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How To Utilize Growth Loops To Scale Your Company
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How To Utilize Growth Loops To Scale Your Company

Illustrator: Adan Augusto
growth loops

Customer acquisition and retention are essential for businesses looking to secure steady growth. Ideally, you need to continually reduce the cost of customer acquisition while putting systems in place to ensure you retain those customers. It’s challenging to achieve this, but it’s possible with the right approach.

To develop your business quickly, you must tap into the power of growth loops. Slack, Zoom, Pinterest, LinkedIn, SurveyMonkey, and more have achieved compounding growth using growth loops. Growth loops are replacing funnels, resulting in a fundamental change in how SaaS products expand.

This article will discuss using growth loops, a growth hacking strategy to help scale your business. Read on to discover everything you ought to know about growth loops and how to implement strategies that can work for you. 

What Is A Growth Loop?

In engineering terminology, a loop is a process in which the output is fed back into the input. In marketing, a growth loop is a self-reinforcing system that builds positive momentum over time. It takes a growth indicator, processes it, outputs more of it, and then feeds the result back into the loop cycle as input. The growth indicator accumulates and scales your marketing efforts rapidly with each cycle.

It occurs whenever you employ one user to obtain another. It might be based on the activities they engage in, their identity, social proof, or even the things they do within the app itself.

Growth loops are used by many of the fastest-growing sites. LinkedIn accessing your email account when you sign up to notify your friends about the platform is an example of a growth loop. 

growth loops linkedin

Growth loops require minimal external support once you’ve hit a critical momentum. In the case of LinkedIn, for example, I’m sure thousands of people every day receive notifications as new users join the platform.

Growth loops can help you acquire new users, get more returning users, and improve your marketing efforts. 

Why Do You Need Growth Loops in Your Business?

Growth loops are considered to be the end of traditional funnels

Your marketing funnel used to be centered around mapping a customer journey and getting as many people as possible to view your content and move them down the funnel. The conversion comes to an end when the customer journey stops.

Growth loops challenge this concept. They are about using systems to repeat growth. Rather than asking your marketing or user acquisition team to improve user acquisition channels, growth loops have product and acquisition working together to produce a scalable product. 

Also, instead of spending $1,000 on a sponsored ad and gaining two consumers, then spending $500 on each customer retention, you just invest $1,000 for an endless growth cycle that includes acquisition and retention.

In other words, growth loops will help your company expand more organically, maximizing marketing costs while lowering client acquisition costs. It can potentially change your entire business, mostly for the better. 

For example, in Pinterest's growth loop, the user finds free content via search engines and then signs up for the platform. When a piece of content is shared or repinned, it is packaged for search engines and appears as high-quality content that a new user can discover. And the cycle continues.

growth loop pinterest

Growth loops enable you to put resources in long-term sustainable systems that continue to expand on their own. They also help organize your workers and teams around a single goal, aligning and optimizing said growth loops.

What Are The Advantages Of Using Growth Loops?

Growth loops have aided countless businesses in expanding by making the process of acquiring and retaining clients easier. 

They are advantageous because they bring teams together to work toward common goals, provide sustainably, compounding growth, and are unique to your product and organization, making them difficult to replicate.

Growth loops integrate product, channel, and monetization approaches that are unique to your business, making it more difficult for competitors to duplicate. In contrast to traditional marketing, where product and acquisition strategies work separately, growth loops consider the complete metrics ecosystem by examining the interplay between acquisition, engagement, and monetization indicators.

Also, the key advantages of generating growth loops are cost-effective, and they function via trust. According to a Nielsen poll, 90% of respondents trust other people's recommendations more than messages directly from businesses. 

Growth loops aim to improve this process and make it as simple and accessible as feasible. Essentially, converting new clientele into dependable sales representatives, since growth loops are based on the idea that a satisfied consumer will gain more value from a product.

Uber growth loops, for example, allowed the company to attract additional drivers to its network to satisfy rising demand while maintaining cheap pricing. As long as Uber costs remain low, consumers will substitute Uber for taxis, public transportation, and personal transportation, increasing demand. Additionally, as the demand for rides grows, Uber can make each driver more productive by reducing waiting times between rides. At the same time, Uber can lower prices since, even with cheaper fares, the improved efficiency maintains the driver's compensation constant. Because of these growth loops, the Uber platform is now available in 69 countries and 10,000 cities.

yber growth loop

So, growth loops assist you in strategizing how to reinvest the output of one cycle as an input for the following cycle at a very cheap cost. Furthermore, the retention rate will be better since growth loops depend on loyal consumers who share, promote, and interact with your business.

Different Types of Growth Loops Depending on Their Goals 

There are multiple growth loops for different value creations, such as new users, returning users, etc. Brands across the world rely on multiple growth loops to achieve relevant KPIs. 

However, creating a growth loop is a time-consuming iterative process that might take months or even years. Also, even if you generate expansion, this will not assure the long-term sustainability of your loop. So, your teams must consider their product, sometimes rethinking basic features and changing them to make them more actionable for the user.

In most cases, there are two types of growth loops based on objectives: acquisition loops and engagement loops. The two types are inextricably linked. 

Customers go from the acquisition cycle to the engagement loop. As your customer engagement improves, it gets simpler to encourage them to re-enter the acquisition cycle and refer even more friends. Let’s look at each of those one-by-one.

Acquisition Growth Loops

These growth loops encourage users to bring in new users and make it as easy as possible for them to do the same.

Instead of constantly investing more resources into the top of the funnel to improve output at the bottom, the product is built to expand as more users convert. It does not require additional costs each time you want to increase brand recognition, making it more cost-effective. The more users you have, the more people you'll attract.  Here’s how an acquisition loop works:

  1. A new user signs up to your platform.
  2. They start using the product.
  3. The user refers the customer to friends.
  4. New users discover the product.

There are several types of acquisition loops. It might be a loop of word-of-mouth acquisition. You build a great product, offer it to your target audience, and they love it so much that they tell their friends about it. Referral programs can also be considered an acquisition loop.

For instance, at Remitly, a leading money transfer apps, users are offered £10 for every new referral they generate. The person making the referral gets a £10 credit, and the person who joins the platform gets £10.

  • The input here is the existing user.
  • A £20 incentive is the method.
  • The output is the new user. 

An acquisition growth loop utilizes your existing customer base to promote your product or service to a new audience. There are several types of acquisition loops that might exist in a business. Viral loops, user-generated content loops, paid loops, and sales loops are the most popular acquisition loops.

TripAdvisor, for example, utilizes a User-Generated Content loop for customer acquisition and retention. The way this content loop works is straightforward. User-Generated Content allows TripAdvisor to appear for more search terms. That increases brand recognition, bringing more visitors to the site and creating more platform users. People who found the reviews provided through TripAdvisor are likely to return to the platform. A portion of the people who come back will leave a review after a trip.

Therefore, it’s good to invest time in maintaining your customer database. The older your data is, the more likely it is to be inaccurate, making it useless for growth loops to work. That’s precisely why you need to conduct a CRM data cleanup frequently.

To succeed in these kinds of loops, you'll also need a solid understanding of who uses your product, how they use it, and how you can leverage all of it in a way that's unique to the company.

Engagement Growth Loops

An engagement loop is an experience that helps a customer to engage more with your product. It aids customer retention and reduces churn. The engagement loop helps bring back visitors to the site. Rather than acquiring new users as in the acquisition loops, the goal here is to engage current users to gain their trust and loyalty. 

An engagement loop may look like this:

  • An unsure user takes action and uses the product.
  • The product performs well and gives a positive experience to the user.
  • The user's trust in the product improves.
  • The user interacts with, learns about, and uses the product.
  • The user creates positive feedback and becomes more engaged with the product.

To establish this, you will need to create retention triggers and make sure your consumers keep experiencing the core value of your product. Once you understand how and why consumers are already interacting with your product, you may consider alternative approaches to push this activity more to other segments and encourage users to engage more.

YouTube, for instance, uses an engagement loop for content viewers. It engages its users by showing them recommended videos based on their watchlist and browsing patterns. Additionally, the platform keeps you engaged when you subscribe to a new channel by sending a notification whenever a new video is published. 

engagement growth loop

Platforms like Pinterest and Twitter also use engagement loops to reach new audiences. For example, during the onboarding process for Twitter, you are asked to select topics you are interested in and follow certain people. 

Engagement loops are most effective when the consumer develops a habit that compels them to utilize the product repeatedly. So, making people more engaged with a platform increases the chance that they will keep using the tool. 

You must consider the value of the content in your product and the value of the original content discovery. That is where you should concentrate your efforts — assisting users in creating great content and making content discovery memorable.

Bottom Line

Experimenting, measuring, and optimizing your marketing strategies should be a never-ending loop. There are constantly new channels to test and improve, and new creative, commercials, offers, and projects to create.

In an ideal scenario, growth loops are organically embedded in your product design from the start, just as you would have considered a product, market, channel, and model fit. If used correctly, you can grow your current customer base without breaking the bank. You’d be missing out if you don’t use growth loops to your advantage.

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