steps. Let’s take a look at the individual stages of this process:

  • Acquisition: the moment when people come into contact with the product. A content marketing strategy and tools such as email marketing, SEO, blogs and social media are employed to grab users’ attention.
  • Activation: lead generation is not enough – you also need to inspire users and foster a relationship with them to trigger tangible actions.
  • Retention: this is when customers become regular, and is essential so that start-ups can prove to investors that their product is popular and that people are engaged with it and loyal to the brand.
  • Referral: if you reach this stage with early adopters, it means they appreciate your product and like it so much they are willing to recommend it to others. Once word-of-mouth is underway, you will see exponential growth at your business. This process can be incentivised through promotions or affiliation programmes.
  • Revenue: the ultimate aim of any business is, however, to make a profit, to ensure the business is sustainable and can continue to grow.
Growth hacking provides many opportunities but also involves numerous challenges
Growth hacking provides many opportunities but also involves numerous challenges

How growth hacking helps a company

Growth hacking provides various opportunities for businesses to explore. For example, given the multidisciplinary nature of the process, firms could launch a work team connecting up the various departments to encourage cooperation between different areas of the company, improve communication and generate new perspectives. Instead of planning a product or service from a single viewpoint, growth hacking promotes a holistic vision that concentrates on the user and improves their experience by providing a more complete offering. Since growth hacking is focused on rapid testing, it is less resource-intensive and so can reduce development costs. And finally, the growing amount of data available increases the options still further. In particular, businesses can use growth hacking to improve personalised marketing, create tailored pricing policies and hone the service provided to customers based on the data gathered.

However, it is important to recognise that as well as the positive aspects of growth hacking, there are also inevitably some challenges. First of all, while this method is based predominantly on data, the number of sources used can be an issue. When a huge quantity of data is generated, you run the risk of the quality deteriorating and so producing analytical errors. It is therefore important to structure the business in a way that ensures all data is quality checked to prevent any mistakes.

Finding suitable staff for the job represents another challenge. An ideal growth hacking team would be made up of experts from different disciplines, so as to stimulate creativity and ensure multiple viewpoints are represented. Putting together a work team with these characteristics could end up being expensive, given the investment required to train staff or even recruit new employees.

Finally, the dynamic nature of market trends is also a risk. To prevent changes in the market potentially frustrating your efforts, the growth hacking team must be constantly updated on customers’ preferences and any emerging trends. This once again highlights the importance of collaboration between company departments and ongoing training, in addition to effective data analysis.