At Sircular, everything is about our users, with startups, investors and accelerators in focus. We believe in building value with a market leading user interface and product experience. Our Chief product officer and co-founder, Alexis Beaussant, explains what it means for us and how we use growth loops to develop and grow the product together with our users.
With growth loops, you build your product so that value is created, distributed, and experienced in a way so that the output of one loop is the input of the next. This is far different from marketing funnels, where the flow of value is linear, going from top to bottom. If you stop paying for acquisition at the top, your entire funnel falls apart.
User generated growth loops means that users of your product create the value that attracts new users, says Alexis Beaussant
In the case Medium, a user creates a post (value creation), which is then indexed on Google (value distribution), so that potential users can find and read the post (value experience). Some of the potential users that find the post via Google will then become active users, thereby creating new posts and starting new loops.
Why are growth loops so powerful?
The are three important core steps to explain the impact of a growth loop:
Compounding interest — User generated growth loops are designed in a way so that each user attracts new users. As long as a user starting a loop and attracts on average more than one user, the growth loop is compounding and yields exponential returns.
Cost efficient — While there might be some monetary or time costs to getting the loops spinning, growth loops are typically highly efficient as they empower the user to do the heavy lifting for you.
Defensibility — Growth loops are built into the product, which means that they are difficult to replicate. Marketing campaigns, on the other hand, are easy to replicate and have diminishing returns as more companies target the same audience.
The core elements of a growth loop
When creating loops, there are two sets of things we have to map:
1. The what, who, and why
Each step of a growth loop has an action (what), an actor (who), and a purpose (why).
What — What steps are essential for the loop to spin?
Who — Who is performing each of the actions?
Why — Why is the user performing the action? This is by far the most important question. If the why is strong, your loop will generate tremendous results.
2. The metrics
Output — What is the main output of each of the steps in your loop? This should be absolutes, not percentages. ie. number of threads, or number of new users.
Formula — How should the out be calculated? One example is unique visitors on thread from Google x number of new users per number of unique visitor
Conversion variable — What are the key conversion variables that impact the output of the step? One way is to track number of new users per number of unique visitors.
Once the key outputs and conversion variables are available, next step is to measure and improve them over time!
When you unleash the compounding power of growth loops, you will leave funnels far behind, and see each feature release as a growth opportunity. If you are building a product, ask yourself the following questions:
What value are we empowering the user to create with this feature? (note that this goes one level further than what value are we creating with this feature)
How can we build this feature in a way that the user will intrinsically want to share value with other people? (either increasing retention or acquisition)
What metrics should we monitor to know that the loop is spinning?
Now go have fun — generate ideas, experiment, measure, repeat!
At Sircular, we are already on our way!