Daniel Wellington is a famous brand that sells watches and changeable bracelets. Nasty Gal is the fashion brand that started by selling vintage clothes and now has its own product lines and expect from being in the fashion industry, these 2 brands have another thing in common:
They both are digital native brands that achieved exponential growth in a short period of time.
They managed to grow and go from a simple e-commerce website or an eBay store to multi-million dollar brands by using a simple method and it consists of only one word "Growth hacking" (oh, shoot, it's 2 words, you get me though).
Except from being a buzz-expression, growth hacking is the thing every company is looking to implement, from tech startups like Bigblue to e-commerce websites like Daniel Wellington or multi-billion dollar empires like Walmart.
In this article, we’ll (make your wish come true) explore what is growth hacking, how these companies place growth hacking in the heart of their strategies and how it helped them (and will help you) take their e-commerce businesses to a whole new level.
Growth hacking is a set of strategies (or small “hacks”) focused on driving fast growth with small budgets. These small hacks consist of using innovative techniques to dramatically increase your KPIs (traffic, conversion rates, revenue, etc.) and thus grow your e-commerce store as quickly as possible.
In contrast to what many people think, growth hacking isn’t only about marketing. It is about using clever, cheap and sometimes technical methods while making rapid experimentation across different channels. It is also (and mainly) a data-driven process in which measurement, testing, and optimization are at the core of its foundations.
"Whereas marketing was once brand based, with growth hacking it becomes metric and ROI driven" - Ryan Holiday
Growth hacking combines data analytics, marketing, and product development. The picture below explains it perfectly:
Now in order to understand it better, let’s go back to the beginning.
The expression “growth hacker” was first used by Sean Ellis in 2010. By that time, he had helped many companies achieve incredible growth by setting up innovative processes and techniques. As he was looking for his replacement, he couldn’t find a good fit to take in charge the growth of these companies.
The problem was that his job post was for marketers, but a traditional marketer does only focus on the lead acquisition phase of the funnel while a growth hacker focuses on the whole customer journey. Once they have enough leads to start running experiments, a growth hacker will run tests and experiments in order to increase conversions, ease the customer experience and thus drive growth for the company.
Since his job post didn’t work that well, he had to experiment (hacking everywhere) another way, and so he published his blog post: Find a Growth Hacker for your Startup, where he was looking for a Growth Hacker and that’s how the whole concept was born.
One of the most important parts of the Growth Hacking process is the Pirate Metrics framework, also known as the AARRR framework (because you know, pirates go "Aarrrr"). AARRR stands for Acquisition, Activation, Retention, Referral, and Revenue. This tool is crucial when it comes to understanding your customers’ journey and optimizing your funnel to drive growth for your website or startup.
Attracting and gaining new customers is important for any e-commerce, but this is not an easy task as there are so many brands out there competing to acquire these customers.
In this stage, you’ll be experimenting with different traction channels and different types of messages to see which ones fit your brand and business model and which one resonates best to your customers.
There are different categories of channels: viral/word of mouth such as social media or embeddable widgets, organic like SEO or content marketing, and paid e.g online ads or retargeting.
You can pre-select some of them and then collect data and analyze it (yes, data analysis everywhere), to then be able to select, optimize and focus your resources on the best traction channels for your e-commerce. If you wanna know more about the channels you can use to build a customer base, and how to pick the right ones for your business I recommend you to read a good book called: Traction: How Any Startup Can Achieve Explosive Customer Growth
The perfect example to illustrate this is the strategy that Daniel Wellington’s CEO, Filip Tysander took in his early days. Instead of reaching superstars to sponsor his beautiful watches by paying them a huge amount of money (that he obviously didn’t have), he targeted many micro influencers with a small audience on Instagram by offering them watches in exchange of a picture of them wearing the watch on their account. This resulted in the brand growing disruptively and in the launch of what we know now as Influencer marketing.
Now that you’ve attracted all of these potential customers to your website, you’ll need to activate them and ensure that they buy and use your products. Activation is about the first experience your potential customer has with your product. It is about how much time does the customers spend on your website and how many pages did he visit.
During this step, you’ll need to ensure the visitor interacts with you by signing up or subscribing to your newsletter, etc.
The key here is to identify each point in your customers’ journey and each step they have to take in order to get to the activation. For an e-commerce store, the steps can simply be: find items they like, add them to the carts, sign up with an account, add information and buy the product. A simple frustrating detail in one of these steps can lead to your customer losing interest and leaving your website.
Once you’ve done this, you’ll be able to study the data, analyze conversions and understand your customers’ behaviors, and based on this you can experiment with different hacks to optimize this experience until the activation and thus drive growth.
To illustrate, we’ll take a closer look at how Sophia Amuroso, who founded Nasty Gal as a vintage fashion eBay store. She used a methodical and data-driven approach by tracking popular search terms to predict upcoming trends in the clothing industry. Based on her data analytics, she also noticed that clothes on humans sold better clothes on mannequins or on the back of a chair. When a product didn’t sell enough and received bad comments, she would change the model to see how conversions evolved.
This experimental and data-driven approach helped her optimize her activation processes and led her to grow from an eBay store to a 100 million dollar brand in just 5 years.
Retaining customers has become a priority since acquiring new customers is much more expensive than keeping them, especially in today’s world, where advertising costs have increased drastically due to the fierce competition for online exposure.
Retaining customers means they not only buy once from your website but multiple times. Retention is a crucial factor to achieve rapid growth. I mean what’s the point of attracting new customers if you end up losing them right after their first purchase?
During this stage, you’ll need to stay in touch with your customers. Some great way to do it is email automation. You can A/B test which type of content they best respond to and which type of messages incentivize your customers. You can use, Crazy Egg which is a website optimization software that offers A/B testing, heat mapping, and usability testing tools. It helps you build A/B tests without any coding experience. It also allows you to send more traffic to the optimal variant of your test and track to track conversion with a very intuitive tool. Based on your data analytics results, you’ll be able to tailor the best offers to drive growth.
You can also add new features or offers to your website. The perfect example to illustrate this is Amazon’s subscription program: Amazon Prime.
The number of amazon prime members in the US as of December 2018 is 101million and they represent 62% of the total Amazon customers in US. The average amount they spent on Amazon in 2018 is $1400. Amazon achieved these amazing numbers mainly by offering the two-day free shipping on thousands of items but also by adding other features such as their video and music streaming services. These features helped Amazon turn occasional customers to subscribers who are now using their products on a daily basis. This basically led them to retain 62% of their customers which is phenomenal.
Referral is by far the best way to drive growth for your e-commerce. I mean why would you spend a large amount of money on advertising when customers who trust you can spread the word about your products and brand.
During this phase, you’ll need to focus all your efforts into turning your active users into brand advocates. We’re talking here about the core of growth hacking: Virality.
You can use different ways to grow your referrals: coupons, games, giveaways, etc.
The best example of referral and maybe the most famous in the growth hacking world is the example of Dropbox where Sean Ellis was responsible for the company’s growth back in 2010. After analyzing their customers' data, he found out that one-third of their customers came from referrals, which means that people loved the product and were talking about it. He got inspired by the Paypal referral program in which the company offered $10 to each user who invites his friends to use their services but Dropbox couldn’t afford such an investment, instead, they opted for offering 250 free megabytes of storage (which was something they could afford) in exchange for referrals. This resulted in a growth of 4000% in a period of 14 months.
The end goal from acquiring, activating, retaining customers and referring your products to new ones is to earn revenue and make a profit. So during this phase, you’ll need to focus on increasing the Lifetime Value of your customers (LTV) and decreasing your Customer Acquisition Costs (CAC).
Customer Lifetime Value refers to the average revenue you’ll generate from a single customer over time while Customer Acquisition Costs refers to the amount you spend on acquiring this customer.
In order to ensure growth, you’ll need to keep a positive LTV to CAC ratio.
Now, let’s imagine you’re an e-commerce owner and you want to grow your lifetime value.
After analyzing your data, you find out your average order value (the average amount spent by your customers for each order) is about $46. In order to increase this amount, you can use a little hack by offering free shipping for orders above $50. This will lead people to add an item to their cart so that they can benefit from the free shipping and so will drive an increase in your average order value and thus in your customers’ Life Time Value.
In order to decrease CAC, you can opt for automating your processes. Automation is a great time, effort and cost saver. Spending less time doing a task that can be done automatically lets you focus your efforts and resources on other aspects of your business.
Finally, growth hacking is much more than just a set of techniques, it is a mindset, that once implemented into your company’s culture, will help you boost your sales and drive exponential growth. Focusing on each step of your customers’ journey and not just on acquisition will help you better understand your customers' behavior and design the best solutions to optimize their experience and so drive exponential growth for your e-commerce.