3 Growth Engines for Startups
Our next stop in our growth journey after the
product/market fit, is the stage of advancement to
growth. In this stage, we need to be through with
solving product related problems and should be
researching methods for growth. For this specific
stage, we’ll be discussing the three fundamental
growth engines for startups that Eric Ries
discusses in his book Lean Startup:
1. Sticky Growth Engine
2. Viral Growth Engine
3. Paid Growth Engine
Sticky Growth Engine
The first of the 3 engines we will be discussing is the sticky growth engine. Some products,
because of the nature of the problems they solve, as well as their methods of interaction,
eventually form some kind of a “sticky” dependence on their user base. Some very efficient
examples of that are Gmail and Evernote, both of which have a focus on B2B, and require a
certain degree of technical integration, and are thus ideal for this kind of growth engine. The
most important advantage to these types of products is the fact that they retain their users for
extended periods of time.
With the stick growth engine, the entrepreneurs need to study how much of the user base they
are missing (which will be detailed in the “Retention” chapter, with detailed churn rate
information), and they also need to have good knowledge of how many new users they have
gained in the same amount of time. As long as the number of users gained trumps the number
of users lost, the product keeps growing. Since the users spend a large amount of time using the
product, this could provide some very useful opportunities in terms of gaining new users.
Viral Growth Engine
Social products and content platforms are the most typical examples of viral growth
engines. The main mechanics of this growth engine is based on reaching new users
by using the existent user base. If the average user is able to add one or multiple
users to the existent base, that starts the viral growth process. The growth rate
depends on the number of new users that are brought in by the existent users.
Users do not always share all the products they use. In order for a product to grow
virally, there needs to be an impressive experience in it. While this experience
might be the content itself, as in the case of BuzzFeed and Upworthy, for a technical
application, it might also be the main features and performance of the application.
For ventures looking to use viral growth engines, the virality rate for the product/
application in question needs to be carefully studied.
Paid Growth Engine
The most fundamental growth engine. A lot of SaaS applications use this
type of engine to reach a certain user segment. A large portion of users
can be reached by using search engines and targeted ads.
Ventures that use this type of growth engine need to work very
diligently with alternative channels to get the optimum price for adverts
and user segments. Since the prices for advertising can vary greatly due
to the existence or constant inception of of similar applications in the
market, the ventures need to be working on alternative routes to
advertising, as well as ideas on how to gain new users.
Find Out More!
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Introduction to Growth Hacking!