The top-down funnel has long been a standard for measuring and managing business growth. It has served companies well for decades, providing an easy-to-follow model that marketers can use to usher users through the conversion process. However, as technology evolves and makes it possible to gather and analyze increasing amounts of data, the funnel is no longer the best way to approach growth. Rather, product marketers should consider switching to a system of growth loops.
Whereas the traditional funnel only operates in one direction—going from top to bottom through various stages—growth loops act as continuous cycles with three to four phases. This shift from a top-down approach to a complete circle means that the output of one phase becomes part of the input of the next. It is a simple structure with a wide variety of applications, offering a more holistic, dynamic view of business growth than the traditional funnel.
Growth loops lead to a number of critical benefits. One of the biggest advantages is that growth loops grow themselves. A funnel requires more resources to be put in at the acquisition stage in order to expand, but a loop takes into account how conversions drive exponential growth. If, for example, a user recommends a business’s product to a friend, then that becomes part of the loop’s data. With a traditional funnel, this kind of activity is lost.
What does this look like in practice? Consider GoFundMe’s public relations growth loop. First, press outlets pick up on notable fundraisers. Then, users are driven to the company’s website from those stories. From there, some users turn into new donors or create their own campaigns. The input, action, and output form a loop that compounds growth; GoFundMe doesn’t need to add more resources to further its marketing efforts.
What’s more, growth loops do away with strategy silos. With funnels, a company’s product strategy ends up being viewed as separate from its acquisition strategy, and both tend to be separated from monetization. Growth loops better demonstrate how these strategies affect one another, helping companies identify where exactly growth is coming from. Removing silos also makes it easier for different departments to work together and develop more effective and efficient big-picture strategies.
An enduring marketing strategy
The dynamic nature of growth loops makes them difficult to copy. Every part must work together seamlessly—the product, channel, pricing model, market, and message—which means each company’s growth loop looks different. Competitors might be able to copy a few elements, but they can’t recreate the loop in its entirety. This, too, is different from funnels, which tend to have a uniformity that makes them easy for competitors to duplicate.
For instance, Netflix’s funnel has been easily duplicated by competitors such as Disney+ and Hulu. These streaming services use social media to garner attention for their shows, draw users in with free trials, then make it easy for subscriptions to continue. On the other hand, YouTube’s growth loop isn’t as replicable. New and returning users visit the platform to watch content, then some users post content for YouTube to catalog. Once videos are added to the platform, they become searchable for other potential users.
Product marketers who develop effective growth loops benefit from increased effectiveness. New tactics can be easily stolen, requiring marketers to refresh their funnels regularly. But growth loops are company specific. Instead of prioritizing invention, marketers who utilize growth loops can focus on innovation.
4 steps for creating a successful growth loop
There is no question that the funnel has its place, but ideally, that place is within the larger scope of growth loops. For product marketers ready to take their growth to the next level, this framework will help them get there. However, it is important to understand what goes into building an effective growth loop to extract value from this modern model. Here are four steps to get started:
1. Get to know the current users.
Before you can grow your user base, you first need to understand who your current audience is. Why does this audience use a specific product? What motivates them? What do they find most valuable about it? By getting into the mindset of how existing users operate, you can more accurately determine what turns prospects into actual customers.
2. Identify what triggers a target prospect.
In every transaction, there is a moment where someone goes from a potential user to an actual user. By figuring out what triggers those moments, you can use them as touchpoints in their growth loops.
When identifying these crucial incentives, it is vital to get as close as possible to when that moment occurs within the process. The more accurately you can identify these points, the more effective your growth loop can be.
3. Track user behavior post-trigger.
Although the initial moment that jumpstarted a user’s engagement is important, it is not the only part of the process that impacts growth. A successful loop should track and analyze user actions in order to determine how you can make the experience better. A more pleasant, streamlined experience can create loyal customers who are more likely to spread the word about your product.
4. Look at the results.
What is the ultimate impact of a user’s actions? Is there any incentive to make someone a return customer? Did a user’s behavior inspire others to come on board? Looking at the output of user actions is a key step in a successful growth loop. This information feeds back into the beginning of the loop and helps it evolve.
Once these steps have been completed, you should determine which metrics to track at every stage of the loop. From there, each cycle can provide new insights and continue to compound growth at a minimal cost.
Approaching marketing differently
When utilizing growth loops, marketers realize that product, acquisition, and monetization work together in a system. Typically, the product team works independently of the marketing team. Even if the product is great, it could still fail because the channels determine the rules.
But if both teams work together, they can stop simply “seeing what sticks.” Product teams can mold their creations for the channels, and marketers can start thinking about what they can do to reinvest existing efforts. This prompts everyone to work toward the same goal.
The growth loop is the right solution for modern product marketers looking to improve the traditional funnel strategy, reduce silos, and increase effectiveness. Once the loop is created, it can start helping products grow right away.