This is the first in a series of articles on Essential Understanding of Growth in 2020, contributed by Unmarketd, a curated marketplace for elite performance marketing and data & analytics experts.
There are only a few ways to scale user growth: paid acquisition, sales, SEO, as well as virality/referrals. Here is how each of them works to generate a positive cycle:
Usually, to achieve growth and maximise investment returns, companies will adopt a combination of the tactics above. Often paid becomes the most common approach because it is the least difficult (you just optimise, and you are ‘data-driven’).
Let’s take a look at what Uber has done:
In the early days, Uber’s growth mix was closer to 30% referrals, 50-60% Word of Mouth (WOM), and the rest was PR and other random things.
That’s what product-market fit looks like.
The demonstration of virality is when the nature of a product is such that, simply by using it, people are showing it off.
Over the years, the mix grew to something more like – 50% paid, 15% referrals and 35% WOM.
Still not bad – however, the 50% paid was very expensive, and often became victim of ad fraud. There are a few lawsuits against agencies and ad networks.
Of course, not every company is like Uber, achieving perfect product-market fit in the beginning.
We feel that a few essential questions companies need to ask themselves before making large investment commitments to growth are:
- Do you have what it takes to run paid? Including margins and understanding what ad fraud is?
- Can you create content naturally w/o long and draining process of coming up with content ideas to grow with SEO?
- Is your product naturally viral? People don’t talk about their cleaners and grocery deliveries at dinner parties…
In the next article of the series, we will look at paid marketing in more detail: the essential maths, how to avoid addiction etc.