Sean Ellis is CEO and founder of GrowthHackers.com, the number one online community built for growth hackers. He coined the term “growth hacking” in 2010, after using it to ignite growth for Dropbox, Eventbrite, LogMeIn and Lookout – each now worth billions of dollars.
Sean also founded and sold customer insights company Qualaroo, growing it to millions of dollars in recurring revenue with customers such as Uber, Starbucks and Amazon.
Sean is co-author of Hacking Growth, published by Crown Business in April 2017. He regularly speaks to startups and Fortune 100s and has been featured in the New York Times, the Wall Street Journal, WIRED, Fast Company, Inc.com, and TechCrunch.
Christie: Hello Sean Ellis, thank you so much for being with us today.
Sean: Hey Christie, thanks for having me on.
Christie: Oh, my pleasure. Okay, so 1994, I’m taking you back here. You were selling print ad space for a business journal. Did you ever think that you’d end up here being this major pioneer of a widely popular and practised business methodology?
Sean: I kind of didn’t think far ahead really. I was just trying to make ends meet. So yeah, I think I do have a lot of curiosity in how things work and how you can make them better. And I think there’s a lot of being in the right place at the right time, to early in my career when the Internet started to have a lot of built-in habits around the ways things used to be and kind of just figuring out with an emerging medium. What’s kind of interesting, just to put it in perspective, I think within two years in 1996 when I started doing online marketing I did tell one of the guys that I was working with I think I could be one of the best in the world at this thing because it’s just so early and everybody’s figuring it out.
Sean: And nobody has 25 years of experience over me doing this. We’re all just getting started and so as a young, a couple years out of college graduate, I was thinking that there was a possibility that I could get really good at it.
Christie: Excellent, excellent. So tell us about Growth Hackers. Now you kind of came into this idea I think when you were with Uproar or was it more when you had found Qualaroo, I can’t remember which one came first.
Sean: Uproar was the first company that I worked on and that was in the mid 90’s, so super early in my career. Kind of one of the first online game companies on the Internet. So Growth Hackers kind of grew out of Qualaroo. I was essentially trying to find a place to showcase our product and what I found was that when we ran the product it was kind of targeted to marketers, when I ran the product on marketing related websites it had the right audience. And so I thought maybe we should kind of build our own marketing related website, which sounds kind of weird. But I think it was, I saw a need that was sort of unfulfilled by the current offerings that were out there. There just wasn’t a good place for marketers and growth people to kind of build their profile among their peers and there wasn’t a good place for them to go and get inspired.
So I thought, there’s sort of a void of the type of site that I think should be out there. Most of the people who were writing about marketing were sort of journalists, as opposed to practitioners. And so I thought if we could build a website of people who are blogging about these things and just really build a strong community around it, we could grow something that’s pretty big. But it was more of a passion project with the idea that it’ll still be useful for our company because I’ll be able to demonstrate our product on the website as we built it.
Christie: Right, exactly. How did you know, I mean when was that moment? This is kind of a tangent here, when did you go I need to create a community for … Like what triggered it, or what sign in the sky, what bat signal Sean said there needs to be a community for people like me. And how did you even know that there were people like you?
Sean: Yeah, I think kind of what triggered it was that I … What I realised pretty early on when you have a marketing technology product that the tactic that works best for market technology products is content marketing.
Christie: You’re right.
Sean: If you can essentially help to educate marketers, that was the tactic that was working for all of these martech products. And so I looked at that and I thought that sounds like such a pain in the ass. So remember I started in business journals where I saw on professional publication how hard it is to consistently output. It’s like a big business to consistently output content and so if that’s the way marketing technology is growing and that’s the engine I need to build as a constant engine of putting out content. I just thought that sounds like a huge pain in the butt. So what I thought was, especially because everybody else has also realised that. So there’s basically already a glut of content for marketers.
And then I thought gosh, if we could aggregate the content, build community around other people’s content, I could do kind of a one time investment in a platform where you actually have to code it and make a good experience and have a place where people can communicate with each other. But you don’t have the ongoing pressure of constantly trying to roll out another piece of good content. And so that in a sense was sort of like I saw what worked, I has some sort of empirical learning around what worked. What worked for us and what worked for other companies, and I didn’t like the answer. And so I was trying to think okay if that’s the fact, what’s another angle that I can take that can help me tap into that fact that’s a little less heavy lifting than constantly …
Christie: And kind of let the community …
Sean: … have to hire a bunch of writers or write myself full-time.
Christie: Yeah, let the community populate it.
Sean: Yeah, so that was one of the problems was this … Yeah and the problem was that there was this glut of content, so let the community find the content that is good, bring it, and then we’ll host the discussions around that content, let the community kind of curate, discuss, and then we can start to organise that content. But it became a solution to the problem I had rather than simply saying okay, this is the only way you can grow a marketing technology business. So I’m just going to do more of it faster than the other guy just seemed like a path that was very incremental where I want to go down something that seemed kind of more scalable, more sustainable and really kind of more interesting.
Christie: Exactly, no that’s perfect. You saw a need and you filled it. That’s in a nutshell what happened.
Sean: Yeah, and I did know the need piece that I said for myself that most marketers, I know that like for the first 10 years of my career I had a lot of success. I built these two companies up to IPO’s from customer zero, yet I had zero reputation. I had zero kind of relationship with other marketers because marketing is kind of a …
Sean: … kind of other marketer kind of knew the person behind this product and I didn’t know the person behind this product, or the teams behind those products. And so that was the other thing is that I know every marketer really wants to geek out, or just people are passionate about growth, marketing is just sort of one of the levers of growth. But they want to geek out with other people that share their passion. And it just wasn’t a place to do that, and so that’s really what we were, yeah I was trying to basically geek out with other people, build my reputation among other people, give other people a way to build their reputation, and ultimately learn from other people. Because I found every time I had one of those conversations, if I listened enough I would say I should try that in my business. There’s probably an angle that I can do the thing that they’re talking about in my business and make it work at the very least I was inspired to try something and a lot of times it doesn’t work but if you don’t have an idea you can’t even run a test.
Sean: So a good source of inspiration was other people.
Christie: Exactly, that’s perfect. That’s great. So rewinding a little bit to your time with Uproar, which you talked about a little bit as one of your first successes. You basically grew that, you growth hacked it’s like we can put that in every sentence growth hack in every sentence. You grew that to be one of the top 10 largest gaming sites, correct?
Sean: Websites, actually overall websites in the world. It was the number seven website in the world in terms of total usage time that people spend on a website. Yeah, it got big.
Christie: Wow, so basically the growth in that is the usage, is growing to five million gamers at that time.
Sean: Yeah, it’s about how do I get …
Christie: Before they even went public.
Sean: Yeah, how do I get more people spending more time was really the formula. So ultimately total hours spent was the kind of metric that we gauge success on because we were ad supported. So every additional minute someone spent on the site the more they’re seeing ads, so that kind of fed our economic engine of the business.
Christie: So talk about that a little bit because you kind of had a strategy for that. You were seeing how the way that most people were doing it their way of advertising on these type of porters was really costly. And that’s one of the concepts of growth hacking, is to come up with a way to grow the business that doesn’t break the bank, maybe that colours outside the lines a little bit. So you basically figured out a way to make it more affordable for them to advertise doing the embedding actually is what it really ended up being.
Christie: So coming up with this, do you need to be some type of visionary? Or is it possible to use the customer data that you gather in this instance to come up with strategies that allow small companies to grow and compete with the larger ones. You made this little baby become this huge, it grew to Goliath basically, and was able to stand with the big boys.
Sean: Yeah, so I don’t know that it’s necessarily about just like pure creativity to come up with it. I think it’s about just having as much understanding of the situation as possible. And it’s about, so for me what I understood in our situation was that we were founded in Eastern Europe, I joined the team in Budapest, Hungary and …
Christie: Wow, like were you there?
Sean: Yeah I was living there, that’s where I moved right after college, and so when we were competing against companies the other leaders in the space were based in Silicon Valley or New York. And eventually we moved our headquarters to New York but we had our entire development team in Eastern Europe where there was a lot of disadvantages to that. There was communication challenges, there was a lot of things that made it hard to have that team there. But there were some advantages too, and so that’s part of understanding the situation. So our big advantage was that our development, our engineering cost at the time like 20% of say Silicon Valley engineering costs. And so I could go dollar for dollar against our competitors.
And to put it in perspective, our competitors in the game space were Yahoo!, the number one website in the world at the time. And Microsoft had their gaming portal, they’re like the most valuable company on the planet at that time. And then Sony was another one of our competitors, which was the number one advertiser on the entire Internet. They spent more dollars on the Internet than anyone else, plus they had their television assets that they were leveraging. They were leveraging Jeopardy and Wheel of Fortune, so they were plastered with come play these games online. And so we’re this little company out of Budapest that needs to compete against these massive companies. And so for me a lot of it was how do we leverage our technology cost advantage to outmanoeuvre these guys, because we have this advantage that they don’t have.
And so the first thing that we did was we really invested in setting up tracking systems, where at the time a lot of people just weren’t very efficient beyond thinking what’s my cost per thousand impressions when I’m buying ads. More intelligent people were maybe looking at what is my cost to get someone to my website, where I had team that we could basically say I want to learn for every dollar I spend here, how many minutes of usage time do I generate across our network of games? You have to start with the question and that ultimately I know that’s where my return on investment is. So I may not have had exactly a dollar in dollar out return on the investment, because you don’t always sell the ads at the same price or the sell through.
But at least I could know relatively how to deploy my dollars to where I’m getting the biggest bang for the buck. So right out of the gate we had more efficient spending because we had way better tracking. Today a lot of that stuff is just off the shelf, but we had to build our own technology around that tracking, and we had to imagine it first and then build it. Then within that we did a tonne of testing, so we tested 20 ad banners ever single day. And in order to create that many ad banners I had to create a network of banner creators around the country where I literally AB tested banner creators.
Sean: We would go and …
Christie: You AB tested the AB testers.
Sean: Yeah, basically if they didn’t create winning banners we stopped using them and we just kept working our way toward the people that created winning banners. So we did spend a lot on banners, so we played their game, but we played their game with a lot more efficiency, way more testing and way more measuring. Eventually I thought are there any other ways I can leverage that technology, or technology cost advantage, to more efficiently effectively acquire customers.
And so that’s where we came up with these embeddable games where we thought why are we playing by their rules where we go and buy advertisements that are defined by the Internet Advertising Bureau? Why should we not use our, we had really good game development technology, why not use the games themselves to acquire the customers. And so that’s where we just came up with this idea, again it was all about leveraging our unique competitive advantage, which was low cost very talented developers. They essentially made a fully immersive advertisement in a sense, but I didn’t have them shape it like a banner because then people would want to charge it like a banner. So we actually kind of used the YouTube strategy about six or seven years before YouTube used the YouTube strategy.
Sean: So we basically had these games about the YouTube size and got them out onto 40,000 websites and essentially they spread virally to these websites because we put this, like this game add it to your own website. And then we built-in financial incentives for the people who signed up through those games and then joined our games on our website, we would pay a cash bounty out to each of these affiliate partners. That’s kind of the process, so two things. So one was really leveraging our advantage. Two was understanding that we need to have a funnel where we engage people every step of the way. So they started game play experience on someone else’s website and we tested all the way through that once they qualified for a cash prize going through this game, then we basically said okay register, fill this out so that you can be in the drawing for your cash prize. And then after they registered then it said come and play a live game with 1,000 other people that’s happening right now that has a cash prize in five minutes so …
Christie: Okay, that’s what I was going to ask you was like how did you … Okay, so you had the methodology there and you had okay, this is how we’re going to test it, this is what we’re going to do. So where did the customer experience come in, where did the customer data come from? And that’s where it is having those massive contests that would just beg people to click on it.
Sean: Right, but we weren’t all that creative in coming up with this. What we really did is we combined two concepts that I saw other companies doing and combined them into one that became really powerful. Hewlett Packard came out with a banner around that time that you could actually play pong inside a banner. So an interactive game play. So it was a neat concept but what does that have to do with Hewlett Packard, right?
Sean: It wasn’t really like contextually relevant to their business necessarily, but it was like oh play the game on the other person’s website, there’s something there. So that triggered one thing and then right around that time Amazon came out with their affiliate programme, which was in my mind at that time I was just thinking it’s an embeddable store on a third party website.
Sean: Which kind of still is, but that was what I got excited about. And then I thought okay so they’re essentially syndicating their stores across these websites. There’s something they really didn’t come from, also gosh if we added this plus this and we look at what our advantages are and we’re got this learning on the more that we test engagement loops that keep people coming in and getting acquired. So optimise a funnel and then optimise engagement and retention on that funnel, all of those pieces were just kind of applied in a new and better way. That once we did that, that took our average customer acquisition cost basically went to about 10% of what it was before.
Christie: Oh, wow.
Sean: And while we did that, we still had many weeks where we were the number one banner seen on the entire Internet with some of our advertisements. So it wasn’t like we didn’t still have some of the expensive advertising playing the old game but we combined the two and so our average acquisition cost for a user was the lowest of any publicly traded company for a free registered user. So I mean I think the result’s sort of talk in themselves of where it ended up.
Sean: What’s interesting is that company got acquired a couple of years later. And then the first thing that the acquirer did was that they didn’t understand the growth engine behind what was leading to the growth of the business. So they shut down the programme because they couldn’t control the third party site content that would be around the games and they were worried about messing up the brand. So it was kind of like old school brand thinking broke the entire engine. Rather than trying to understand how that business was growing, they applied their own stuff and just broke it. So I think so much of this is about truly just trying to figure out, before doing anything don’t break what’s working.
Christie: Right, right, yes.
Sean: So much of it is figure out how it works.
Christie: Step one, if it ain’t broke, don’t fix it.
Christie: That’s actually a good point. With the founders and marketers that have a business, definitely start-up types, how can they determine what metrics to focus on in these tests? You just sort of gave us a very detailed overview of what you all decided to focus on for Uproar.
Christie: In a nutshell, I mean I know every business is different and every product or service is different, but if you could point out the metrics that they really should be focusing on, because I think some people lose their way.
Christie: Especially with their testing, they go nuts-o with it. How many tests should they be running and what are the best ones to get started with?
Sean: Right, so the tests themselves are obviously to ultimately move a metric. The reason that you test is to move a metric and if you’re focused on the wrong metric, then ultimately the tests can be really successful at moving the wrong metric but they’re not going to move the business forward at all.
Sean: And so I think that’s the mistake, the starting point that a lot of people make is that they … The starting mistake that a lot of people make is that they just use the cookie cutter metrics. And so Facebook for example, started to go down that path. People asked, wow there’s 800,000 accounts that have been created on Facebook. People got all excited about that in the early days and to Mark Zuckerberg’s credit I think what it comes down to is that this stuff is kind of intuitive if you actually step back and stop trying to do what everyone else is doing. And just step back and say does it help my business to, play out the scenarios. If I have 80 million registered users is that guaranteed to help my business? How would it help my business, how would it not help my business?
Sean: You pretty quickly come to the answer of, if they’re not using it don’t matter if they’re registered, right?
Christie: Right. It’s kind of like, you bring up a good point with Facebook. Something I’ve always said about it it’s like doing social media marketing for clients, they get all excited about how many people like their page. I got all these likes, I got all these likes, and I’m like yeah okay let me explain something to you, someone has to like your page to leave you a negative review.
Sean: Right, yeah.
Christie: So liking your page doesn’t always translate into you having awesome business, you know?
Christie: So it’s a perspective that you have to have and you need to know what matters.
Sean: Right, and so ultimately to me I think the metric that everyone should start with is understanding how value is created in their business. And so value for Facebook is created when people actually use Facebook.
Sean: If they’re not spending time on there, they’re not …
Christie: They’re not engaging.
Sean: … creating content for other people to see and they’re not engaging with other people’s content. So time is a huge part of value creation in Facebook. So not surprisingly, Mark Zuckerberg moved from registered accounts to monthly active users, and then to daily active users. Because if they are active on a daily basis that’s more powerful than being active on a monthly basis. Again, you just play out worse scenario, they only come back once per month, that counts as a monthly active user …
Christie: Or not even.
Sean: How much value are they creating for themselves or for our business, not very much.
Christie: Right, exactly.
Sean: So then they moved. They had this what they call a north star metric that was monthly active, they moved it to daily active. But if you go back usage time was our thing for Uproar. Interestingly I started to go down the same path with Log Me In where our initial metric we were just trying to grow people who signed up for accounts, so kind of the same challenge that Facebook had, but I realised that 90 plus percent of the people who signed up for an account never …
Christie: Never came back.
Sean: … used the product.
Sean: Now it’s not that they didn’t come back, they just never even used the product. So they never did a single remote control session with our remote control software. So did we create any value for them if they registered an account? No, in fact we created negative value. They spent time creating an account and they never got value in return for it, so they actually have a net loss in their interaction with us. So they’re going to spread negative word of mouth around that. So nobody had to kind of tell me that, but it’s sort of just so intuitive that I think anybody could do it if they really kind of settle down and say how do people get value from my product. There’s a shortcut to it, so one you can kind of try to intuit it. The shortcut that I use is I ask people who’ve used the product, I run a survey, and I ask them how would you feel if you could no longer use this product? So that’s my first thing.
Christie: That’s a good question.
Sean: Yeah, and if they say I wouldn’t be disappointed then I ignore their feedback. They don’t care about my product.
Sean: So what I’m looking for, I give them a choice, very disappointed, somewhat disappointed, not disappointed. And I’m looking for people that answer very disappointed. And if they say they’d be very disappointed without my product, they have the answers to where the value is in the product. And so that’s where I say okay well what’s the benefit that you’ve gotten? What were yo using before? What was your intent when you signed up for this? Why did you decide to start? I’m learning everything about those people, they tell me what the value is. And then the next step is how do I find the signal of the most consistent value that people get from the product who say that they’d be very disappointed without it. And how do I then try to attach a metric to expansion of that value.
How do I try to measure it if I get 100 more people to that, which metric would grow? If I get the existing people using it 10 times more often, how would that metric grow? And so what I’m trying to find is a single metric that measures the expansion of value over time, and that ultimately should be when I’m running tests, those tests should ultimately be to expand value. Because it’s value that keeps people coming back, as you said the return visits is really important, the return usage. And if they didn’t get value in the first place, they’re not coming back. And I think that’s again where marketers a lot of times make the mistake that they’re thinking about what’s the tactic that I can bring them back with. Where they should be thinking why aren’t they coming back, what can I do on that initial visit that gives them enough value that they come back without a tactic?
Christie: Without you having to hit them over the head and drag them by the hair.
Sean: Right, exactly.
Christie: You want to hit them with the value initially so it becomes a no-brainer that they’ll not only be like I’m going back, they’re going to tell all their Facebook friends.
Sean: Yeah, so value is your best retention strategy. You don’t need a bunch of crazy pop-ups and tactics to remind people to come back. I mean those things can be potentially useful when used sparingly in the right way, but they’re never going to outweigh actually getting someone to a valuable experience on their first visit. And trying to increase the value that you deliver to them over time.
Christie: That seems like it would be very trick to figure out, it seems like it would take a lot of trial and error to figure out that balance of that. No, or you think it’s pretty simple?
Sean: I have a really systematic process for it and I’ve kind of written about it. The value itself, the way that I do it just like a brief overview because that could be a whole long conversation in itself, is that I start with an open ended question. So I ask how would you feel if you could no longer use it. I’m getting the people who say they’d be very disappointed and then I’m just asking them what’s the main benefit you get from this product? And so I can go into any business that I don’t know anything about what they do and I ask those two questions together and I’m going to come back with a pretty good idea of the benefit that they get.
There’s one other question that I like to layer in there, which is have you recommended this product? And then if they say yes, how did you describe it? When they write in that description it gives me two things. It gives me a clear description of what the product does, and the main benefit, and then sort of a metre of how much value they got. I’d be very disappointed without this, so people who claim this benefit the meter’s like … super valuable, so that’s like phase one. Phase two is I give another set of users, a different set of users, those same questions but this time I give them a multiple choice. Instead of the open ended I say, which of the following best describes the benefit that you get from this product, A, B, C, D? And now I can start to say people who picked D 80% of those people would be very disappointed without the product.
Christie: I see.
Sean: People who pick A, only 5%.
Sean: So I start to find one thing, and then there’s one other question that’s super powerful, which is why is that benefit important to you? I then ask that as an open ended question and it gives me a tonne of context about why the benefit’s important to them. Basically with that information I can get to the answer in one day if I can get enough survey responses. And for a big company I can get enough in one day. So I can quickly zoom in, this is the benefit that’s most broadly appealing. And the best combination of broad appeal and deep appeal, and now I have to try to think what’s a metric that represents this? I think that’s the mistake a lot of times, is that people then spend six months trying to figure out the perfect metric. There’s three or four good enough metrics, and there might be one perfect metric, but spending all that time trying to get the perfect metric means that you’re not executing to grow it. And all four of the good enough are going to be correlated with each other anyways.
So just find something that’s good enough, and that becomes a company wide shared mission to grow that metric because that metric should reflect the benefit that people get from the product. So now you have a product team that understands this isn’t just, we’re not just growing registrations here, we’re growing value that’s being delivered. So that should be something that they get excited about, marketing people should get excited about, engineers. It takes a little bit of time for them to start to get excited about it, but if they start to see that experiments that I run expand this metric, the experimentation process starts to become pretty addictive and it takes over a company pretty quickly.
Christie: And so what people definitely need to understand, the whole concept of growth hacking, is not a one person job. It is a team, and it’s a dedicated team, to …
Sean: Not necessarily a dedicated team. So when I was at Dropbox I was the only non-engineer, there was only eight of us. It was an interim VP marketing role so after six months I left, and then for the next nine months there was not another marketer that joined the team.
Christie: Oh, wow.
Sean: And they didn’t have growth team. So I think a lot of people get caught up that there’s an exact formula, it’s got to be a growth team, it’s got to be this. Really what it needs to be is a clear understanding of that success metric and a willingness of the team and not just willingness but a measured success in number of experiments that you’re launching to grow that metric. And so with Dropbox very quickly they saw once the CEO and I push those first couple of experiments through the rest of the team started to go holy crap, this works. This actually makes a big difference in how our footprint grows here. And so the entire team became very test driven and I continued to see their testing throughput at a high level after I left. They actually published last February their numbers that showed their actual growth rate from the time that I was there all the way through to the current day, and that growth trajectory stayed strong that entire time and they’re the fastest SaaS company to ever reach the $1 billion revenue run rate.
Sean: And I think a lot of it was one, it’s a great product, but there was a lot of products that tried to do the same thing in the same space.
Sean: That team nailed it better, but then on top of just building a great product, they passionately executed the expansion of that product primarily sponsored by the CEO and pretty quickly it became kind of a core part of that culture.
Christie: Excellent. So I saw a video, you’re like which one?
Christie: There’s so many, yeah uh-oh. No, this one is a talk that you did where you broke down the three stages of growth.
Sean: Mm-hmm (affirmative)
Christie: So I know that you can get very deep into each of those, but just the cliff notes version.
Sean: Sure, I can do a very high level.
Christie: The three stages of growth, product market fit is one, and that is another handy-dandy phrase that you have coined that everybody’s using now. Stacking the odds and scaling growth, so …
Sean: I may have popularised that one.
Sean: I may have helped popularise product market but I didn’t coin that one.
Christie: Oh, so that wasn’t yours, you just borrowed it and made it great?
Christie: Okay, so those are the three stages of growth. So give us the cliff notes version, our audience is largely start-ups and small businesses and things like that, that are really trying to use these concepts to grow their business. So you have these three concepts that will help them get going.
Sean: So before I even say what they are I want to say why it’s important to have these, and then I’ll say what they are.
Christie: Excellent, perfect.
Sean: Or I’ll explain what they are. So especially in a super early stage company, focus is your by far most important asset. It’s more important even than money, just what you think about the time that you spend. Essentially what this kind of framework for growth is about is that there’s a certain stage in your business where growth is basically impossible. And if you focus on growth you will go out of business. In fact, there’s a study that people, a pretty big study on start-ups, the number one cause of start-up death is trying to scale, which is the first stage, when you don’t have product market fit. So essentially that’s saying you basically don’t have anyone that’s answering that question, how would you feel if you could no longer use this product? Everybody is saying I wouldn’t give a crap, or I’d be somewhat disappointed, but you don’t have anyone saying it’s a must have.
Christie: Well right, if you’re focused on rapid growth you’re not even paying attention to your customer.
Sean: Well you might be if you’ve got a great solution, you might be just trying to get the solution in the right people’s hands, but if you don’t have a great solution focusing on getting a shitty solution in more people’s hands, or a beep solution, hopefully you can edit.
Christie: No, that’s fine.
Sean: But ultimately, you’re just focused on the wrong thing. It essentially means that all that creativity you’re thinking about how do I get this in more people’s hands? If you actually refocus that creativity and said, how do I tweak this product until it’s the right product for a market of people who say they’d be very disappointed without it. And so phase one is it needs to be a must have for someone for you to be able to sustainably grow a business. Phase two then, I call it different things at different times, but I think kind of the main thing is you have a great product, let’s just assume that you went out and tried to grow it like crazy.
Sean: But what happens if you’re using the wrong message to talk about that product? You’re going to probably have a really hard time getting people to try that product.
Sean: What happens if you’ve got totally the right message but when they try to use it, it’s so convoluted on your first attempt to use the product that 95% of the people give up before they ever use it because you have such a bad onboarding process. And that’s not hypothetical, that’s what happened to us at Log Me In. So I was trying to grow it, we actually had a great product for people who get through the onboarding process. But over 90% of the people never used the product because it was so hard to use that first time. And so getting that figured out was, sorry I got a calendar invite just popped up.
Christie: Oh, I’m so sorry.
Sean: So getting that figured out was really critical for being able to grow our company. And what was hard as a marketer I didn’t have influence on the, once they’ve registered I really didn’t have much influence on how do we get them from registration to using the product. And so it took me going to our CEO and saying I’m going to have a really hard time growing this business. I can’t scale marketing by more than $10,000 a month right now. After 10,000 we’re losing money because we’re so inefficient at this point and we need to fix this. So I took the data to him, he took the data to our head of product, as a group we decided before we put any more money into marketing, before we put any more money into the product roadmap of new features to build, we need to figure out this first user experience.
Sean: And within four months we were able to get 1,000% improvement in the number of people who signed up and used the product.
Christie: That’s amazing.
Sean: So 10 times as many people used the product after signing up. And so what that meant when I went back and started testing marketing channels, so it’s the same one so no new creativity on marketing channels, just I’m going to go back and try the stuff I tried before, most of which didn’t work. Now is scaled to $1 million a month, so I was stuck at 10,000, now it’s scaled to $1 million a month and with a three month payback on dollars invested.
Sean: That business was cashflow positive from the minute we started scaling it because we were so efficient at the conversion, activation, usage. So when we talk about value is what drives retention, activation is what drives value. Each of these growth levers are interdependent. If you have bad activation, you can’t spend money because you have a bad ROI, but you also have bad retention because you didn’t get people to the valuable experience that would have brought them back. That’s a big part of the growth process is where’s the opportunity that I should be focused on as a business right now? And so that’s the last part of the pyramid is scale. So essentially it says you’ve transitioned to growth, now you’ve got an efficient onboarding, you’ve got the right messaging. You want to do that as quickly as you can because you validated that your product’s a must have for the people who get to the finish line.
Sean: Now it’s okay, I got that stuff, now I’m going to focus on getting this into as many people’s hands as possible and I can probably run really hard and really fast, so that’s this idea. There’s a blog post I wrote on it called the start up pyramid, and this is about 10 years ago.
Christie: Hey, it’s still relevant.
Sean: If you just search Google for it. Yeah it’s the most popular blog post I’ve ever written. You’ll see kind of the breakdown of what I’m talking about here.
Christie: There’s a tonne of information on your concept of growth hacking and using these three stages of growth, well I guess it could be a strategy I guess.
Sean: Strategies within the stages.
Christie: Strategies within the stages. So we at Feildboom use the term customer obsessed. So even with all the information that you’ve given us today, if you were to hear the phrase customer obsessed. What does that mean to you, and relate that to your growth hacking.
Sean: I would just take it one step back and just be customer curious. Obsession comes, it’s harder to force yourself to be obsessed, but just wondering why do people come to my website in the first place, what was their world before they came there? If they recommend it, why are they recommending it? Why are they not recommending it? Just why, why, why, why, why.
Christie: That could be the obsession actually, to be obsessively curious about your customer.
Sean: Yeah, customers are fascinating.
Christie: They are.
Sean: You’re running this big experiment of how do I, you could look at it in a negative light and say how do I manipulate as many of these people into using my product as possible? That’s not really what I think you should be trying to do. I think it’s really how do I understand to their needs to such a level that I can figure out how my solution is going to be relevant for them and I can base that on the people whose lives I’ve made so much better with my solution. So it starts with who has a better life because of my solution. All of it, if you’re just really curious about it and then testing is another form of curiosity. How do I get more people to do this? Is this going to work better or is this? The most exciting part of my job has always been when I launch a survey and I get to go see the answers for the first time, especially if it’s a survey I’ve never run on that company before. Or I launch a test and I finally get to look at the data, did it work, did it not work? I think it’s really hard to be successful in this type of role if you’re not truly curious. Because then you’re just working the numbers and you lose that empathy that’s important for really trying to figure it out and meet the needs of customers.
Christie: Right, listening to you talk I don’t know if I’m the best kind of customer a company could have or the worst kind of customer a company. Because I say I get in mousetrap mode a lot, especially with apps and platforms and things.
Christie: Is that build a better mousetrap. I always try out something and I go well this would be better if, and sometimes I will do the feedback thing and be like I love this however, I would love it like 10 times more if it had this.
Sean: Yeah, which I think is awesome. If you can basically engage customers to that level where you can take their feedback. I think a lot of the problem is what I like about what you said is I love this and I would love it even more if, or I’d love it even 10 times more if. What you see a lot of people doing is I hate this, but I would love it if you did this. Then you’re trying to make a product right for them and you break it for all the other people.
Christie: For all the other people, right.
Sean: Most of the time I ignore feedback from people who don’t already love my product because it’s so hard to get people to love it in the first place. Take that island of love and grow that versus trying to jump to a different island.
Christie: Right, no I love it, I love it. So kind of wrapping things up a little bit, got a few lightning round questions for you I guess we can call it.
Christie: Which companies out there do you think are doing a great job of being customer obsessed/customer curious? I kind of like that customer curious, but the obsession could actually be being curious about your customers as you said. So who’s out there kind of killing it in that realm?
Sean: I think like the well known companies Air B&B, I think Lyft, I think Uber is kind of weird but I think that they have a lot of the right elements but sometimes they go down the path of kind of manipulation of things more than trying to focus on value creation.
Christie: Maybe trying to tell you what they think you want instead of really finding out what it is you do.
Sean: Yeah, but I mean one of the companies that I’m super excited about recently is Mobike out of China. They launched last April of 2016, and on a daily basis they do four times as many rides as Uber does, but it’s a bike sharing platform that is growing like crazy. I think they’re really good and then I’ve done a lot of studying, I’m going to China in a couple weeks, so I started prepping for that.
Christie: Wow, that’s awesome. That’s amazing.
Sean: Alibaba and Tencent are two other super fast growing Chinese companies that are fascinating.
Christie: Alibaba I’ve heard of them, yeah.
Sean: Yeah, but I think both of those companies are totally customer obsessed. Tencent is the biggest game company in the world now, a lot through acquisition. But those are a couple of companies that are really good. I actually have a meeting that starts …
Christie: Yes, I know. I’m sorry, I know our time was cutting really short, but I’m really glad that you took the time to speak with us today and share your wealth of knowledge. So I know that everybody can find you, or at least find your community, growthhackers.com. But where else can they find you on the web?
Sean: Twitter is usually pretty good so @seanellis on Twitter. Connect with me on LinkedIn, those would be the main places.
Christie: Excellent, well I don’t know about everyone else watching this but I got a tonne of information out of this today. So I really hope that you did too. So once again this is our great web series on how to grow, well growth hackers is on my mind, so how to create customer obsessed companies from the people who know how to do it, just like our friend Sean Ellis here. And we will see you next time.