Contrary to their name, startups don't like to just start up. They should by all logic and statistics be called shutdowns. I should know, I've been behind a few shutdowns.
But if you actually want your startup to grow, why not use the same methods they do in silicon valley? Say hello to Growth Engines for business success.
What is a Growth Engine?
A growth engine is a mechanism in a startup that drives sustainable, repeatable growth by acquiring and retaining customers through a systematic, scalable process.
The 3 Types of Growth Engines
1. The Viral Engine
Viral growth occurs when your existing users bring in new users naturally through product usage or explicit referrals. This engine is particularly powerful because it can lead to exponential growth with minimal marginal cost.
Key characteristics:
Growth is driven by user-to-user transmission
Success is measured by viral coefficient (K-factor)
Common in social networks and communication tools
Some examples are Google Search, WhatsApp, LinkedIn, Dropbox
2. The Paid Engine
The paid growth engine relies on converting paid advertising or marketing into customer revenue. The key here is ensuring that the lifetime value (LTV) of a customer significantly exceeds the customer acquisition cost (CAC).
Key metrics:
Customer Acquisition Cost (CAC)
Customer Lifetime Value (LTV)
Return on Ad Spend (ROAS)
Payback Period
Companies like DoorDash and HelloFresh have mastered this engine by optimising their unit economics to support substantial marketing spend.
3. The Sticky Engine
The sticky engine focuses on retaining existing customers and maximizing their lifetime value through exceptional product experience and customer service. It's about building long-term relationships rather than just acquiring new users.
Critical elements:
High retention rates
Strong customer satisfaction
Regular product usage
Expanding customer value over time
SaaS companies like Salesforce exemplify this model, with their focus on customer success and product stickiness.
Building Your Growth Engine
1. Identify Your Core Engine
While companies may employ multiple growth strategies, there's usually one dominant engine that drives the majority of growth. Identify yours by asking:
How do customers currently find you?
What's your most efficient acquisition channel?
Where do you see the most organic growth?
2. Optimise for Your Engine Type
Each engine type requires different optimization strategies:
Viral Engine:
Reduce friction in the sharing process
Create strong incentives for referrals
Build virality into the core product experience
Paid Engine:
Focus on unit economics
Diversify marketing channels
Optimise conversion funnel
Continuously test and iterate on ad creative
Sticky Engine:
Invest in customer success
Build strong onboarding processes
Develop expansion revenue opportunities
Focus on product-led growth
3. Measure and Iterate
Implement proper analytics to track your growth engine's performance:
Set clear KPIs based on your engine type
Monitor both leading and lagging indicators
Create feedback loops for continuous improvement
Regular testing and optimisation
Common Pitfalls to Avoid
Premature Engine Switching Don't abandon your chosen growth engine too quickly. It takes time to optimise and see results.
Ignoring Unit Economics Even viral growth needs sustainable unit economics to support long-term success.
Over-reliance on a Single Channel While you may have a primary growth engine, diversification can provide stability.
Scaling Too Early Ensure your growth engine is working efficiently before attempting to scale significantly.
Conclusion
It's essential to have great products and services for your business, but to grow you will need to make some concessions on the front end to bring in your first lot of customers who may be wary of trialling something new.
Sometimes that means spending more on marketing than what you will receive from your customer, but it gets the wheel turning.
You can use Growth Engines to organise your approach to growing your business. By focussing on each of the paid, viral, and sticky engines you can avoid losing momentum or having a hole in your plan through which customers will exit.
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