The levers of growth
In order to grow your company, you need to focus on the levers of growth: Acquisition, Activation, Revenue, Retention and Referrals. But how do you know where to focus? Which lever matters the most? It’s time to get analytical and laser focused on where your efforts can contribute the most growth.
Let’s look at the levers using Facebook as an example. Acquisition is when somebody signs up. Activation is that new member connecting with friends and sharing pictures. Retention is focused on how long people stay engaged. Does their attention drift away or do they log in on a regular basis. For Facebook, the revenue comes from showing ads to the users. Do people act on the ads enough to justify charging advertisers? Referrals are when users invite their friends to join.
Facebook is an enormous company and can devote resources to each growth lever, but they focus on activation, expressed as a goal of having any new user friend seven other users in ten days. If a user meets this milestone, it’s much more likely that they will stay engaged with Facebook.
What are your metrics?
The definition of each lever will vary from industry to industry, which is why experimentation is required. In the beginning you may not have enough metrics to know which lever most needs pulling. In the beginning you may want to focus on qualitative data, or to put it simply, the stories you can get from your potential or existing customers. Focus on establishing product-market fit – are you making something people want?
Later on, the process of doing the experiments will reveal where your company is weakest and you can begin focusing on quantitative data – statistics – once you have mapped your funnel. Look for big leaks in your funnel. If a high percentage of people are finding you and signing up with you, but a low percentage keep using your service in a month, then focus on fixing retention.
Your first efforts will probably yield the best results, because you have picked the most obvious problem. You gather feedback and prepare experiments to improve retention from 50% to 75% but then it gets harder and harder to move that metric. That’s okay. Move on to the next lever and see if you can make substantial improvements there.