If You're Not Surprised, You Growth Bets Aren't Bold Enough #0048

"Bold bets in marketing are like going skydiving without checking if the parachute is there. It’s either going to be the thrill of your life or... well, let’s just not think about it."

01/02/2024

If You’re Not Surprised, You Growth Bets Aren't Bold Enough

Matt Lerner, Founder SYSTM Brands, guides founders on effectively running growth sprints to identify and leverage major growth opportunities rapidly: The Secret to Running Effective Growth Sprints — Follow This Process to Learn Faster”

• Embracing a High-Speed Experimentation Culture:

  • "[…] experiment like crazy. Every team. Ten tests per week — per employee...Regardless of whether that number is knowable, in the early days of any startup, you need to learn a bunch of things the hard way. Why not do that as fast as humanly possible?"

• Identifying Big Growth Levers:

  • "Great startups don’t waste time on small stuff. Every early-stage company works hard, but great startups prioritize incredibly well...For startups, finding big growth levers is a matter of life or death. Most startups never find them, and they die."

• Focusing on the Right Experiments:

  • "Your big levers are seldom obvious. Generic tactics like paid ads, SEO and referral programs will only get you so far. Growth levers are unique to each startup’s specific, unexpected learnings — so every sound hypothesis for a growth experiment must start with a customer insight."

• Selecting and Prioritizing Experiments:

  • "Run as many good experiments as you can with your resources...The more data you have, the easier this decision will be."

• If your not surprised, you are not betting bold enough:

  • "If the experiment works, great!...But most of your experiments will fail — or at least surprise you. (If they don’t, you’re not being bold enough.)"

How To Make Free Trials, Coupons and Referral Programs Work

Andrew Chen, General Partner at Andreessen Horowitz aims to highlight the pitfalls of using incentive programs like referrals, free trials, and coupons in attracting customers in “Why the worst users come from referral programs, free trials, coupons, and gamification”

• Incentive Programs Attract Lower Quality Users Due to Negative Selection:

  • "The people you attract with referral programs, free trials, coupons, and gamification — folks who are 'incentivized' as a broad umbrella category — are usually MUCH WORSE than organic ones. Worse LTVs, worse conversion, less engaged, and so on."

  • "The problem is, all of these forms of incentives usually end up attracting a different type of marginal user that wouldn’t have signed up earlier. They are less qualified, more discount seeking, and behave differently. There is negative selection."

• Why This Matters:

  • "First, it tells you that if you take a game or an app that does not have inherent engagement and retention, it is not enough to add gaming mechanics."

  • Second, all of these dynamics create sort of a related dynamic to the Law of Shitty Clickthroughs. Not only do individual marketing channels degrade, but many of the new channels you add over time — because they are incentivized — perform worse than the initial channels. Thus the entire machine gets slower and harder as you go.

• Referral Programs on the Driver Side at Uber Showed Positive Selection:

  • "Funny enough the referral program on the driver side attracted very positively selected users… the drivers were highly money motivated. Because they were so motivated and signed up for larger referral bounties, they actually performed better after sign up. Even though referrals was 15% of sign-up they were well over 30% of first trips.”

• Importance of Understanding What You’re Selecting For:

  • "Incentives are a form of selection and you need to make sure you know what you’re selecting for."

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