🕹️Loops Not Funnels
The traditional way of thinking about acquisition, known as the funnel, may not be the best approach. It can lead to silos within a company and a focus on linear growth, which isn't sustainable.
That's why the fastest growing companies have started using a different approach: growth loops.
These loops act as a sustainable growth engine, helping businesses drive exponential growth instead of just linear growth.
By building a system of compounding loops, you can create a strong foundation for long-term success. These loops work by constantly reinvesting output back into the system, similar to compound interest.
And the best part is that each cohort of users can lead to the acquisition of another cohort, thanks to various types of loops. So if you want to avoid stagnation and drive exponential growth, it might be time to consider using growth loops.
There are four main types of loops:
Viral loops
Content loops
Paid loops
Sales loops.
Each type of loop serves a different purpose and can be effective in driving growth depending on the specific needs and goals of a business.
For example, Dropbox's viral organic loop was instrumental in their early growth.
By understanding and utilizing these different types of loops, you can build a strong foundation for long-term success.
When it comes to growth loops, it's important to consider both the cost and the return of each loop.
While it may be tempting to try to implement as many loops as possible, it's actually more effective to focus on a few high-impact loops rather than a larger number of smaller, low-return loops.
In order to kickstart those high-impact loops, it may be necessary to launch smaller loops first. However, it's important to note that not all loops are created equally, and it's crucial to carefully evaluate the potential return of each loop before investing in it.
One way to measure the strength of a growth loop is through the use of a metric called the Growth Multiplier (GM).
The GM is a measure of the efficiency of a loop and can help you understand how well your loops are performing.
By optimizing the GM of loops, you can drive more sustainable growth over time.
There are various strategies that can be done to increase the GM of a growth loop, such as optimizing existing loops, adding or combining new loops, or increasing linear efforts.
By understanding and leveraging the power of the GM, you can drive more effective and sustainable growth.
1/1-v(where "v" is a ratio of new signups between 2 cycles of a growth loop.)
There are several strategies that businesses can use to optimize growth and increase their growth multiplier over time.
These strategies, referred to as strategic levers, include:
1. Optimize existing loops. If we get more output per cycle, we would increase our GM (growth multiplier).
2. Add / Combine Loops. Introducing new loops or combining existing loops can help increase the ceiling and efficiency of other loops. However, it's important to note that adding new loops can be challenging and may require the development of new features or products.
3. Increase Linear. While this is a lower-leverage investment compared to the other strategic levers, increasing linear efforts can help produce activation energy, feed growth loops, and attract low volume, high intent customers.
In conclusion, the traditional funnel framework is limited and can create strategic, functional, and metrics silos. Instead, focusing on growth loops as a sustainable growth engine can lead to exponential growth.
By identifying and optimizing existing loops, adding or combining new loops, and increasing linear efforts, companies can increase their growth multiplier and drive sustainable growth.
It's important to remember that not all loops are created equally and it's better to have a few high growth loops than a lot of small, low return ones.
By understanding and leveraging the power of growth loops, businesses can build a strong foundation for long-term success.
(Credit: Reforge Growth Series)
Very interesting Katya!!