Product Growth Handbook

Growth is an engine for your business. As both a product manager and startup founder, I've been always thinking about how to grow the product/business. As I'm constantly consuming and highlighting articles on product growth, virality, psychology, and so on, I'd like to share some of my favorite reading materials that helped me figure out the big picture of product growth. (When someone says that they are an avid reader, look at their Glasp page! Here's my Glasp.)

There are countless must-read articles about product growth but I picked up some to map out the whole picture of product growth for you - product managers and founders. I've covered the growth mindset & psychology, growth framework, growth channels, growth strategy, virality, and retention & engagement.

Don’t just read this article or the attached articles. Instead, highlight where you resonate with and leave your thoughts and learnings with Glasp so that you can look back at them anytime and we all can get smarter at the same time ;)

If you're ready, let’s move on.

Table of Contents

• Growth - Mindset & Psychology
• Do Things that Don't Scale
• The Psychology of Startup Growth
• Growth - Framework
• AARRR Framework - Metrics That Let Your StartUp Sound Like A Pirate Ship
• Growth Loops are the New Funnels — Reforge
• The Hook Model: How to Manufacture Desire in 4 Steps
• Growth - Acquisition & Activation (Channels & Conversion)
• How to Set Up, Hire and Scale a Growth Strategy and Team: Growth, Hiring, KPI
• The Growth Marketing Handbook
• Content-driven Growth
• Investor field notes: distribution and conversion models for consumer startups
• Growth - Referral (Virality)
• Why People Share: The Psychology Behind "Going Viral"
• Lessons Learned – Viral Marketing
• The Five Types of Virality
• 60 Ideas to Boost Your Growth
• Growth - Retention & Engagement
• Hierarchy of Engagement, Expanded
• Engagement Drives Stickiness Drives Retention Drives Growth
• Octalysis: Complete Gamification Framework - Yu-kai Chou

Growth - Mindset & Psychology

Before diving into the growth framework, you need to have a growth mindset and understand the right psychology behind growth. Otherwise, you will end up being always seeking attractive headlines such as "20 best growth hacking ideas", "20 ideas to go viral", etc. Embrace the pain of failure, do things that don't scale, and be relentlessly resourceful.

Do Things that Don't Scale

http://paulgraham.com/ds.html

By: Paul Graham (@paulg)

Actually, startups take off because the founders make them take off. The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all startups have to. You can't wait for users to come to you. You have to go out and get them. Don't be shy and lazy. Don't ignore this path because the absolute numbers seem so small.

It's not the product that should be insanely great, but the experience of being your user. The product is just one component of that. For a big company it's necessarily the dominant one. But you can and should give users an insanely great experience with an early, incomplete, buggy product, if you make up the difference with attentiveness.

I have never once seen a startup lured down a blind alley by trying too hard to make their initial users happy.

As long as you can find just one user who really needs something and can act on that need, you've got a toehold in making something people want, and that's as much as any startup needs initially.

I should mention one sort of initial tactic that usually doesn't work: the Big Launch. [...] Why do founders think launches matter? A combination of solipsism and laziness. They think what they're building is so great that everyone who hears about it will immediately sign up.

The Psychology of Startup Growth

https://www.nfx.com/post/psychology-startup-growth/

By: James Currier (@JamesCurrier)

Growth is not a one-time gimmick. To get 1000% growth, there is no silver bullet. Growth comes from adopting the right psychology. The right mindset.

• Language first: Your language defines you. It tells users how you are relevant to their life. The common mistake is that companies build features first and then "put language on it". Language should come first.
• Empathy for users: The great Founder spends more time thinking about how the user thinks and feels. About their psychology. The question you have to ask every day is “What is your product to them so that it deserves a place in their complex lives?”
• Always be moving: Move constantly. Make more moves than anyone else. To grow, you have to run quicker experiments. Iterate faster. Never stop.
• Data love: Meaure everything. Test, measure, and iterate.
• Sustain pain of failure: Success is going from failure to failure with no loss of enthusiasm. Move on from the losses.

Growth - Framework

To grow your product or business, you need to have a big picture of what you are doing and how growth works. Simply put, growth is all about compound effects. What a user does should increase the other user's value, so that the more users take actions, the more it creates value for all. The following frameworks will give you a clue to the most important question: How does your product grow?

AARRR Framework - Metrics That Let Your StartUp Sound Like A Pirate Ship

https://ms-mbalke.medium.com/aarrr-framework-metrics-that-let-your-startup-sound-like-a-pirate-ship-e91d4082994b

By: Melanie Balke (@mbalke4)

The AARRR metrics were coined by Dave McClure (we highly recommend you to take a look at his slideshare in 2007). These are the five most important metrics for a startup to measure your company’s growth while at the same time being simple and actionable.

The AARRR Framework:

• Acquisition: Where are your users coming from? Understand customer's journey, optimize it, and then find the marketing channel of largest-volume (#), lowest-cost ($), and best-performing (%). A single channel is enough as Peter Thiel said:

It is very likely that one channel is optimal. Most businesses actually get zero distribution channels to work. Poor distribution — not product — is the number one cause of failure. If you can get even a single distribution channel to work, you have great business. If you try for several but don’t nail one, you’re finished. So it’s worth thinking really hard about finding the single best distribution channel.

• Activation: How good is the user’s first experience? Do LOTS of landing page tests & A/B tests - guess & iterate quickly to figure out the "Aha Moment". Get your user to the aha moment and let the user realize the real value in your product so that the user keeps coming back.
   • Facebook: 7 friends in 10 days
   • Twitter: following 30 people
   • Dropbox: upload at least 1 file
• Retention: Do people regularly come back to use your product? Why are others leaving? Your most unhappy customers are your greatest source of learning. Automated emails are a simple and easy retention feature.
   • Acquisition Rate > Churn Rate = Growth
   • Acquisition Rate < Churn Rate = Leaky Bucket (Burning Cash 🔥💰)
• Referral: How can you turn your customers into your advocates? Only encourage users to refer after they have a "happy" user experience (8/10 score) or have a systematic process with incentives (e.g. Dropbox's referral program, hotemail's free signup, etc). Pay attention to Viral Coefficient, the number of users a customer refers to you. (e.g. Viral Coefficient 2 means 1 user refers 2 new users).
• Revenue: How can you monetize and increase revenue? You need to figure out the monetization plan. Increase Customer Lifetime Value (CLV) and decrease Customer Acquisition Cost (CAC). A good ratio is CLV:CAC = 3:1.

Growth Loops are the New Funnels — Reforge

www.reforge.com/blog/growth-loops

By: Andrew Chen (@andrewchen), Kevin Kwok (@kevinakwok), Casey Winters (@onecaseman), and Brian Balfour (@bbalfour)

The AARRR metrics framework is a good starting point but misses the larger picture of the loop itself (no compound effect). “How does your product grow?” is simply the most important question to be able to answer. Focus on how the output of one cycle of the loop leverages the next cycle of the loop to get more output (compound effect), not short-term bumps and sugar rushes.

Growth Loops:

• (Input) New User: A new or returning user is created by reinvesting the output of the loop. (e.g. in case of Pinterest, sign up or returns)
• Action/Step: A series of actions/steps that generate the output. (e.g. save content, repin, etc ⇒ quality signals ⇒ search engines)
• Output: The steps produce some output that can be directly reinvested in the input. (e.g. find content via search engines ⇒ sign up or returns)

Why Growth Loops?

• Sustainable Compounding Growth: The fastest-growing products are typically powered by 1- 2 major loops that transition over time. Measuring and understanding the power/health of your loops is critical to understanding where to focus.
• More Defensible: Loops combine how your product, channel, and monetization model work together in a single system, meaning it's hard for others to replicate.

The Hook Model: How to Manufacture Desire in 4 Steps

https://www.nirandfar.com/how-to-manufacture-desire/

By: Nir Eyal (@nireyal)

The Hook Model is similar to Growth Loops in terms of the compound effect but from a different perspective.

The first-to-mind solution wins. The Hook Model is a 4 step process to build habit-forming products: Trigger, Action, Reward, and Investment. As the user goes through these phases, he or she builds habits in the process. (We highly recommend taking a look at his slideshare in 2013). Frequency and attitude change matter.

The Hook Model:

• Trigger: Starts with external triggers then shifts to internal triggers.
   • External - What gets the user to the product? The information for what to  do next is within the trigger (e.g. email, ads, notification, etc).
   • Internal - The information for what to do next is informed through an   association in the user's memory (e.g. emotions, routines, situations, places, etc). Negative emotions are powerful triggers (e.g. lonely, bored,   inferior, etc).
• Action: What is the simplest action in anticipation of reward (e.g. scroll, search, play, etc)? Leverage motivation and ability: Behavior = Motivation + Ability + Trigger.
   • 6 Factors in Motivation: seeking pleasure, avoiding pain, seeking hope,  avoiding fear, seeking acceptance, avoiding rejection.
   • 6 Factors in Ability: time, money, physical effort, brain cycles, social  deviance, non-routine.
• Variable Reward: Is the reward fulfilling, yet leaves the user wanting more? The unknown is fascinating and increases behavior.
  • Social Rewards: empathetic joy, partnership, competition, recognition, and cooperation. (cf. John Maxwell's 6 Principles: we want to be valued, appreciated, trusted, respected, and understood.)
  • Resources: materials, information, inspirations, etc.
  • Self-achievement: mastery, competency, completion, etc.
• Investment: What is the bit of work done to increase the likelihood of next returning?
  • Load the Next Trigger of The Hook: message, comment, follow, save, etc.
  • Store Value to Improve The Experience: content, data, followers, reputations, etc. We value things more when put work in them. We seek to be consistent with the past behaviors.

Growth - Acquisition & Activation (Channels & Conversion)

Now you have the whole picture of what you should do. Next is to optimize each step. After you set a certain goal as a team or business, you should identify which channels you should go for and leverage based on the existing users. But acquiring users to your platform will be meaningless if users don't see value in your product. Both distribution and conversion matter.

How to Set Up, Hire and Scale a Growth Strategy and Team: Growth, Hiring, KPI

www.ycombinator.com/library/59-how-to-set-up-hire-and-scale-a-growth-strategy-and-team

By: Anu Hariharan (@anuhariharan)

Most products found 1-2 relevant channels early on that really work for them. 70% of experts say that referrals were the top channel within the first year. Identify the growth channel that works for a startup the best based on existing user behavior. Ask the two key questions:

• How do customers find solutions / solve this issue today?
• How do your best users use your product today? Can you do something to get more such users to discover the product quickly?

Identify Growth Channel

The Growth Marketing Handbook

https://www.julian.com/guide/growth/intro

By: Julian Shapiro (@Julian)

The growth funnel explained in the article is similar to the AARRR metrics but this article digs into the growth channel and what channel mixture you should use.

Succeeding at Unpaid Channels:

• Product-led growth: Does your product grow virally from users inviting other users who use the app together? This is one of the healthiest and fastest ways to grow. (e.g. Dropbox, Slack, Zoom, PayPal, etc)
• Content and SEO: Are people already googling? Then SEO is potentially viable. Build distribution pipelines around your content to share it beyond Google (e.g. webinars, newsletters).
• Word-of-mouth and referrals: Build an amazing product (low-friction and good referral programs) that people can't stop talking about.
• Sales: Will you have significant profit margins (typically $1,000+)? Then, attract sales leads through ads, content, warm intros, conferences, cold emailing, and out-of-home marketing.

Channel Mixture You Should Use:

• B2C ecommerce: Instagram/FB Ads, organic social, influencers, sponsorships, and marketplaces.
• B2C mobile app: Instagram/FB Ads and Apple Search.
• B2C SaaS app: FB Ads, Content, product-led growth, and Google Ads.
• Brick and mortar: Instagram/FB Ads, Yelp Ads, and PR.

Content-driven Growth

https://www.lennysnewsletter.com/p/content-driven-growth-strategy

By: Lenny Rachitsky (@lennysan)

The landscape of content-driven growth can be divided by 2x2 maps: SEO vs. virality & user-generated content (UGC) vs. editorially-generated content.

5 Content-driven Growth Strategies:

1. UGC x SEO: Leverage the user-generated content to be surfaced in organic search (e.g. Quora, Glassdoor, Reddit, etc).
2. Editorial x SEO: Focus on certain keywords and create content (employees or contractors) to try to rank higher (e.g. HubSpot, Ahrefs, Slidebean, etc).
3. UGC & Editorial x SEO: Use the combination of UGC and Editorial (e.g. Thumbtack, Zapier, Yelp, TripAdvisor, etc).
4. UGC x Virality: Motivate users to share what they created with their friends so that it pulls those friends into the product (e.g. TikTok, Airbnb listings, Zillow’s Zestimate, etc).
5. Editorial x Virality: Create one-off viral content (by founder or company) that spread through word-of-mouth (e.g. Mr. Beast, Stir, Superhuman, etc)

High-level Takeaways:

• Start Small: Play around with platform, topic, and style until you find something that works.
• Align on a Clear Goal: Clarify your goal. Is it to SEO, drive virality or build your brand?
• Hunt for Opportunity: Figure out topics that are underserved and create content to satisfy it.
• Give The Reigns to Passionate Ones: Let a passionate person (founders or employees) produce content.
• Think Long-term & Be Patient: Will it pay off in long-term? It takes years to see significant payoff.

Investor field notes: distribution and conversion models for consumer startups

www.bvp.com/atlas/investor-field-notes-distribution-and-conversion-models-for-consumer-startups

By: Talia Goldberg (@TaliaGold) and Alexandra Sukin (@AlexandraSukin)

Success or failure for internet businesses is dependent on Distribution and Conversion.

Distribution alone is not enough. Distribution without conversion is like being eight feet-tall on the basketball court but missing every layup. [...] Startup founders often fetishize monetization, when really, the focus should be conversion.

9 Distribution Tactics:

• Virality via social proof: We trust in groups of people and friends, and want to emulate behavior that we feel is validated by others. (e.g. friends or UGC recommendations, endorsements from influencers, other people's reviews, etc). Linktree leveraged the public pages of celebrities as social proof.
• The Etsy Effect: When a seller promotes their own content or product from a marketplace, it brings new consumers from the entire marketplace. This drives discovery and loyalty to the platform and creates brand equity.
• Influencers enable disintermediation of the social media superpowers: Many companies compete for attention on Instagram and Facebook, and this makes ads expensive and platform-dependent. Tap into the audiences of influencers. Experiment with newer less crowded platforms.
• New platforms: New platforms = new opportunities. Leverage (1) mega platform shifts (e.g. IoT, voice devices, blockchain, etc), and (2) breakout individual / social platforms (e.g. Zynga piggybacked on Facebook).
• Group purchasing: Users are incentivized to share deals with their networks to get discounts, while merchants benefit from streamlined supply chains and aggregated deliveries. (e.g. Pinduoduo, etc)
• Niche markets unlock massive markets: By building for niche, underserved communities, startups can create “wow” in a specific vertical and spur liquidity and organic growth like word of mouth. (e.g. Amazon started with books). Subreddits can be turned into a discrete products.
• Standing on the shoulder of giants: The same vein as leveraging breakout consumer companies. Benefit from a “codependent relationship”.
• First-order irrational, second-order rational (h/t Chris Paik): Disrupt a market by doing something that seems completely irrational but has some second-order result that is extremely beneficial to the company and creates an exceptional business model. (e.g. Robinhood free trading & monetization via payment through order flow)
• FOMO and the Velvet Rope: Leverage scarcity and hype (FOMO) around product launches. The invite system is a powerful use of FOMO as it implicitly leverages social proof. (e.g. Clubhouse, Pinterest, etc)

7 Conversion Tactics:

• A/B testing: One way can be to split a target audience into two groups, where one has the current version of the product and the other an updated version.
• Auctions: Leverage the human desire to compete for scarce goods and resources, and create a highly engaging experience by combining competition with the incentive for users to constantly observe the behavior of others in order to make buy/not buy decisions.
• Entertainment as conversion: Capture consumer attention by providing entertaining content. (e.g. live streaming with gamification or surprize)
• Community-driven conversion: Creating an engaged community can drive high conversion. (e.g. Peloton and Monthly; synchronous and asynchronous experiences with people who share similar interests.)
• Gamification: Leverage points, badges, leaderboards, meaningful stories/narratives, avatars, and teammates. (e.g. Pinduoduo - daily check in to reward points. Duolingo - experience points and streaks of lesson completion.)
• Gambling psychology: The unknown is always fascinating. (e.g. Twitter's feed refresh, Tinder's swipe, etc)
• Scarcity: A subset of FOMO. Many companies artificially engineer scarcity to create demand for products. (e.g. NBA Topshot - limited amount of unique digital assets, StockX - limited product drops, etc)

Growth - Referral (Virality)

Once you figure out the growth channel and user activation process, you should let users advocate your product and invite their friends to the platform. Referral or virality can't happen if you don't understand the psychology behind why people share. Humans are status-seeking monkeys, and we want to be valued, appreciated, trusted, respected, and understood. You need to somehow show the benefits of sharing your product and reduce the friction to sharing.

Why People Share: The Psychology Behind "Going Viral"

https://www.nfx.com/post/why-people-share/

By: James Currier (@JamesCurrier)

The foundation of viral growth is rooted in motivational psychology and language. Virality ≠ Network Effect, but thinking through how to make your product viral helps to give it network effects.

Baseline Viral Thinking:

• Pack Animal Psychology: as a pack animal, we’re constantly thinking about our status, how we’re perceived, where we fit in, etc.
• Reduce the Friction to Sharing: minimize the effort and thinking required to share.
• Make a Product Broken unless People Share: if a user can't get the utility that they want, they will look for ways to share.
• Make Language about The User, Not You: Transcend your own self-interest in favor of your users' own self-interest.

What People Consider Before Sharing = Benefit & Costs:

• How might sharing this benefit me (the sharer) or you (the audience/recipient) either via utility or via status/reputation?
• How much time and effort (friction) will I have to spend to share this?

8 Clusters of Motivation That Trigger Sharing

• Status: Status is scarce because it indicates the hierarchy of us in the pack. Access to something scarce or exclusive motivates people to share because they can get high status from the people they share it with.
• Identity Projection: “Tribalism” is a powerful human motivation. People want to show who they are and seek validation in that point of view. We share to (A) signal that we belong or (B) help us find our tribe.
• Being Helpful: We share useful things to be perceived as helpful and nurturing to our tribes. Language matters. If your language is clear, pithy, and compelling, it will 10x the word of mouth.
• Safety: Any perceived threat to safety can be a powerful reason why people share (e.g. Nextdoor, Citizen, Trulia's crime map, etc). Fear is embedded in the most primal part of our psychology.
• Order: People share it to help them bring other people into the same protocol of organization. People who organize their world by their personality are motivated to share tools to optimize and organize.
• Novelty: People seek novelty and curiosity. We are attracted by things that are new enough to not be stale, but not too new to be strange.
• Validation: People share things to be validated and boost their self-esteem. They want to know what people think of them, and they will share products that help them do that.
• Voyeurism: Two related motivations: vicarious enjoyment and schadenfreude. People share things to allow others to vicariously live through them or to unite with others in common judgment or disdain.

Lessons Learned – Viral Marketing

https://www.forentrepreneurs.com/lessons-learnt-viral-marketing/

By: David Skok (@BostonVC)

There are two key parameters that drive viral growth: (1) the Viral Coefficient (K), and (2) the Viral Cycle Time (ct). With these two parameters, you'll see how the population of customers changes over time. The most viral products are those that only work if they are shared (e.g. does your product work better by sharing?).

The Viral Coefficient (K) is the number of new customers that each existing customer is able to successfully convert. The Viral Coefficient K = (# of invitations) * (conversion rate %). The Viral Coefficient must be greater than 1 to have viral growth. Otherwise, you will not have true viral growth.

The Viral Cycle Time (ct) is the time that it takes for the invitation-to-invitation cycle to complete (e.g. a user sees your product, tests it out, invites friends, then a friend sees your product... ). Shorter is better! Customer growth is dramatically affected by a shorter cycle time. Understand the user flow and reduce the friction to share.

The Five Types of Virality

https://news.greylock.com/the-five-types-of-virality-8ba42051928d

By: Josh Elman (@joshelman)

The goal of all viral efforts is to insert (or “incept”) an idea of what a product can do into someone else’s head, and to get them so excited about it they want to try it and use it.

5 Types of Virality:

• Word-of-mouth virality: A product being so good that people can’t help telling their friends about it. Make sure your product is easy to find later. Is a name easy to remember and spell? Is it easy to describe? If you don’t have a pithy way to describe your product, your users won’t be able to either.
• Incentivized word-of-mouth virality: Similar to word-of-mouth, but with a little added incentive for people to refer their friends. (e.g. Dropbox storage, Uber refer bonus, etc)
• Demonstration virality: The nature of a product is simple and cool so that people are showing it off. (e.g. Instagram, Pinterest, Musica.ly, etc)
• Infectious virality: People get other people because it will make your product better for both of them. (e.g. Snapchat, Twitter, Nextdoor, etc). Invitations are the key to spreading. Don't be spammy. Being invited into a product that isn’t naturally social doesn’t really work.
• Outbreak virality: People are spreading because it's fun, popular, or cool by sharing them. (Pokémon Go, etc)

If your product is about creating content or having experiences that are easy to show off, focus on demonstration virality. If your product costs money and has value, focus on the incentivized word of mouth.

60 Ideas to Boost Your Growth

www.lennysnewsletter.com/p/turbo-boosts

By: Lenny Rachitsky (@lennysan) & Ali Abouelatta (@abouelatta_ali)

To get people’s attention, you need to do something special. Something remarkable.

7 types of strategies to boost your business/product:

• Viral Video: A video that tells your story, demos your product, or delights people so much that they can’t help but share it with their friends. (e.g. Dropbox, Twitter, mmhmm, etc)
• Mini-product (aka "drop"): Launch a non-core product offering that gets attention, which reflects attention toward your brand and/or core product. (e.g. Calm - do nothing for 2 min, Toucan - own the word, etc)
• Limited-time Offer: Running a promotion on your existing product, giving people a reason to pay attention and act. (e.g. Coinbase - Dodgecoin sweepstakes, Cash App - 99% off, etc)
• Influencers: Partner with an influencer to promote your product. (e.g. Reddit - Paul Graham, Spanx - Oprah, Atoms - Alexis Ohanian, etc)
• Co-marketing: Collaborate with another company to promote your products. (e.g. Red Bull x GoPro, Hulu x Uber Eats, etc)
• Offline Experience: Organize an in-person experience that gets people fired up about your product. (e.g. Snackpass - events with local college groups, Snapchat - spectacles vending machines, etc)
• Picking a Fight: Take a stand against a big company or competitor, which creates controversy and attention. (e.g. Hey - fight with Apple, Salesforce - fight with Siebel Systems, etc)

Growth - Retention & Engagement

In the end, everything is all about retention. Even if people are coming to your platform and inviting their friends, without a real value it is a leaky bucket. To increase user retention, your product needs to be sticky. To be sticky, users should be engaging with your product. Focus on the user's core action and virtuous loops of how a user's core action moves the flywheel forward. Remember? Growth is all about compound effects. What a user does should increase not only the user's value but also the other user's value.

Hierarchy of Engagement, Expanded

https://sarahtavel.medium.com/the-hierarchy-of-engagement-expanded-648329d60804

By: Sarah Tavel (@sarahtavel)

How do you maximize your chances of building an enduring $1B+ company? It comes down to maximizing engagement.

Tavel's Hierarchy of Engagement:

Level 1 - Growing Engaged Users: Focus on growing users completing the core action, the action that forms the foundation of your product and correlates with retention (e.g. Facebook - friending, Pinterest - pinning, Snapchat - snapping, YouTube - subscribing, etc). Other features support the core action (ladder of engagement).

Level 2 - Retaining Users: The product should get better the more it's used. Users have more to lose by leaving the product. Create accruing benefits and mounting losses as a user engages. Anonymity apps look good for Level 1 but fail for Level 2.

• Accruing Benefits: The more I use the product, the better it gets. (e.g. Pinterest - personalized feed and recommendation)
• Mounting Loss: The more I use the product, the more I'd have to lose if I left the product. (e.g. Pinterest - bookmarks, followers, expression, and extension of your identity)

Level 3 - Self-perpetuating (Virtuous Loops): Create virtuous loops as users engage. Virtuous loops are the flywheels that convert users' engagement into fuel to power your company forward (compound effect). The strongest one is a network effect. (e.g. more users pin ⇒ richer interest graph ⇒ better discovery)

The Ultimate Metrics:

• Cohorts show:
• Growth: Size of each cohort
• Engagement: Ratio of users performing the core action
• Retention: Cohort performance over time
• Cohort Performance is the clearest way to see a company's engagement.
• Number of weekly users completing the core action.
• Percentage of weekly active users completing the action.

Engagement Drives Stickiness Drives Retention Drives Growth

https://medium.com/sequoia-capital/engagement-drives-stickiness-drives-retention-drives-growth-3a6ac53a7a00

By: Sequoia Capital (@sequoia)

If a product truly adds value for you, you will engage with it more deeply. If it makes you happy, you visit it more frequently and become an active user.

Retention is simply about users returning to your product; stickiness is about them returning of their own volition. Stickiness helps reduce your dependency on tactics such as push notifications.

Fundamentally, if a user finds value in your product, they will return. The greatest growth lever is creating magical moments in which users recognize that value (e.g. Aha moment, etc). A great company focuses on sustainable growth through engagement, stickiness, and retention.

• Engagement Drives Stickiness: Not all daily active users (DAU) are equal. Some engage a lot, and some engage less. Measure “Lness”, the number of days visited per week. The number of sessions, a measure of engagement, can serve as an early predictor of stickiness.
• Engagement Drives Stickiness Drives Retention: The differences in stickiness manifest in retention. The more a user engages with a product, the more sticky it becomes, and the more likely they are to retain. Measure D1, D7, etc (retain on the Nth day after installing the app).
• Engagement Drives Stickiness Drives Retention Drives Growth: A decrease in DAU is an early indicator of a decrease in WAU and MAU. The fate of the user and platform differs drastically based on engagement, stickiness, and retention.

Octalysis: Complete Gamification Framework - Yu-kai Chou

https://yukaichou.com/gamification-examples/octalysis-complete-gamification-framework/

By: Yu-kai Chou (@yukaichou)

Gamification is a good way to attract new potential users and retain existing users by keeping them actively engaged with a product. But don't rely too much on gamification. You should always focus on the user's core action and value.

In essence, gamification is a human-focused design that optimizes people's feelings, motivations, and engagement. Some extremely successful products do very well with Social Influence, while others just utilize Scarcity. Think through the Octalysis for each step in the user journey for each user role.

Octalysis - 8 Core Drives of Gamification:

• Epic Meaning & Calling: a user believes that he/she is doing something greater than themselves or they were “chosen” to do something. (e.g. Wikipedia, open-source projects, etc)
• Development & Accomplishment: the internal drive of making progress, developing skills, and eventually overcoming challenges. A badge or trophy without a challenge is not meaningful. (e.g. points, badkges, leaderboards, etc)
• Empowerment of Creativity & Feedback: People want to be able to see the results of their creativity, receive feedback, and respond in turn. This can be Evergreen Mechanics, where no longer needs to add more content to keep attracting them. (e.g. Lego, painting, etc)
• Ownership & Possession: When people feel ownership, they innately want to make what they own better and own even more. The more effort we put, the more sense of ownership we feel. (e.g. collecting stamps, etc)
• Social Influence & Relatedness: social aspects that drive people (e.g. mentorship, acceptance, social responses, competition, and envy). When your friend has amazing skills or owns something extraordinary, you will be driven to reach the same level. Also, we want to be closer to people, places, or events that we can relate to.
• Scarcity & Impatience: the fact that people can’t get something right now motivates them to think about it all day long. (e.g. early days of Facebook, Clubhouse, etc)
• Unpredictability & Curiosity: The unknown is fascinating and this is the primary factor behind gambling addiction. Many have misunderstood this as the driver behind points, badges, and leaderboard mechanics.
• Loss & Avoidance: People want to avoid something negative happening. (e.g. losing previous work, losing the opportunity, etc)

Left Brain vs Right Brain Core Drives

• Right Brain Core Drives: more related to creativity, self-expression, and social aspects. Intrinsic Motivators = the activity itself is rewarding on its own. You don't need a goal or reward.
• Left Brain Core Drives: more associated with logic, calculations, and ownership. Extrinsic Motivators = the goal is to obtain something, whether it's a goal, good, or anything.

White Hat vs Black Hat Gamification

• White Hat Gamification: utilize the top Core Drives. Does it let you express your creativity, make you feel successful through skill mastery, or give you a higher sense of meaning?
• Black Hat Gamification: utilize the bottom Core Drives. Are you doing something because of the unknown or the fear of losing something?

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Hope this article helps you understand the whole picture of product growth. If you have any questions, please DM me on Twitter or LinkedIn.

Remember what you should do next?

Don’t just read this article or the attached product management articles. Instead, highlight where you resonate with and leave your thoughts and learnings with Glasp so that you can look back at them anytime and we all can get smarter at the same time ;)

See you next time,

Kazuki

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