How To Validate PMF EffectivelyㅣSean Ellis, Hacking Growth

Summary

In this insightful discussion, Sean Ellis, the originator of the term 'growth hacking,' explains the challenges companies face in implementing growth hacking strategies. He emphasizes the importance of product-market fit and the necessity for cross-functional collaboration. Ellis highlights the significance of testing hypotheses across all growth levers, from acquisition to monetization, and stresses the value of a high volume of experiments over chasing a single perfect test. He also discusses how growth hacking can foster a more humble and cooperative company culture, focused on uncovering truths rather than asserting opinions.

Takeaways

• 📈 Growth hacking often fails because as companies optimize and test, the cost of acquiring customers through platforms like Facebook and Google increases, making it harder to find profitable customer acquisition strategies.
• 🧠 Sean Ellis, the coiner of 'growth hacking,' emphasizes that his strength lies in getting people to use good products, as evidenced by his work with companies like Dropbox, Eventbrite, and Lookout.
• 🎓 Ellis's initial foray into marketing was through formal education, but he found that it made him too academic and rigid, causing him to rethink his approach to marketing.
• 🤝 Growth hacking is a cross-functional effort requiring collaboration between product, marketing, engineering, design, and data teams, which many companies struggle to achieve as they grow.
• 🔍 Ellis advocates for a scientific approach to growth hacking, focusing on testing and analyzing across all levers of growth: acquisition, activation, retention, and monetization.
• 🎯 The most powerful lever for growth hacking is activation, which is crucial for driving customer engagement and retention.
• 🤔 Companies often fail at growth hacking not due to a lack of ideas or hypotheses but because they struggle to get different teams to collaborate effectively.
• 📊 The importance of running a high volume of tests cannot be overstated; the more tests conducted, the higher the chances of discovering a successful growth strategy.
• 📊 Product-market fit is essential before focusing on growth hacking; without it, customer retention is impossible, and any growth efforts will be unsustainable.
• 🤝 A shift in company culture towards humility and curiosity, driven by the iterative and experimental nature of growth hacking, can lead to more cooperative and effective teamwork.

Q & A

Why do most companies fail with growth hacking according to Sean Ellis?

Sean Ellis suggests that most companies fail with growth hacking not because they struggle to come up with hypotheses or test ideas, but because they can't get different teams to agree on how to work together effectively. As companies grow, they often become more specialized and siloed, which hinders the cross-functional collaboration required for successful growth hacking.

What is the significance of activation in growth hacking?

Activation is considered the most powerful lever of growth. It involves getting users to take the initial steps that lead to them finding value in the product, which is crucial for both engagement and retention. A great first experience is key to driving retention and encouraging users to return to the product.

How does Sean Ellis define growth hacking?

Sean Ellis defines growth hacking as a scientific approach to figuring out how to grow the business, involving testing and analyzing across all levers of growth from acquisition to activation, retention, and monetization.

What is the role of product teams in growth hacking?

Product teams play a significant role in growth hacking because there are many opportunities within the product to improve customer value and retention. However, they often spend half their energy convincing the product team to run experiments within the product.

Why is it challenging for companies to run experiments on products?

It can be challenging for companies to run experiments on products because different teams, such as product, marketing, engineering, and design, may have differing opinions on how to approach growth and testing. This can lead to friction and a lack of agreement on the best course of action.

What is the importance of product-market fit in the context of growth hacking?

Product-market fit is critical before focusing on growth hacking. It's the stage where users try the product and find it valuable enough to continue using it. Without product-market fit, companies can't retain customers, which is essential for sustainable growth.

How does Sean Ellis measure product-market fit?

Sean Ellis measures product-market fit by asking users how they would feel if they couldn't use the product anymore. He suggests that if around 40% of users say they would be very disappointed without the product, it indicates a strong product-market fit.

What is the significance of the retention cohort in determining product-market fit?

The retention cohort is significant in determining product-market fit because it shows the percentage of users who continue to use the product over time. If the cohort plateaus at a certain level, it indicates that those users find the product valuable enough to keep using it, which is a sign of product-market fit.

How does the volume of experiments relate to growth hacking success?

The volume of experiments is crucial for growth hacking success because it increases the chances of finding high-impact tests that drive growth. Sean Ellis emphasizes running a high velocity of tests, as every test is an opportunity to discover what works and what doesn't.

What impact does growth hacking have on company culture, according to Sean Ellis?

Growth hacking can lead to a less arrogant company culture where everyone becomes more curious and cooperative in seeking the right answers. It fosters a culture of testing and learning, which replaces assumptions with data-driven insights.

Why does Sean Ellis prefer to work with companies that have product-market fit but have not yet started growing?

Sean Ellis prefers to work with companies that have product-market fit but have not yet started growing because at this stage, the stock is still cheap, and he can get more stock options. This strategy allows him to potentially make more money if the company's growth takes off after he joins.

Outlines

00:00

📈 Challenges in Growth Hacking

Sean Ellis, the coiner of the term 'growth hacking' and author of 'Hacking Growth,' discusses the difficulties companies face in growth hacking. He notes that while digital marketers are adept at testing and optimizing for return on investment, the challenge lies in the rising costs of customer acquisition as everyone adopts similar strategies. Ellis emphasizes that the problem isn't a lack of ideas or hypotheses but the increasing difficulty of finding profitable customer acquisition methods. He also shares his experience growing companies like Dropbox and his approach to focusing on product engagement and retention over traditional marketing.

05:02

🤝 The Importance of Cross-Functional Collaboration in Growth Hacking

Ellis highlights that growth hacking requires a cross-functional approach, involving product, marketing, engineering, design, and data teams. He points out that as companies grow, specialization can lead to siloed teams, which hinders effective growth hacking. The challenge is not just in generating and testing ideas but in getting different teams to collaborate. Ellis argues that growth hacking is not just about marketing but encompasses the entire customer journey, from acquisition to retention and monetization. He stresses the importance of a high velocity of tests and the need for a commitment to testing across all areas that can accelerate growth.

10:02

🎯 The Growth Hacking Process and Product-Market Fit

Sean Ellis outlines the growth hacking process, which begins with qualitative analysis to understand why users love a product, indicating product-market fit. He emphasizes the importance of understanding what users value in a product to grow effectively. Ellis then discusses generating ideas, prioritizing them, running tests, and analyzing results. He advocates for a high velocity of tests to increase the chances of finding successful growth strategies. Ellis also introduces a key question to gauge product-market fit: asking users how they would feel if they could no longer use the product. He shares insights from running this question across hundreds of companies and the significance of retention cohorts in determining product-market fit.

15:04

🧘‍♂️ Cultivating a Culture of Humility and Curiosity Through Growth Hacking

Ellis discusses the cultural impact of growth hacking on businesses, suggesting it fosters a less arrogant and more curious environment. As tests often reveal that initial assumptions are wrong, team members become more open to finding the right answers together. This collaborative approach improves the business culture, reducing arguments based on personal opinions and increasing cooperation. Ellis believes that this culture shift is a significant outcome of integrating growth hacking practices within a company.

Keywords

💡Growth Hacking

Growth hacking is a strategic marketing approach focused on rapid and scalable business growth through creative and cost-effective methods. In the video, Sean Ellis, the coiner of the term, discusses how growth hacking involves a scientific approach to figuring out how to grow a business, including testing and analyzing across all levers of growth such as acquisition, activation, retention, and monetization. The concept is central to the video's theme as it explores the challenges and successes of implementing growth hacking strategies in various companies.

💡Product-Market Fit

Product-Market Fit refers to the extent to which a product meets the wants and needs of a specific target market. In the script, Sean Ellis emphasizes the importance of product-market fit as a prerequisite for successful growth hacking, stating that 'if you can't retain customers, you can't grow.' He introduces a method to validate product-market fit by asking users how they would feel if they couldn't use the product anymore, which is a key concept in the video's discussion on growth hacking.

💡Acquisition

Acquisition in the context of growth hacking refers to the strategies used to attract new customers or users to a product or service. The video mentions that the only way to be competitive on acquisition is to focus on the entire customer journey, which includes not just getting users to the website but also converting them and providing a great experience to encourage return visits.

💡Activation

Activation is the process of getting users to take the desired action within a product, often the first meaningful interaction that indicates they understand the value proposition. Sean Ellis in the video identifies activation as the most important lever for growth, explaining that a great first experience is the biggest driver of retention and engagement.

💡Retention

Retention is the ability of a product or service to continue to attract users over time. In the video, retention is discussed as a critical aspect of growth hacking, where the goal is to ensure that users keep coming back to use the product. Sean Ellis mentions that understanding and improving the customer experience is key to enhancing retention rates.

💡Monetization

Monetization is the process of converting potential revenue opportunities into actual revenue. In the video, Sean Ellis talks about monetization as one of the levers of growth that growth hackers focus on, aiming to find the right way to get money from customers while improving the overall value they receive from the product.

💡Testing

Testing in the growth hacking context involves conducting experiments to determine the most effective ways to grow a business. The video script highlights the importance of running a high velocity of tests, emphasizing that every test is an opportunity to find a successful strategy that could significantly impact business growth.

💡Cross-functional Collaboration

Cross-functional collaboration refers to the cooperation between different departments or teams within an organization to achieve a common goal. The video discusses how growth hacking requires collaboration between product teams, marketing, engineers, designers, and data analysts, and how the lack of such collaboration can lead to the failure of growth hacking initiatives.

💡Customer Journey

The customer journey maps the complete experience a customer has with a brand, from initial awareness to最终 purchase and beyond. In the video, the customer journey is mentioned as a holistic approach to growth hacking, where the focus is on how to get customers in, convert them, provide a great experience, and encourage them to return and refer the product to others.

💡Marketer's Dilemma

The marketer's dilemma refers to the challenge digital marketers face where as everyone becomes more adept at testing and optimizing for return on investment, the costs of acquiring customers through platforms like Facebook and Google increase, making it harder to find profitable ways to drive traffic to websites. The video script uses this term to illustrate the reality of the competitive landscape that marketers must navigate in the growth hacking process.

💡Hypothesis

A hypothesis in the context of growth hacking is an educated guess about what might improve a business's growth metrics. The video script suggests that most companies do not fail at growth hacking because they struggle to come up with a hypothesis or test ideas, but rather because they struggle to get different teams within the company to collaborate effectively.

Highlights

Most companies fail at growth hacking due to the difficulty in finding a profitable way to attract customers.

Digital marketers are aware of the need for testing, but the challenge lies in the increasing competition and rising costs on platforms like Facebook and Google.

Growth hacking is not just about marketing but requires a cross-functional approach involving product, marketing, engineering, and design teams.

Sean Ellis, the author of 'Hacking Growth' and the coiner of the term 'growth hacking', emphasizes the importance of a scientific approach to growing a business.

Ellis's strength lies in growing great companies, as evidenced by his work with Dropbox, Eventbrite, and Lookout, all of which reached billion-dollar valuations.

Growth hacking focuses on the entire customer journey, from acquisition to activation, retention, and monetization.

Activation is considered the most important lever for growth, as it influences customer retention and engagement.

Many companies struggle with organizing cross-functional teams, which is essential for effective growth hacking.

The challenge for growth hacking is not coming up with ideas but getting different teams to agree and work together effectively.

Product teams often play a significant role in growth hacking, as there are many opportunities within the product to improve customer value and retention.

Growth hacking is about improving the customer experience and simplifying the product, not tricking people into actions.

The volume of experiments is crucial for growth hacking; the more tests run, the higher the chances of finding successful strategies.

Product Market fit is a prerequisite for successful growth hacking; without it, customer retention and, consequently, growth are not possible.

Ellis developed a question to identify product Market fit: asking users how they would feel if they couldn't use the product anymore.

A retention cohort analysis helps determine product Market fit by looking at the percentage of users who continue using the product over time.

Growth hacking can lead to a more humble and cooperative business culture, as teams work together to uncover the truth rather than argue about opinions.

Transcripts

what I would say is that most companies

fail with growth hacking it's

unfortunate but it's it's the reality

most digital marketers today are clever

enough to know I need to do a lot of

testing the the problem with it though

everyone else has gotten very smart at

that too if everyone's testing

everything and optimizing on return on

investment Facebook and Google and all

of these other platforms are making it

bidding every anytime someone gets good

at these things the prices keep going up

now it's harder and harder to find a

profitable way to get people to the

website and so so they get frustrated so

then they stop trying to run experiments

in the product want to run all their

experiments on Facebook or on Google or

some something external and then it's

not growth acking anymore than they're

just doing marketing and so but I don't

think it's because they they have a hard

time coming up with a hypothesis or or a

hard time coming up with the right test

idea I think it's

because uh hi I'm Sean Ellis I am the

author of hacking growth I'm also the

person who coined the term growth

hacking which has become pretty well

known around the world over last 12

years I think or 13 years since I came

up with the term what I'm really good at

is getting people to to use good product

when I'm uh responsible for growing them

I did that for a number of years and

that's when I went to Dropbox I joined

Dropbox Dropbox was less than 10

employees at the time Dropbox became the

fastest SAS company to reach a billion

ion Dollar in Revenue so faster than any

company before it soon after I left

Dropbox was was when I coined the term

growth hacking but really the techniques

that I had used to grow these companies

were the techniques that are are really

what what we talk about when we say

growth hacking today I also did a

interim VP growth role with with

Eventbrite also reached the billion

dollars valuation right after event

bright I went to Lookout also reached

the billion dollar valuation I really

think my my strength is is growing great

companies and so you can read a book but

when you actually try to do it it's

really hard so I I do a lot of workshops

that's a lot of what my focus is these

days so in in the first company I told

you I started in sales when they said

you know we want you to do this and

we'll make you the the marketing guy I

never took Marketing in school I don't

know what I'm doing so then I decided I

would go back to school and take some

classes in marketing and I went to New

York university did really well got a

got an A in the class and then and then

I went back and tried to to do it and I

got I was really bad at it after the

class the class kind of broke me made

made me think about it the old way of

doing marketing I I became too kind of

academic and so it was a very like I had

to like okay get that out of my head now

and go back to it so that was kind of

the first time I realized like my

Approach is a little bit different than

and how they teach marketing but then I

just kind of forgot about it and I was

just focused on how do we grow these

businesses how do how do we do our very

best to grow these businesses I moved to

Silicon Valley in 2007 I also had a lot

of venture capitalists who were

introducing me to Founders they said can

you help this founder they're really

having trouble growing and and so I said

sure and then I would sit down with the

founder and the first thing they would

say is we really need your help to build

awareness I've never focused I'm

building awareness I want them to

actually use the product and so for me

it was like how do I get them to sign up

for the product to use the product get

value from the product pay me money for

the product and then I take that money

to get more customers and and create

something that's much more sustainable

so kind of this mis idea from the

founders that they needed to build

awareness you know just in general I

just that's when I started to recognize

that my Approach was different and so

coming up with the idea of calling it

growth in we need to stop calling this

marketing because I Define growth

hacking as a scientific approach to

figuring out how to grow the business

are testing and analyzing across all of

the levers of growth from acquisition to

activation retention and monetization

most powerful lever of any of them

activation is like the the most

important one that I would generally

focus on it's the first one that I focus

on when I work with a company engagement

and retention there's there's a sense

entially what you're doing is what what

brings someone back again and again to

come in and use the product and so of

course the most powerful thing to bring

people back is a great first experience

which is actually the activation so the

biggest driver of retention engagement

is a great activation step in the

customer acquisition process then you

can still be tactical about you know

what are the what are the prompts what

what do I do to bring someone back and

then how do I make sure that every time

they come back and use the product that

even more likely to come back and use it

again the next time how do how do I get

them to actually invest something into

the product so maybe do a little bit of

customization that makes it a little bit

more valuable each time and makes them

feel like they they have some ownership

around that experience so and and what I

would say is that most companies fail

with growth hacking it's unfortunate but

it's it's the reality but I don't think

it's because they they have a hard time

coming up with a hypothesis or or a hard

time coming up with the right test idea

grow grow is cross functional growth is

something that requires a product team

to work with a marketing team to work

with Engineers to work with designers to

work with data people most companies

aren't organized that way as they get

bigger companies essentially have more

and more specialist teams that become

separated that's what causes growth

hacking not to work in most businesses

most digital marketers today are clever

enough to know I need to do a lot of

testing the the problem with it though

every everyone else has gotten very

smart at that too if everyone's testing

everything and optimizing on return on

investment Facebook and Google and all

of these other platforms are making it

bidding any anytime someone gets good at

these things the prices keep going up

now it's harder and harder to find a

profitable way to get people to the

website and so the only way to really be

competitive on acquisition is to

actually focus on the entire customer

journey and so this is where growth

hacking then becomes so marketing is

more how do I just get them to come in

growth hacking starts to look at the how

do I get them to come in how do I

convert them how do I give them a great

experience once they come in how do I

get them to come back a lot more often

how do I get them to tell their friends

what's the right way to get money from

them and these are all areas that you

can test so grow attacking is going to

cover a lot more and and it turns out

that probably the product team does more

with growth hacking than even the

marketing team because there's a lot of

opportunities within the product to

improve the value of the customer and

retain the customer but half of their

energy is spent trying to convince the

product team to run an experiment that's

inside the product they get frustrated

so then they stop trying to run

experiments in the product and so then

they want to run all their experiments

on Facebook or on Google or some

something external and then it's not

growth decking anymore anymore than

they're just than they're just doing

marketing and so the main point of why I

believe companies fail with this is is

because they can't get these different

teams agreeing on how to work together

effectively once you get the teams

working together then some of the other

challenges become important challenges

so how do you identify what the best

opportunities are how do you come up

with the good ideas how do you

prioritize between those ideas the

biggest thing is that commitment to

testing and the ability to test

anywhere in the business that can

accelerate growth is the part where most

people get stuck it may be the brand

design side of things that feels like

all this testing is going to make our

website ugly or our product ugly it

could be the product side that said oh

man these growth hackers they're going

to come in and start making our product

awful because trying to trick people to

do things but that's a that's a

perception thing the best growth hacks

are not things that trick people they're

finding where people get confused in the

product to day and finding a way to make

it easier and simpler for them and it's

about improving the customer experience

around the things that matter you know

when you build something initially

you're building it maybe based on some

best practices but a lot of times it's a

guess it's a guess that this this is

going to be what's going to work the

best and sometimes you did a pretty good

guess but a lot of times it takes a lot

of people going through there to realize

like no this is actually very confusing

and we need to understand why it's

confusing so with a lot of usability

testing and serving and the more that

you can diagnose the problem then you

come up with ideas maybe if we tried it

this way maybe if we tried it that way

and those new additional things can can

make a huge difference so there's a

great quote from Amazon's uh founder

former CEO where he said our success in

Amazon is a function of how many

experiments we run per day per month per

year and so volume of experiments really

starts to matter and when we talk about

the growth hacking process proc it's

it's uh it starts with analysis and so

that's really the first analysis I'm

doing is is more of a qualitative

analysis of who loves the product and

why do they love it so the first thing

that I do when when I validated product

Market fit is I figure out why do I have

product Market fit because if I don't

understand why I have product Market fit

you know then I'm not going to be able

to grow very well let's say I think that

people love the product for this reason

but they really love it for this reason

of my advertisements all of my messaging

is pushing them to do something with a

product that it's bad at doing then then

I'm probably not going to keep those

people it's really important if you have

product Market fit to to understand what

is the main benefit that those musthave

users are having so it's really hard to

improve something you don't understand

so that's where the analysis starts then

you start to say okay I have ideas to

improve the situation and so that's the

next step is to generate some ideas the

next step is to actually prioritize

which of those ideas you want to test

first then you start to run the test and

you analyze the results and it's just

that that repeating process of you need

to try a lot of ideas to figure out

what's going to work and what's not

going to work and so one of the most

important things in growth hacking is

just running a lot of tests a high

velocity of tests I'm going to emphasize

that over and over because it's really

important and I think what we realized

was that nobody knew consistently what

was going to be the the best and so the

only way to figure out what was the best

was just to test a lot of things uh a

great analogy is is one that comes from

the sports world where you have there's

a quote from a a hockey player Wayne

Gretzky that essentially says you miss

every shot that you don't take so but

that also applies to soccer uh or or

football as they call it in most of the

world but essentially if you only take

one shot maybe you make it but if you

take 10 shots in a game or 50 shots in a

game you're much more likely to win

because every shot is an opportunity to

score and it's the same thing with

testing every test you run is an

opportunity to find that one big test

that ultimately is a lot more successful

than everything else that you do and so

it's a mistake often when teams are

obsessed on trying to run one perfect

test they get so excited about an idea

that they they only want to focus on one

it's much better to to make sure that

every week we're running three different

tests every single week or five

different tests every single week

depending on the size of the company you

just don't know which one's going to be

the one that that ends up being super

high impact and and uh making a big

difference in the growth of the

[Music]

business I think the most important part

you can't grow something that people

don't really like when they try it and

so in the startup world we call that

product Market fit a lot of times I'll

tell people I got lucky and they'll

they'll say oh you're just being humble

no it really is like if if you give me

something to grow and nobody likes that

product I will fail every time what I

focused on was we need to get people to

experience the product in the right way

if people don't like the product all you

can do is get really good at getting

people to try the product and then they

disappear what we call product Market

fit when when someone tries the product

they enjoy the product they keep using

the product so if you can't retain

customers you can't grow so it's really

you know validating that you have

product Market fit is is really critical

before you get obsessive on on growth

hacking and and trying to grow the

business for me picking product Market

fit became really important so I came up

with a question that really helped me

which was I asked users on the product

how would you feel if you couldn't use

this product anymore I only asked people

who had really used the product so they

they've come in they've used it

hopefully the right way and even more

than once but then it's a a random

sample of people who've used the product

more than once hopefully recently when I

asked that question if say 5% of the

people said that they'd be very

disappointed without it that's not

enough I'm I'm not going to be able to

grow that business was was really what I

told myself what I eventually I had run

that question across hundreds of

companies so ones that I worked with and

ones that I didn't work with and what I

found is that about 40% of the users

said they would be very disappointed

without the product those companies were

generally successful to some level

whether I worked with them or not that

question a good leading indicator of

product Market fit the obviously more

important thing is if people keep using

the product and so that's what we call

we call a retention cohort so if you get

100 people who start using the product

and after you know 30 days zero of them

are still using the product you do not

have product Market fit but you're not

going to have all hundred of them using

the product that's that that would be

nearly impossible and so usually what

happens is 100 people start using the

product one week later it's down to 70

and then down to 60 then down to 50 if

it keeps going to zero you don't have

product Market fit but if it goes down

to 50 and then those 50 keep using it

over the long term now you have a signal

that for half those people it was

something that was so valuable they keep

using it that's product Market fit and

you can grow that so uh we call that a

retention cohort that plateaus so it

essentially runs parallel to the x-axis

at some number it depends on on the

business so some businesses like Comm

the uh the meditation app they they

Plateau only about 5% of the users

because they have to they have to

develop a a habit of doing meditation

which is hard for people where Instagram

plateaus more like a 50 or 60% um part

of it too Instagram is free and C costs

money so that's another reason why

people might stop using it so it's it's

less important where it plateaus but if

it if it always goes to zero eventually

you're not growing you're just replacing

you're replacing the original people who

signed up and and so for a while you can

grow but eventually you're going to

flatten out and so product Market fit is

something that you can quantify for me

the best company for me to work on is

one that has all the signs of product

Market fit but no growth yet because the

minute that it has growth is when the

investors say wow this will be valuable

and they start pouring money into it

what I want is if I see ass signs a

product Market fit it doesn't have the

growth yet that stock is still very

cheap and so I get my stock options and

then then I can make good money off of

that if I come in later like once the

company's already growing really fast

they they of course won't give me very

much stock so for for me one of the

important things is trying to pick after

product Market fit but before

growth one of the biggest impacts of

growth hacking on the culture of a

business is that everyone becomes less

arrogant they if they used to think they

had the answers and tests keep revealing

that they're wrong a big part of the

time they stop being so insistent that

they have the right answer and they

start being curious about what is the

right answer and that to me creates a

much better culture where where business

starts people start working together to

find the right answers in the business

and and they work together more humbly

there's less arguments about my opinion

versus your opinion and more cooperation

and how how do we actually uncover the

truth