What Is Growth Hacking? A Framework for Growth

There are two common ways to interpret the term “growth hacking.” Both are wrong.

• It’s a way to “hack” startup growth, like how you use life hacks to make wine ice cubes or waterproof your shoes.
• It’s a sketchy way to achieve growth, like computer hackers getting access to things they shouldn’t.

The more accurate way to think about growth hacking: like a lumberjack hacking away at a tree.

Like those burly woodsmen, growth hackers methodically work toward the core of something—for them, it’s their startup’s growth mechanisms. They do so with high-impact strikes, and over time, they perfect their technique.

The metaphor isn’t perfect. Lumberjacks chop down trees—there’s a beginning and an end—but business growth is never over.

Given that growth is something you can always be reaching, it’s important to think of it as a discipline, not a series of hacks. We’ll break down the (understandable) misconception that growth hacking is a way to easily score some quick wins—and we’ll provide a better way to approach startup growth.

What we’ll cover:

• What is growth hacking?
• Why is growth hacking misunderstood?
• Growth hacking examples
• Product-market fit
• Define your growth metric
• 5 phases of the growth funnel
• Growth hacking in a nutshell

As you’ll see, true growth hacking uses a growth strategy framework. And it involves experimentation—the kind with hypotheses, tests, and iterations.

So really, your job as a growth marketer is part lumberjack, part scientist. Which brings us to one of our first points: Growth hacking is multidisciplinary.

What is growth hacking?

Growth hacking is the tenacious, systematic pursuit of business growth. Instead of making random guesses about what might work, you identify high-impact opportunities, test them, extract useful learnings, and apply those learnings.

The term “growth hacker” has lost some of its meaning since Sean Ellis coined it in 2010. Back then, the idea was to think beyond the limited scope of traditional marketing, factoring in product development and applying a more strategic—and scientific—approach to growth.

What that means is a more thoughtful methodology—which is especially important for small businesses and early-stage startups with limited budgets.

Here are three revealing quotes about what growth hacking is supposed to be (all emphases added):

• “Growth is now a system. It’s a process. It’s a philosophy on how to get businesses to the next level. Growth is a discipline that can be studied and applied if you have access to the right people and frameworks.” - Hiten Shah
• “Intrinsic to the method is also the search for new opportunities for product development, whether by assessing customer behavior or feedback, or perhaps experimenting with ways to capitalize on new technologies.” - also Hiten Shah
• “Coding and technical chops are now an essential part of being a great marketer. Growth hackers are a hybrid of marketer and coder, one who looks at the traditional question of ‘How do I get customers for my product?’ and answers with A/B tests, landing pages, viral factor, email deliverability, and Open Graph.” - Andy Chen

Key takeaways:

• Growth is scientific and strategic. It’s not something you game.
• For true growth to occur, you must understand what your users want and how they behave.
• Growth is interdisciplinary. It involves both marketing and product.
• The reason for that: At the core of growth are your product and its intrinsic value. Startups can grow only if customers find value in the products or services they offer.

Why is growth hacking misunderstood?

Growth hacking is misunderstood for a simple reason: It has the wrong name.

The term “growth hacking” suggests shortcuts, tricks, and super fast time frames. It implies that you can “tactic hunt”: bounce around from “hack” to “hack” without ever committing to a sustainable growth process.

It leads people to think there’s a single tactic that can 100x their growth overnight, and it’s their job as marketers to go find it.

That’s a myth. And that’s not how it works.

A more accurate term would be “growth iterating” or “growth optimizing,” but neither is as catchy.

Hacks and tricks aren’t what turn good startup ideas into multi-billion-dollar juggernauts like Airbnb or Dropbox. Instead, those companies use a methodical process for growth that’s central to how their entire businesses function.

We’ll walk you through the proper fundamentals of the growth-hacking process. But first, a few examples of growth hacking done right.

Growth hacking examples

Dropbox, as one example, is said to have used growth hacking to grow its user base by 39x in 15 months. We’ll discuss how they did it later in this article—it involved a product-embedded viral loop.

Airbnb used growth hacking to register its first users, while validating that it was building something people wanted. They made it extremely easy to post an Airbnb listing to Craigslist through a custom integration. Since then, they’ve tested and optimized, making enhancements and upgrades along the way.

Companies like Booking.com, Spotify, Meta, Microsoft (including LinkedIn), and Duolingo have large-scale experimentation programs that let them practice “high-velocity incrementalism”: many small changes made quickly and at scale, for a large cumulative effect. (Experimentation expert Stefan Thomke coined that term.) Each has seen explosive growth.

What those case studies prove is that, again, growth isn’t “hackable.” Over time—and with the right mindset and infrastructure—growth accumulates.

Product-market fit

Before you start applying growth hacking techniques, make sure you have product-market fit.

Effective growth hacking starts with a single question: Are you building something people want?

From there, you’ll use feedback loops to make sure your product development actually solves a problem worth paying for. This is known as achieving product-market fit.

• Businesses like Patreon and Uber have strong product-market fit. There’s a market for the problems they solve.
• Quibi and CNN+ had poor product-market fit. There wasn’t much of a market for either high-profile streaming service—and both shut down within months.

First, you must accurately define the value your product provides for customers. That value may change over time. For example, say you’ve created an app that makes it easy to book events in cities around the world. Maybe the value your audience gets out of your app is that it makes trip planning easier.

As a prompt, ask: What will make our customers stick around? Knowing the answer to that question means you know what value your customers get from your product, versus all the others on the market.

Here are some examples of core product values (CPVs).*

‍* These are what we think their CPVs are—they’re not official CPVs from those companies.

Define your growth metric

Once you’ve established your core product value, measure it by identifying the metric tied to its meaningful progress. This is your north star metric.

In our events app example, that metric might be the number of trips created in your app. It reflects the app’s stickiness.

Here are some examples of real-world north star metrics, courtesy of Lenny Rachitsky:

Compare those to the CPVs for those companies we provided above. North star metrics and core product value are closely related.

You can also define counter metrics to monitor when a product isn’t trending toward product-market fit. For the events app example, a counter metric worth paying attention to might be the number of people who download the app but don’t plan a trip.

With that context set, now we can introduce the larger growth-hacking equation: The growth of your product depends on a combination of (1) how well your product serves your market and (2) how well you optimize your growth funnel.

Let’s dive into what that second part means.

5 phases of the growth funnel

The growth funnel refers to the stages of a customer journey, especially in relation to business growth.

Without a product that people want, your growth funnel collapses. You may initially get tons of users, but they won’t stick around (and refer others) if the product doesn’t live up to its promise.

There are five distinct phases of the funnel:

1. Acquisition: how you find new people who are interested in your product
2. Activation: how you turn interested people into customers
3. Retention: how you get customers to purchase your product again or continue using it
4. Referral: how you get customers to tell their friends about your product
5. Revenue: the money you generate from all these activities (which will ideally be higher than the costs associated with doing the work)

A simple acronym to remember this is AARRR—hence its nickname as the “pirate metrics framework.” Silicon Valley investor Dave McClure created it.

The AARRR funnel helps you visualize how customers progress through the buying and user experience. That’s useful for identifying where people are getting stuck and where you can optimize.

One caveat, though: The funnel makes it seem as though growth is linear. As though there’s a finite end point.

That’s not the case. So we recommend using the funnel as a general guide, but thinking of growth as a constant process. Remember, growth is never over.

Phase 1: Acquisition

Let’s say you have a product that customers love. How do you get it in people’s hands in a scalable, profitable way?

You invest in acquisition channels.

The goal of acquisition is to drive qualified traffic to your website. This typically includes some combination of:

• Search engine optimization (SEO)
• Pay-per-click advertising (PPC)
• Social media marketing
• Content marketing
• Influencer marketing
• Email marketing
• Traditional marketing
• PR
• Referrals
• Sponsorship
• And other channels

Some acquisition channels are more likely to succeed than others. If you’re selling an ecommerce product, social media ads and influencer marketing will probably be more successful than PR.

Run tests to determine which channels have the most potential. Double down on the ones that show signs of growth. (In our Growth Program, we go over the specific criteria we recommend evaluating potential channels against, including scale and targetability.)

You can apply the learnings from one digital marketing channel to another for compounding wins. So if one of your Google ads has a particularly high conversion rate, use the headline copy as the subject of your next email promotion.

Once acquisition gets people into your funnel, you have to activate them.

Phase 2: Activation

Users must experience the core value of your product before they’ll habitually use it.

This “aha” moment is the turning point when they become activated and are likely to continue using your product.

Here are some examples of “aha” moments:

• Facebook: adding seven friends in the first ten days after signing up
• Mailchimp: sending your first email campaign
• Candy Crush: finishing your first game
• Grubhub: ordering food for the first time

One goal of growth hacking is to get people to their “aha” moment as quickly as possible. Their first use of your product should hook them into returning.

That’s why it’s essential to have a well-thought-out user onboarding process as part of your growth marketing strategy. Among the millions of other products that people instantly forget about, yours should make a great first impression.

A famous example of onboarding optimization is Twitter’s signup flow. The growth team at Twitter studied the behavior of new users and realized that if someone didn’t follow at least a handful of accounts right after signing up, they were unlikely to keep using Twitter.

So they redesigned their onboarding flow to make new users follow at least five accounts. (They’ve since dropped it down to one.) And they made it dead simple by showing accounts related to the topics users cared about.

‍The key to great onboarding design is decreasing friction. Make it as easy as possible for a new user to get into—and experience value from—your product.

Tip: Make your signup forms half as long. Better yet, don’t even have signup forms until the user is ready to pay. Once they’ve actually gotten value from your product, you could prompt them to register an account so they can save the work they’ve done.

Phase 3: Retention

Retention spans all the activities that keep users coming back.

It’s far cheaper to keep current customers than it is to acquire new ones. So invest in giving the people who are already paying you a five-star experience.

The most potent form of retention is the kind that happens naturally: Your product is so good that people come back out of habit or necessity.

Besides creating a great product, here are four specific retention strategies:

1. Don’t rely on promotional giveaways and limited-time specials. They don’t build long-term customer loyalty. Instead of short-term promos, consider creating an enticing rewards program.
2. You’ll lose customers if they have to repeat their problems to customer service bots. Refer to notes from previous conversations, use real names/faces, and escalate to your team quickly if your bots can’t solve the problem.
3. Surprise current customers with freebies. Don't wait for birthdays—that’s when people get gifts from other brands. Bonus: Relate gifts to your core offering for more affinity. E.g., Chewy randomly sends customers portraits of their pets.
4. Churn isn’t always intentional. It’s often caused by an expired credit card. For SaaS companies, retry the card on file again. If you need to contact customers, send a mobile-friendly link to collect card info, and follow up with SMS. Tools like Churn Buster can help.

Retention goes hand in hand with the next step: referral. You get new customers when existing ones stick with—and want to share and talk about—your product.

Phase 4: Referral

When someone becomes an active, engaged customer, you want them to invite the people they know who could benefit from your product. This is a cheap, repeatable, and scalable source of customer acquisition.

For some products, users will, on average, refer more than two users after joining. This helps create a viral loop, which can lead to runaway growth.

There are two types of virality:

• Organic: Virality happens naturally. Example: You invite someone to your Slack group, and they become a Slack user.
• Inorganic: Virality is incentivized. Example: You refer a friend to Outdoor Voices because you’ll get $20 off your next purchase.

Dropbox is the classic example of a company that’s achieved massive success through incentivized virality. They reward users with extra storage space for each friend referred to the service. This has turned their user base into a free, enthusiastic sales force. Dropbox acquires new customers for practically no cost.

In addition to their use of incentivized virality, Dropbox also has organic virality. Their product is more valuable when other people use it. So users invite colleagues and friends, then stick around because their contacts are on it too.

Not all companies will be able to rely on referrals and virality. It depends on your product and business model, as well as your ability to embed your product’s value into your referral incentives—like Dropbox did. If your product is highly niche or expensive, achieving viral growth through referrals is unlikely.

For more on virality, check out our complete guides to viral marketing and referral programs.

Phase 5: Revenue

The last step in the growth funnel is revenue. Pricing is at the heart of it.

A strategic approach to pricing entails determining, early in your startup’s life:

1. What to charge for. We call this your value metric. Sometimes it’s obvious (an umbrella shop charges per umbrella), but sometimes it’s much trickier to pin down. That’s often the case for SaaS and marketplaces.
2. How to charge—for instance, whether you should charge per user, offer tiered pricing, or have a flat rate.
3. How much to charge.

After you decide on those three components, your pricing will still need to evolve. Pricing isn’t fixed. Just as with acquisition, activation, retention, and referrals, a strong revenue model is one that’s optimized over time.

Activities for optimizing revenue growth include:

• Refining your value metric or pricing structure
• Conducting willingness-to-pay research
• Considering freemium or free trials
• Upselling upgrades or cross-selling complementary products and services

For example, if you offer a monthly subscription, try rolling out an annual plan. This could provide you with the funds upfront to invest in other growth opportunities. And it ensures that those customers stay with you for a whole year.

Also consider what other related needs your customer base has. How can you line-extend your product?

It doesn’t matter how many users you have on your platform. If you aren’t able to generate profitable revenue from them, you typically don’t have a real business.

Growth hacking in a nutshell

How can you optimize each phase of your funnel?

Through experimentation.

Running experiments doesn’t mean just A/B testing your homepage header or call-to-action buttons. It’s the process of creating hypotheses, testing them, collecting data to prove or disprove them, and applying what you’ve learned, for continuous growth.

It applies the scientific method. The experimenter:

• Comes up with testable hypotheses
• Uses a prioritization framework to decide which ones to run
• Runs disciplined experiments
• Collects the data
• Validates or refutes the hypotheses
• Reports the findings
• Runs new experiments based on learnings

That’s what true growth hacking is. It’s not a destination or a series of tricks. It’s an ongoing process of learning what works and what doesn’t. And it’s recognizing that each stage of the process is connected to the others.

Adopt a learning mindset rather than a strictly doing mindset.

We’re in the process of creating an in-depth, step-by-step guide to business experimentation. Sign up for our newsletter to get notified when it’s available.