LAW
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Growth loops are everything
Growth loops are the framework that AARRR should have been. Your acquisition system generates traffic and drives it into the sales funnel. The funnel turns cold traffic into excited new customers, and engagement and retention systems help the customer get as much value from the product as possible. That can then generate three things: revenue, referral opportunities, and user-generated marketing assets.
Crucially, these things in turn feed your acquisition system again (!!): revenue allows you to buy paid ads, referrals invite new users, and user-generated content can rank for SEO. That’s how growth loops work, and is the essence of growth marketing.
Tips
- There are three fundamental systems that make up your growth loop: acquisition (how to get traffic), the sales funnel (turn traffic into customers), and the engagement & retention systems to deliver core product value.
- In order to make those 3 systems into a loop, the crucial insight: retention of the first group of users, needs to drive the acquisition of the next group of users! Retention, somehow, needs to feed acquisition.
- There are three ways retention can feed acquisition:
— Referrals — where active users invite other users into the product (think organic word-of-mouth, referral schemes, inviting of coworkers or friends, etc)
— Revenue — where the money you earn from the first users get reinvested into acquisition of new users (via paid ads, outbound sales teams, affiliate marketing, influencer marketing, content marketing, etc.)
— Assets — where active users create assets that help acquire new traffic (think embedded Youtube videos, “powered by” widgets, user-generated content that ranks for SEO, etc.) - The amount of variations of growth loops that can be created is virtually as long as the list of acquisition channels at your disposal. Each new channel opens up new sorts of growth loops to be created.
- Many of the most successful startups rely primarily on one deep and fundamental growth loop that generates most of their initial traction, and then can unlock more loops as they scale. You’re not limited to only one loop, but it is often wise to focus your efforts on unlocking one loop fully, before trying to unlock a second loop.
- In many ways, this concept of growth loops is the deepest and most profound mental model for growth. We use it daily, for almost all of our clients. The central thesis of our philosophy could be summed up as: Make growth your obsession (Law #1), think in systems, rather than hacks (Law #2), and those systems need to become a growth loop (this law!).
In Practice
Pair with
- Kwokchain on e.g. Figma, Superhuman
- Andrew Chen: The Cold Start Problem
- Reforge blogs
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