If you’re involved in marketing you are certainly aware of sales funnels. In stores, online, for products or services; the sales funnel is thé standard strategy for customer conversion. But this old marketing method is definitely showing its age, the growth loop seems better suited to successful business growth. Instead of a linear approach to conversion there are looping patterns, these allow companies to build on past success and grow. Let’s explore the concept of growth loops and how they compare to the reigning champion ‘the sales funnel’.
What is a growth loop?
A growth loop is a closed system where the sum of all input creates an output that can be used as input for a new cycle. This loop can be repeated for increasingly better results based on the goals that are defined beforehand. Here’s an example of a growth loop for a social media service:
- A user visits a webpage or opens an app.
- This person signs up for an account.
- The person uses the service and adds content.
- This content is spread across the network or through search engines.
- This inspires other users to sign up, share content or create new content.
This loop applies specifically to social media platforms that thrive on new users and contributors. These users can be targeted by advertisers, this implies that more signups mean greater revenue. The growth loop will increase in volume which can lead to a rapid acceleration of results.
The use of loops can also apply to other goals such as upselling to existing customers. Instead of entering a new sales funnel the prior success is reinvested into a loop. Take for instance a subscription to a free service with optional paid plans that offer more features. Instead of creating a new funnel the user is placed in a loop to increase the likelihood of upgrading.
How do growth loops compare to sales funnels?
During the introduction I described the standard sales funnel as the ‘reigning champion’. Although this approach is still widely used in companies worldwide, many entrepreneurs and marketing professionals realize that the rigid structure of a linear funnel isn’t sustainable in the long run. Growth loops are not replacing the old method overnight, you can see loops being implemented in linear strategies. It works a bit like a board game with a ‘go back to square X’ approach. But this time the path will be slightly changed, with some obstacles removed and improvements implemented.
The most obvious issue with a sales funnel is the lack of connection to the greater strategy. It’s difficult to grow a company based on a series of dead ends. You could advertise with the intent of selling 1000 units very quickly or you could advertise with the intent of selling 100 units + 10% every month. So instead of focusing on a single large event you set a course for a growing sales perspective. Keep in mind that +10% is a cumulative goal, the actual amount will keep rising just like interest on an investment.
This is a simplified view on a growth loop. By using output as input the new cycle will grow larger, and larger and larger.
How to build a growth loop that … grows!
To make growth possible you need to build your strategy from the ground up. In the previous example I compared one large sale to multiple smaller sales with increasing revenue. The marketing strategy for both scenarios will be vastly different.
Let’s build a growth loop together that has the potential to expand with these five building blocks:
1. You want to build a community, this means you need content that will attract new users to join. These new users will in return provide new content for both existing and new users. Not only will the community grow, the loyalty of users will also increase.
2. Inspire users to share the content on your platform with others to expand your reach. You can do this with obvious and less obvious triggers. If you want to activate existing users you will have to offer them a reason to do so. You can appeal to emotional and subconscious responses by implementing various psychological triggers.
3. Make sure you track all actions that are possible (and legal!) to track and compartmentalize them where applicable. You want to optimize your growth loops which means analyzing data and making adjustments along the way. Each loop builds upon the success of the previous loop and adds new value.
4. Invite and/or nudge your audience to share information about your services or platform. Don’t sit and wait until your users invite others to the party, provide them with guidance and advice to lower the threshold. Utilizing your CRM expertise in a growth loop can increase the growth potential significantly.
5. Collect and analyze performance at every step. Make sure your existing users stay informed, invite them to share and participate and see what the conversion rate in each step is. If conversion is lacking, the loop can’t grow and will eventually start producing diminishing returns. Make sure every step in the process is closely monitored and optimized if it underperforms.
Of course you will profit from custom blocks in your strategy, I’d love to take a look at the potential of growth loops in your organization with you.
Get rid of internal competition
One major takeaway that I want to emphasize is how growth loops require a collaborative effort. In a standard sales funnel every department will have unique goals that don’t always match. For instance; the marketing department is tasked with acquiring 100,000 extra visitors to a website. The next step in the funnel is a conversion, let’s say leaving an email address. It doesn’t matter where those 100,000 people come from and what they’re interested in, just get the target and celebrate. If only 1,000 visitors actually provide their email address the yield is pretty low. Never mind the next step, we all know how a funnel is shaped.
In a growth loop the various contributors and departments work together towards a shared goal. There’s no internal competition but a collaborative environment. Otherwise, the participants will just get their subpar results thrown back in their face at the looping point. If you want to create a healthy business with growth potential, collaboration, and insight are of vital concern.
Are you ready for a roller coaster ride? Buckle up!
Using growth loops in combination with funnels will expand a linear process to a compound strategy. This is a long term process that requires various iterations and room for experimentation in both your strategy and in the product or service itself. With a reliable tech stack you can track all data without clutter.
So, what do you think? Are standard sales funnels outdated and will growth funnels benefit your business? Let me know about your current strategies and let’s find out how we can improve your results.