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The-Growth-Handbook.Pdf Authoritative, actionable strategies on how to grow your business. Intercom builds a suite of messaging-first products that all modern internet businesses can use to accelerate growth across the customer lifecycle, from acquisition to engagement and support. www.intercom.com We also regularly share our thoughts on growth, marketing, sales, startups and the business of software. blog.intercom.com Executive Editors: Adam Risman and Geoffrey Keating Copy Editor: Karen Ostergren Book Design: Judson Collier and Kelly Carpenter Art Direction: Justin Pervorse © 2018 Intercom Inc. ISBN: 978-0-9861392-9-1 We’ll spare you the legal mumbo jumbo. But please don’t share this book or rip off any content or imagery in it without giving us appropriate credit and a link. Got questions? Drop us a note at [email protected]. 06 21 31 48 57 69 Chamath Palihapitiya, Founder and CEO, Social Capital and Facebook’s first VP of Growth When asked, I often tell people that the key to seem smart. Great things are simple. We had a very understanding growth is two things: simple framework for growth – acquisition, activation, engagement, virality. Having this framework allowed 1. A fundamental understanding of your product and, us to prioritize our work, design experiments, build specifically, what the key reasons people use it are. products and so on. It also allowed everyone to It’s easy to be confused about what true value looks like understand it and see how decisions were made in a and, as a byproduct, conflate causation and correlation: logical, transparent way. motivations and root causes versus byproducts and outcomes. Knowing your true product value allows you to This book will help you and your business understand design the experiments necessary so that you can properly all of the above. It serves up a full package of ideas, isolate cause and effect. For example, at Facebook, one suggestions and lessons from across the entire thing we were able to determine early on was a key link spectrum of growth, from acquisition to activation. between the number of friends you had in a given time and Featuring contributions from people who’ve grown your likelihood to churn. Knowing this allowed us to do a lot businesses from $0 to many billions in revenue, it to get new users to their “aha” moment quickly. However, outlines time-tested advice for anyone working in this required us knowing what the “aha” moment was product, marketing and sales. with a fair amount of certainty in the first place. Done right, a smart effort around growth puts 2. A simple framework for doing your work. Too companies into hyperdrive. Good luck on your journey. many people “complexify” things in an attempt to If your business isn’t growing, nothing else matters. pricing right. This book will help you answer all of these It’s the perennial problem that faces businesses at all questions, and much, much more. stages of their development. Late in 2017 we began to think about creating a podcast series devoted to The book is written as a collection of short sections, the topic of growth. The thesis was simple: we wanted which are self-contained and address one of six topics to interview the people who established the growth we feel are essential to growth: acquisition, activation, marketing function at some of the most successful retention, monetization, testing and optimization, and software companies of our generation. metrics and measurement. Read the sections in any order that works for you – this isn’t a book you need to We got such a positive reaction from listeners that we read front-to-back. began to think about how we could bring that content to an even bigger audience, the result of which is this book. In each section, you’ll find links to learn more about As well as excerpts from our podcast, we interviewed each topic. We don’t pretend to have all (or even most) our own team for their insights and have also included of the answers, nor are all of our ideas applicable in all samples from some of the best writing on growth that situations. We’d love for this book to be the first point in helped and inspired Intercom in its early days. your journey to learn more about growth, not the last. The result is a set of stories from people who have figured Last but not least, we owe a huge debt to our out some of the hardest growth problems so you don’t contributors. Without their valuable insights and hard- have to. Perhaps you’re acquiring customers but they’re learned lessons, this book simply wouldn’t be possible. not sticking around. Perhaps you don’t understand Thank you for all your time and wisdom. what metrics you should be tracking? Or maybe you’ve found product market fit but are struggling with getting Geoffrey Keating & Adam Risman, Intercom [01] Acquisition In the early days of a startup, customers are likely • Software solves a fundamental problem; discovering a product through word of mouth. At first, this • People who have that problem are able to find that looks like a founder emailing contact after contact, asking software; all of them to try the product and showing them how it can • They’re successfully activated and experience help accomplish their goals in a cheaper, faster or easier value through the software; way. If the team is doing everything in their power to help • They stick around, and would be genuinely sad to those very first customers fall in love with the product, see this software cease to exist; they’ll tell their friends, and the cycle will begin anew. • They tell their friends about the software; and • Product usage continues to grow up and to the left. Word of mouth is the most economical way to acquire new users, but over time, its returns are diminishing. This When your software shows this pattern, and you’ve got requires new thinking and new acquisition channels alike. a system in place that can accomodate onboarding and activating all these fresh faces, then it’s time to ask, Let’s be clear – there are no silver bullets when it comes to where are my future users spending their time? What pain where and how to acquire new customers; there is, however, points are most important to them, and how can I (cost- a golden rule before getting started: Your software has effectively) connect those dots back to my product? product market fit. Marc Andreessen, who coined the phrase, defines that as “Being in a good market with a product that can satisfy that market.” In practice, that looks like: 6 [01] Acquisition [01] Acquisition The new sales and marketing funnel Des Traynor, Co-founder, Intercom Sales and marketing funnels are a very old concept but they’re finally changing in a substantial way. So many businesses, both B2C and B2B, are shifting to subscription models. This changes the nature of what it means to “close” a customer. Landing a new deal in this subscription economy might mean $500 per month, not quite the $20,000 upfront deal you once got. As a result it’s no longer enough to just get a customer to convert. This new model only works when retention is strong enough such that the customer is still paying $500 or more in month 40 and your customer lifetime value is realized. In this new era, acquisition is just not as important as retention. Plan accordingly. 7 [01] Acquisition Acquisition is we basically looked at if you spent an hour of time on diminishing in each of the three pillars, what would be the relative impact on that hour of time to your bottom line. revenue effectiveness What we found is that if you improve your acquisition by 1% (by increasing your lead volume Patrick Campbell, or conversion rate), you’ll see just over a 3% CEO, ProfitWell boost in your bottom line. This contrasts starkly with the relative improvements in monetization The nail in the coffin is that the (increasing your ARPU by 1%) and retention prevalence of competition and the rapidity in (lowering your gross churn by 1%) that see boost producing product has made acquisition so much in roughly 13% and 7% respectively. harder that the effectiveness of focusing on that lever solely has diminished considerably. To put it another way, because it’s continuing to become easier to switch from product to product and the increase of ad, content and social noise has gone up, it’s not only harder to acquire a customer, it’s also harder to keep them. Yet, just focusing on acquisition means your bucket becomes so leaky, all you can do is add more customers to the top of the funnel in the hopes that you’ll make up for all those you’re losing. To quantify this a bit more, we built what’s called The individual numbers aren’t as important as the a simultaneous equations model to normalize and relationship that shows improving your retention compare the impact of doing one unit of effort on or monetization has 2-4x the impact as improving acquisition, retention and monetization and seeing your acquisition. Yet, all we want to focus on is what that unit of efforts impact on that pillar. Put acquisition, and to make matters worse, data another way (although it’s a bit oversimplifying), indicates that this trend is getting worse over time. Excerpt from “Data shows our addiction to acquisition based growth is getting worse”. 8 [01] Acquisition [01] Acquisition Short-term hacks vs.
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