Businesses that don’t grow stagnate. Growth is particularly important for startups, who need to find a powerful way of increasing sales in the early days. Eric Ries author of The Lean Startup identifies the three engines of growth. These engines can drive sales and customer base growth. In this article, we’ll explore how each of the three engines can be used to build rewarding relationships with your customers.
The Three Engines Of Growth
- Sticky Engine – sticky customers are loyal and stay with you. You increase their spend by offering new features or great service.
- Viral Engine – your existing customers become your cheerleaders. You encourage them to spread the word to others.
- Paid Engine – you spend budget on marketing such as paid online advertising to attract new customers.
Most businesses will use all three of these engines at some point, but for a startup it’s probably wise to pick one engine to begin with. Focusing your energy and budget on one means you can assess what activities or features are delivering value.
The Sticky Engine
Taxi service Uber’s massive growth is partially down to the sticky engine it uses to increase revenue from existing users. By expanding its offering to users who are already Uber converts (opening in new locations, offering more routes, more vehicle types and more features) Uber increases average spend per customer.
Amazon use a sticky approach with their rapidly expanding product range. We started out buying books from them; now we buy everything from picture hooks to pet food. Their existing customers are constantly increasing the amount they regularly spend with the company as their range of available products and delivery speed increases.
Other companies evolve their core offering over time to retain customers; Netflix started out as a DVD rental service but as technology changed they started streaming content to those same customers. These days they’re making their own very successful content to keep those customers from going elsewhere.
Sticky Engine : Best Practice
- Only introduce new features that alleviate some kind of user pain – otherwise they won’t stick.
- When you’re concentrating on getting more revenue from your existing customers you need to know what they’re thinking. Use a Net Promoter Score to measure user satisfaction as you go.
- Remember that your goal is to increase long-term user engagement rather than just achieving a single interaction with a new feature with interest quickly dropping off. Validate demand for ideas before you launch and measure uptake afterwards to make sure this is happening.
- Data can tell you whether a feature is performing or not. When a feature isn’t performing, user testing can help you work out why.
- No one using your new features? Don’t just ask people what they want and build it!
Let's get your UX strategy sorted
We combine traditional business planning with actionable insights through workshops, research, testing and idea validation.Find out more
The Viral Engine
For obvious reasons, many successful online businesses use a viral engine to get their existing customers spreading the word about them. LinkedIn’s notifications of who wants to connect with you or its offers to invite your email contacts to connect are designed to get your network using their service. Services like G Suite from Google make it simple to share and collaborate on documents, sending out invites to those of your colleagues who aren’t already signed up.
And other companies use persuasive offers to entice us to do the work for them – like food box delivery company Gousto, who offer attractive discounts on your next order if you invite a friend, who also gets a discount for signing up.
Viral Engine: Best Practice
- The best viral engines work by delivering product value with growth as a side effect. It’s very useful to be able to collaborate on a Google Doc with colleagues – the side effect of this great benefit is that customers naturally add users as they invite collaborators.
- When you offer a referral incentive, balance people’s selfishness with their altruism by incentivising the user and also offering something to the person they invite.
- Producing high quality content and sharing it (content marketing) is another way to power this engine. As you may have noticed from this article, that’s what we’re doing!
- A/B or multivariate testing is the best way to validate whether these approaches are working and how to position them.
- Measure user satisfaction as you go – Net Promoter Score matters here because it’s all about how likely a user is to share.
- Never get in the user’s way. Don’t block the path to their goal with prompts to share – irritated users go elsewhere.
- Don’t just stick social sharing buttons on everything. No one will use them anyway.
The Paid Engine
Paying for advertising is of course a tried and tested way to reach and attract new customers. The digital landscape has sparked some new takes on this approach, like online price comparison site Moneysupermarket, where financial companies pay for their products to be listed, reaching new customers by virtue of being on the comparison list.
Paid Engine: Best Practice
- To make sure you’re not wasting money, calculate your expected customer lifetime value. How much profit will you make from your average customer whilst they’re interacting with your company? Never spend more than your projected customer lifetime value to acquire a new customer.
- Consider what your customers are trying to achieve when they are exposed to your advertising. For example, if you’re promoting interesting content then social advertising may be the way to go. However, if you’re directly promoting a product or service, stick to search engines where people may be in more of a “I want to buy an X to do Y” mindset.
- Create A/B test landing pages to convert visitors to your site into customers. It’s all very well to get people to click your ad but what’s important is that they actually purchase afterwards.
- Consider offering free trials to encourage people to commit to spending money if they like the product. By not taking money immediately you can give people the chance to experience the product and understand if it’s right for them. You can potentially use their data to start a conversation and help them get the most out of the product.
- Never throw money at advertising without tracking whether it is effective.
- If you experience a high drop off rate, try session tracking tools which recreate videos of what users are doing. You could also run some user testing if this doesn’t shed any light.
- If you’re selling B2B then advanced analytics tools such as Lead Forensics can tell you which firms have visited your site. (Ask us if you’d like to learn how we use these tools.)
So there you have it, the three engines of growth. Which will you concentrate on to drive growth?