Sean Ellis is an entrepreneur, angel investor, and startup advisor. He is the founder of GrowthHackers and was previously the founder and CEO of Qualaroo, an automated user research tool. He attended the University of California, Davis, and graduated in 1994.
Sean actually coined the term “Growth Hacker” and he has led marketing at multiple companies that have had an IPO. In this episode, we talk about his new company, Qualaroo, and we find out what he’s learned about growth through all of his experiences.
TOPIC SEAN COVERS
- What he learned about growth through all of his experiences
- His new company, Qualaroo, and we find out what he’s learned about growth through all of his experience
- He has led marketing at multiple companies that have had an IPO
- His advice about how to know if in the right direction, a product market fit before there’s even a product or MVP
- What has he found to get people to that experience quicker
- What is different about this last stage scaling growth as opposed to the transition of growth
- His best advice to any startup is to try to grow
- And a whole lot more
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READ THE TRANSCRIPTION
Bronson: Welcome to another episode of Growth Hacker TV. I’m Bronson Taylor and today I have Shawn Ellis with us. Shawn, thank you so much for coming on the program.
Sean: Thanks, Bronson. It’s good to finally get on here.
Bronson: I know we’ve been we’ve been trying to get you on for quite some time now and for good reason. You’re actually the individual that coined the term growth hacker. So if it wasn’t for you, this product would be named something totally different. But let me give a little intro about you. For the people that maybe aren’t as familiar with you, you’ve led marketing at two companies that had an IPO, logged me in an uproar. You were the first marketer at Dropbox, Look Out Zombie, and you’ve had important growth roles at many other companies, and now you’re the founder of Kuala Roo. Does that all sound about right?
Sean: Yeah, that’s about right.
Bronson: Yeah. So you seem to be pretty busy.
Sean: Yeah, definitely. Especially in the founder role now. It’s I think it’s it’s my busiest time yet, but it’s it’s a good time.
Bronson: Yeah. I was going to ask you about that later. So being a founder is more busy than leading growth in all those other companies.
Sean: Yeah, because it’s, it’s, you know, I mean, you wear a lot of hats as a founder and so I don’t have as much time to focus on growth. And and, you know, growth is the most fun. But, you know. But ultimately, you got to do it all.
Bronson: Yeah. No, absolutely. Well, we’ll talk about quality towards the end a little bit. Before we get to that, I want to talk about kind of the knowledge you’ve acquired leading up to this newest venture because you had so much exposure to so many different companies and your exposure was really focused on growth. You were able to come and really focus on that piece of the puzzle. So you’ve kind of developed a philosophy, a framework, a way of thinking about it that’s more developed than most people, I think. So I really want to try and get inside your mind a little bit. But first I heard you say something in a presentation once you said that you think the first six months of a company matters for growth the most. Why is that? Talk about that a little bit.
Sean: Sure. Yeah. So I don’t know that it matters the most for growth in in all companies. It was really an observation that I’d made on the two companies where I had run marketing for about five years each, two companies that have gone public, the first first two marketing roles I had, and it was really in the second one where I where I look back and said, you know what? What what was the most important stage in the company kind of getting to this point where we had just filed to go public at that point? And and it was really when I look back at those companies, it was really the first six months was really the first six months of once the product was released. And in both cases, we got pretty lucky that that both companies, both products were pretty close to product market fit right out of the gate. So so I probably would refine it saying the first six months after product market fit are the most important for growth. But in my situation in those two companies, it was really those first 2/1 six months of of when I was when I was consciously thinking about growth in those companies.
Bronson: Yeah. Thanks for clarifying that. Let’s actually jump into the product market fit a little bit because that’s something you’ve really brought to the conversation with a lot of emphasis. And I have people in the show often they talk about, oh, we’re pre product market fit, we’re post product market fit. And I know that you got some of those thoughts from, I think, Mark Andresen, but you’re really the one to refine it and really go further with it. But let’s back up one step before that and let’s talk about the startup marketing pyramid, because this pyramid seems to be your philosophy of how you kind of arrange all the stuff you’ve learned. Is that fair enough, you think?
Sean: Yeah, I think it’s just a it’s a way of kind of looking at some of the milestones that that, you know, instead of like that question of the first six months, it it’s much more milestone oriented. So it’s it may take a company two years to get to a product market fit after their initial release. And if it takes two years, then you don’t want to kind of think of a time base, you want to think of it a bit more milestone based. So that’s that’s the pyramid is all about getting to product market fit is at the base of the pyramid. Next level is is a bunch of things that you’re doing preparing for growth, transitioning to growth. And then and then finally, it’s, it’s the ongoing execution of driving growth. But a lot of that formula takes place in the middle stage. And then you’re not really in a position to think about growth until you have product market fit.
Bronson: Yeah, no, that’s great. Well, let’s start kind of base a little bit with product market fit define for us product market fit. What is it in your in your terminology?
Sean: So it is something that’s always been pretty abstract. So I think if you look at anybody who’s spent a lot of time around startups and driving success and startups, they, they all have different ways of saying product market fit more and more. I think the terminology is, is focusing on product market set. But Sequoia talks a lot about just you know you need to create must have product that the term product market fit. I think first time I read it was on Mark and Reason’s blog, but Y Combinator, Paul Graham talks about make make products. People want something people want. Steve Blank talks about, you know, validating that. That the product solves a real problem or meets a need. So you have all these people that have kind of talked about the same idea and it just it’s it makes logical sense that if you’re if you don’t have a product that meets a need and meets a need for a large group of people, then you have a really hard time growing a business around that product. So, you know, so if I, if I narrowed it down to a specific definition, I would just say it’s a must have for a segment of users that reflects a a reasonably sized market that you could build a business around.
Bronson: Yeah. And you give a presentation once and one of the slides when you talk about this point is like a rock star on stage and all these people in the crowd kind of like grabbing at them and holding their hands up, trying to get toward them. And that usually stuck with me like, ah, must have product. You want to be the Beatles? Like It doesn’t have to be that big, but you want to really want what it is you’re doing. And that kind of made it click for me, I think the easiest.
Sean: Oh, interesting. Yes. It’s it definitely has a passion around it because I think I think that founders tend to tend to be a little bit sort of manic. That’s a good way of saying it, that, you know, one day we’re taking over the world and next day, oh, what the hell am I doing? This is so stupid. And depending on the lens that you’re looking through, the same information can look great or look bad, and so you can be pretty delusional as a founder. So I try to take it down to like a very specific metric, but the metric is really reflecting that it has to be a must have a nice to have is not enough it’s not a nice to have basically doesn’t the world doesn’t need more nice to have products. There’s just so many choices for people that if it’s a must have product, you have a fighting chance and it’s nice to have you really don’t have much of a chance. And so yeah, I basically took it down to a single survey question that that help me gauge whether it’s a must have or a nice to have. And it’s just asking people kind of the inverse, how would you feel if you couldn’t use the product anymore? And if if people said very disappointed, then then that reflects really must have if they said somewhat disappointed, that’s kind of more of a nice to have. That was interesting in the early days when I showed companies the data on running that question, they always gravitate toward, wow, 86% of my users say that they would be disappointed without my product. They just merge those two numbers in. And it might have been that that 80% said somewhat disappointed and only 6% said very disappointed. Yeah. And I basically told them ignore ignore the somewhat disappointed focus only on the very disappointed because the very disappointed are the are the only people that really matter. And I compared that across a lot of different companies and basically found that you needed about 40% of your users saying that they’d be very disappointed without the product before you before you could really grow the company. And that was sort of a post back looking backwards where I where I basically said, okay, let, let me take all the successful companies that I’ve been involved with and whether whether it’s working officially with them or just just getting to know them and running that question, I guess their user base and comparing the answers to that question versus the ones that were flailing and maybe not working as well. And I found that kind of that magic place where a company seemed to get traction and grow consistently was was when 40% of their users said they’d be very disappointed with the product.
Bronson: Yeah, that’s a great number to keep in mind. Now, let me ask you this question, though. You know, that assumes you have a product. It assumes that you’re able to send out kind of a questionnaire and you have users that have used it enough to know how disappointed they would be. But a lot of startups, they’re in the idea phase or they’re getting ready to build an MVP. Is there any advice you can give us about how to know if in the right direction a product market fit before there’s even a product or MVP? Or is that just not possible? Or do you just have to have something before you can know?
Sean: Well, not so. So, first of all, I’d like to have the guts to start a company. You. You basically have to ignore all the doubters because because everyone’s a doubter around you in the beginning, they all think you’re crazy to be taking the leap and and it kind of causes you to, to to ignore bad information and to and to be really overconfident in what you’re trying to do. And you sort of need to be because otherwise you wouldn’t you wouldn’t do it. But so it’s kind of this really tough stage. But what I find is when I talk to a lot of entrepreneurs, when I ask them, why does the world need that thing that you’re creating, they state as fact a bunch of things that may or may not be true. And and that ultimately is if those premises are wrong, you’re going to waste a lot of time. Building the product is a lot easier to actually just have some conversations with your target users and and challenge the premises, not from the perspective of like, Oh, I won’t do this, this product at all based on the feedback, but at least looking at it from the perspective of one another kind of tweak how I do this product based on the feedback. So what you’re really trying to find out is one is, is the problem that you’re solving is, is the reason you think the world needs this product. Is it is it actually true? So you’re not you’re not actually out trying to sell the product or the vision of the product. You’re actually just trying to kind of challenge your base assumptions on why why you think the product will be successful. And, and and so if people aren’t having the problem or, or not really having the problem or they don’t really care about solving the problem, then then you probably want to rethink the business a little bit. Maybe they have the problem, but they’ve already got a great solution. Then then you want to at least make sure that you’re solving it in a different way, in a way that that will hopefully be superior. But but ultimately, I think just the key is that those conversations with your target users are going to make you a lot more informed so that when you do build something, you’re building it. You’re building it in line with with what the world needs and just where cheap. I mean, it’s really I think that’s it’s kind of the whole lean startup approach. It’s really about it’s about avoiding big money, wasting effort. So don’t build something nobody needs. If your best assumptions are wrong, it’s really cheap to just go out and have some conversations first and then secondly, once you’ve built it, you don’t want to just go straight to trying to grow it, which is what a lot of people did in the past, which I did in the beginning, too. I just got lucky that the companies actually created products that fit a need. But, you know, if if it’s really expensive to try to grow a product. And so it’s it’s much cheaper to find out if the product that you created is actually something people need. So it’s really about sort of. Figuring out the cheap lessons while they’re still cheap and not not sort of spending a lot of marketing or spending a lot on building a team to build a product is, in fact, at the base of the pyramid really is. I mean, before product market fit would be base assumptions. If you’re going to have a four level pyramid, the bottom part would be, you know, validate base assumptions.
Bronson: Yeah. There you go. Perfect. So you kind of start with the product market fit at the base of the pyramid like we’ve been talking about. And then next you say you move into the transition to growth and like you said, you want to make sure you have profit first so you’re not wasting a bunch of money and a bunch of time because this stage is hard. You’re going to spend a lot of resources to make this happen in terms of personnel, energy, money, whatever. And so as you transition to growth, you know, now we know that a lot of people, at least 40%, you know, need this product. They are going to be very disappointed if they don’t have it. But how do we actually uncover the must have experience? Because we know they really want it, but maybe they want it for different reasons. Right? So what do we do to really learn what that must have experience is for your users?
Sean: So I’ll go into that in a in a sec and I’m going to sort of take a little step back and actually come to how I how I figured that out. Yeah. Which is basically. So after after I left by my last long term marketing role, I knew I was going to do a bunch of roles in the first six months to really try to figure out what was what was important and, you know, what sort of execution steps were important. And what I what I really was trying to figure out is which of those which of those opportunities are just I don’t have a chance, you know, which which of those opportunities are just going to waste my time. And ultimately, I look that, okay, so I have to figure out how to grow the company. And, and that’s that’s really what I’m bringing to the table. I also have to figure out how to how to make sure that people can can experience the product in a way that that is good. But ultimately, the thing I don’t have a whole lot of control over as a as a marketer, I didn’t have a whole lot of control over was whether whether the product was important to people or not, whether if, if, if nobody likes the product, I could be the best marketer in the world and I’m going to fail every single time. So a lot of the stuff I basically figured out more, more as a sort of failure, prevention of just basically going in and knowing that what, what situation and I am I screwed in which situation do I not have a chance? And so first thing I wanted to do was figure out, you know, do people actually care about this product? If nobody wants it, I will fail. And but I basically figured out if if if people want it, then everything else is within my control. And so then I feel like I can execute my way into helping companies shape that first user experience so that people can get to the, the great experience that the product could deliver. Yeah. And, but ultimately then the next step is really try and understand what is that great experience. So it’s, it’s a lot of just drilling into existing users of the product and focusing on why would they be very disappointed without the product. And the more that I kind of understand the experience and what makes it a must haves, the more that I’m really trying to kind of narrow that down to to a kernel and understand that I’m on the deepest level possible. And everything else that I’m doing from that point forward is about delivering that must have experience. And so growth channels are about getting more people who could benefit from it to to experience it. And then everything else is, is really just, just fine tuning the delivery of that.
Bronson: Now that makes a lot of sense because once you know that, you know the main thing that people care about, so now you’re just optimizing for that. Every flow is about that, every funnel is about that, every inbound channel is about that. That’s the thing you’ve got to get them connected with, right?
Sean: Right. The unique asset, the basically product market fit is this is this elusive asset that most startups who fail never created. And so once you’ve created it, then everything else is about is about that product market fit is about understanding it, articulating it, highlighting it, surfacing it, making sure that it’s accessible, and then connecting it with your target users.
Bronson: Yeah, just to make sure everybody listening or watching this is really clear. Give us maybe one example of a must have experience. It could be from a product you worked on or just any product just to make sure we’re all super clear of what kind of thing would be considered a must have experience.
Sean: So I’ll give you an example just from from log me in that the kind of last long term role that I was in a in a marketing role when we first tried to grow that products. I had a lot of positive feedback from our investors and others that I was signing up thousands of users a day for that product. But when I actually studied the funnel, I could see that majority of users fell off somewhere before they actually came in and did a remote control session. So in case you’re not familiar with log in as it’s you install the software on your computer and then you can go to any other computer and easily remote control your computer and get files off of that and essentially work as if you’re sitting in front of that computer. But what I found is that that a lot of people will call it vanity metrics. A lot of the vanity metrics like sign ups or even downloads ultimately didn’t matter if if they didn’t go in and remote control a computer and in logging in was a unique case because there’s so many steps that you need to take before you. Ultimately, a remote control of a computer, including after you’ve set it all up, you have to go to a different computer and then remote control. And then you’re like, wow, this. His great. I can’t live without this thing. And maybe even you can’t live without it until and you know, it’s just that first time that you do it. But it’s that first time that you are, you know, on the other side of the city or the other side of the country. And you really need something off your computer and oh, thank God it was on there. And now you can remote control it and you get it that that might be the time that you say this is a must have. But it’s but it’s ultimately kind of defining what the experience is and the benefit of that experience and that that ultimately becomes kind of the kernel of what you’re trying to build a delivery engine around.
Bronson: Yeah. So as a marketer you’re really focused on the KPI for you is connecting people to that must have experience, not just sign ups or any other part of the flow. It has to be getting them to have the experience because that’s when they become, you know, rabid fans about what’s going on here.
Sean: That’s great. Well, all of your all of your value indicators in the business, whether it’s whether it’s retention, whether it’s revenue, whether it’s word of mouth, it’s just every everything that ultimately creates value in your business is directly correlated to delivering that must have experience. Yeah, I think. You know, at times people will think about the sort of a sales cycle. I don’t know what my ROI is until until they get through the trial period and everything else. But what I find is it becomes very easy to model and ROI based on the number of people that reach the must have experience, because most of the numbers become pretty consistent, deeper down the funnel.
Bronson: Yeah, no, that’s great. So not only is it, you know, the key metric you’re looking at, it’s also the key indicator to what’s going to happen in the future to those users and money and whatever. So really, all roads lead to that. I mean, however you look at it, it’s all about the most out of experience.
Sean: Yeah. So if you if you’re sort of taking your business into into stages first is about creating it in the first place. And then second is about is about, you know, stripping away all friction and getting as many people to that who sort of start the process to reach that. And then third is about plugging that into your market.
Bronson: Yeah. Now, let me ask you about the intent of people coming to the site, because I’ve heard you speak about this before. How do you measure their intent when they get there? Because I can imagine intent kind of informing you about must have experiences that maybe aren’t there yet, but they wish they were, you know. So does intent play into this right now?
Sean: So I think intent is one of those things that that is is almost as an important asset as as your must have experience. So just in in the world that growth hackers or marketers are dealing with. And there’s just so many choices out there for people and there’s so much competition for attention. There’s the numbers that I’ve heard are 3000 advertisements of A that the average person sees. And so breaking through to people with your promise. Yeah. It’s just really hard. It’s almost it’s almost unrealistic on a startup budget to be the one who’s going to create that advertisement. Is it going to get through? Versus companies that have, you know, multi-million, hundreds of millions of dollars of budget channeling in to get people’s attention. So intent is this asset that you have that you can you can leverage, which basically means that somebody somebody has a need for something that’s it’s that they’re reaching out for information. So instead of bombarding them with all those messages every day, where as a coping mechanism, they’re blocking them out because their head would explode if they try to process all 3000 advertisements coming in. Intent is is basically the the outreach that if it’s at all related to your product, then the art is figuring out how to connect that intent to your must have experience and you want to understand everything you can about that intent. And, and then ultimately, ultimately, if you can understand that and if you can connect it to your must have experience in a way that doesn’t just dismiss it again, I think so many marketers are are so self centered and focused on themselves that they’re thinking, you know, I have to find a way to jam this message at this person, but that if you if you truly understand what they’re looking for, then you might be able to connect the dots to how your product promise can help deliver on that intent.
Bronson: Now, that’s great. And you mentioned the word promise there. And I know that promises and hooks are a big part of your philosophy. So talk to us about promises and hooks. I mean, define them. And then how do you use them to bring people into that must have experience?
Sean: Yeah. So so an intent with intent would be kind of on the hook side. So a promise is basically just the the reflection of your must have experience, just the way that you’re just it’s the promise of what your must have experience will do for someone. So it’s the way you’re describing your must have experience.
Bronson: So we’re talking to a tagline here. I mean, is that the best way to think about it?
Sean: Or it can be, but it’s like I mean, I think it’s it’s more on it. I’d start with the kind of conceptual level and then I would constrain, constrain the, um, the concept of, of what, what the promise that reflects that must have experience. You can show, you could test a thousand different ways to say that promise. So tagline would be super consistent. But sometimes, depending on what the hook is or what someone’s intent is, you need to wordsmith the promise that it’s it’s it’s it connects with their intent.
Bronson: So platonic form of the the promise and it’ll weave its way into your product in different ways.
Sean: Yeah. So, so probably the difference is that on the intent side, you can intent you can basically ab test the heck out of, out of intent and hooks and you’re not constrained at all. It’s whatever gets the highest response gets the highest response. That’s great. But but your promise you’re constrained to it having to reflect what the must have experiences. So you know maybe there’s a million variations on the hook side, but there’s only a thousand on the promise side because because you’re just you’re just super constrained by it. Ultimately, if it’s a false promise, then someone’s going to get to the finish line and say, this isn’t what I thought it was. This sucks. And so so ultimately, you have to be authentic to to what you’re promising. It has to actually be able to effectively deliver on that. Gotcha. And so then it’s all about sort of setting the context so that that promise resonates with people. So if they if they have intent and so like one way of measuring it would just be a Google search. So if somebody has search Google for something specific, then you want to have a headline that’s very related to whatever they searched. And then you want to have a way of wording the promise so that it is contextually relevant to whatever they searched. Yeah. Hopefully hopefully stays true to the promise and then maximize. So you might test 50 variations of combinations of the two to figure out how to how to maximize the number of people who ultimately go down and. Experience. The must have experience. Yeah. And so what you might have on the, on the hook side might just be a restating of the intent of somebody’s search. But a lot of times you don’t have the benefit of, of, of intent to work with. So in that is, you know, you might have a question mark that you live with. So if you’ve got a weight loss product, you don’t just have the promise of, you know, lose £30 in 30 days. You start with that. Maybe a question that says feeling fat. Yeah. Or something that that that maybe makes them say like I actually am feeling fat. So now you’ve highlighted the problem in their mind so that the promise now can, can feed into into that and it can maximize the response on that.
Bronson: So you’re highlighting the problem without actually knowing the specific problem, because you’re being just vague enough with the question that they’ll fill in the blanks themselves and then receive your promise. Is that kind of what you’re saying here.
Sean: That you still you do know the problem for your target users and not everyone you reach with your touch is going to be your target user. So you’re trying to get the attention of your target users. So someone who’s in really good shape is not going to respond to the feeling that that the but your target user might now that you’ve got their attention and that sort of receptive to your promise, then you then you promise afterwards.
Bronson: Now talking about optimizing flows because like we said before, the whole goal is to get people to this must have experience. And so what have been some of the ways that you’ve found that are best to optimize the flow? Is there certain things you can do, certain things you don’t do, or what have you found to get people to that experience quicker? That really works.
Sean: So what you want to do is actually is actually understand what’s preventing them from getting to that experience. So, you know, like in one one company that I worked with, we have the majority of people who signed up for the product from a certain channel all ages. But my, I’m getting calendar pops on my like, all right. So the majority of people who signed up for a channel or VR channel were not downloading the software. Mm hmm. And so they they would sign up, and then they weren’t downloading the software and see. And one thing you can do with flows is just like AB test, a lot of different ways to try to encourage them to download the software, for example, just like in this case. And so you might make it more obvious that, you know, click on this book and maybe you make it a different color, maybe you make it bigger, but you say, download the software, maybe you say next step and you just try different ways there. But if you can actually get to the heart of the problem of why they’re not downloading the software, then then you’re much more likely to come up with an experiment that is going to move the needle. So I had had one company where we had a couple of hundred thousand people a day who were hitting the website. 10% of them were converting to a sign up, says 20,000 people a day, converting to a sign that this is through a new channel we had discovered, and then a 97% drop off at the download step. Oh wow. Yeah. AB tested the heck out of trying to get more people to download. Couldn’t move the needle. But when we actually asked people was anything preventing you from downloading the software at this point, we got the answer. I don’t believe it’s free. And so once we once we knew that the kind of offer was too good, then then our next experiment actually tripled the download rate at that step, which made the channel viable. And what we actually did was we gave them a choice. We set, we said a load free version of software, which we project with a big juicy check like this is what we expect you to take and then or download a trial of the, you know, paid version $10 a month or $20 a month version. And when they saw there was a paid version, suddenly the free offer was credible and a lot more people followed through with with that channel. But I don’t think we would have ever gotten there if we didn’t actually we didn’t actually know what was preventing them from downloading in the first place. Yeah. So you kind of what you want to do is ultimately map all the steps that it takes to get to your must have experience, understand the motivation for following through with that step and the fears or confusion and concern that prevent people from following through with that step. And then you use both sets of information to drive a lot of testing.
Bronson: Yeah. And one really succinct way that I’ve heard you put it before when you talk about these flows is desire minus friction equals conversion rate. I think that’s such a well-said way to put it because, you know, you have the desire, the intent, all those things that are coming in, just remove the fruit or the friction and you end up with the conversion rate of something. And all the things we’ve talked about is about removing that friction. Like in the example in this game.
Sean: The friction was go ahead. In that formula, you also have the ability to increase the desire. Mm hmm. So, I mean, it really the two levers that you’re working with are. The increased friction, which is going to get more people to the finish line, which is going to increase your conversion rate or increase desire. And that’s really about momentum from the beginning. So getting better messaging, a better hook, a more powerful promise, you know, more customer testimonials, more maybe a video or something that that sort of shows them that experience. That just creates so much desire and momentum that I’ll give you an example. I was I was booking a trip with Southwest not very long ago, and they had a whatever it was, I think they were celebrating some some kind of anniversary of something. But they said for the next 48 hours, all tickets are half price. And I, I fly every week on Southwest. And so as tickets are a big deal for me. And so I basically went in to book to book, you know, six months of flights in advance of the travel cost. And half of the next six months would have been awesome. And so my desire was really strong and I went through to book my ticket and it timed out and sale and I did it again and timed out and failed. And I did it again at a time out and failed. And there was so much friction, but my desire was so strong to do the transaction that I just kept going back. But so my desire was strong enough that ultimately I picked up the phone, waded through a long queue of people, got all the tickets and got it all worked out. But it was, you know, the fact that I was willing to pick up a phone because the transactions kept sailing online, that that the problem was had to be super strong. That was motivating me to to try to take advantage of the offer in the first place.
Bronson: Yeah, that’s a perfect example because it shows us those levers so clearly, desire and friction and the conversion that actually happened afterwards. So the beginning of the pyramid is the product market fit the middle piece of the pyramid. Is it work our way up is kind of the transition to growth, all the stuff we’ve been talking about and then the last stage of scaling growth. What is different about this last stage scaling growth as opposed to transition of growth? Because actually this is where my understanding gets fuzzy. I don’t know if there is much of a difference. If it is, I’m not sure what it is.
Sean: Sure. So scaling and growth is it’s basically a again, kind of like looking back at the short term roles that I was taking and and trying to kind of reverse engineer failure. So basically, I was saying if nobody wants the product, I’m guaranteed to fail. Like I, you know, I might be able to game growth for, for a little while, but but in the end, no one no one’s going to use it. No one’s going to pay for it. It’s like in the end, it’s I’m not going to be successful. And then so that’s basically like that. That’s like a just impossible growth situation long term. But what you have with a lot of companies is a it’s just a really hard growth situation. And so with one company where I, you know, just in the early part of trying to figure out how to drive growth, I had a very leaky funnel. And in trying to drive that growth, I immediately went to the channels. And as I’m trying to drive that growth, I basically hit a wall, realized that I couldn’t spend more than about $10,000 a month with a profitable return on investment. All three channels were exhausted. There was just I was basically wasn’t growing at the pace that I wanted to be able to grow that company. But then I looked at at a super leaky funnel and we realized that I had skipped a lot of steps in in sort of preparing for that growth. And I hadn’t I didn’t really have the funnel to work with, I mean, the pyramid to work with at that point. So it’s kind of just making it up on, on the fly and just realize that, gosh, we have such a hard growth situation. I want to go back in and see if I can get more people to the must have experience to start the process. And so I spent about four months of working with the engineering team, working with the CEO, working with, like all of us, this really focused effort. And we had this this theory maybe early on that because it was downloadable software, maybe maybe this is really the fastest you can grow a downloadable software company. When we look at the IAM companies, whether it was Skype or or IQ or some of the some of the the older ones that are out there and, you know, they had tens of millions, hundreds of millions of users. And so now downloadable software you can grow. So so then we thought, well, let’s study how their installers work for these products because clearly they’ve gotten there. So we spent a lot of time on the engineering team testing different installers and just trying to make the installation process as easy as possible. We we figured out all of these different points in the funnel that people were dropping off. We experimented with the trial process and when when somebody signed up for a free version, did they did you start them on a trial of the premium or not? We did. We did kind of all all of these different tests that ultimately took a lot of effort and time. But we we actually ended up getting about 1,000% higher rate of people who started the process who successfully completed and purchased the product. So that meant that channels that I had previously tested and invested a dollar and say I only got $0.50 back on the dollar, so I’d be a dollar, I couldn’t invest anymore. Now I invest that same dollar and getting $5 back on a dollar invested because I’ve got all of that that improvement through every step of the funnel. So when I went back and tested the exact same channels that previously had scaled to only $10,000, now I could spend over $1,000,000 a month on the exact same channels driving growth, and that company took off from that point. So, all right. The transition to growth, this basically is basically you’re trying to grow with one hand tied behind your back, you know, nine fingers taped. And you got one pinky that you’re trying to figure out how to grow the business you’re ultimately building in during this transition, the growth phase you’re ultimately building in all of the advantages, stacking the odds so that when you do go out and start testing channels, that they’re actually going to work.
Bronson: I gotcha. So when you finally get to scaling growth, it’s when both hands are not behind your back. You can dump in a lot more than 10,000 mark because you fix the funnel. You may have a, you know, massive return on ROI. Now you’re ready to really just pour fuel on the fire, right?
Sean: Things that you’ve done. I mean, it’s not easy at that point. For most companies. It’s really hard to grow. It’s just that. It’s just that you’ve made it significantly easier. It was it was nearly impossible before when you had a really inefficient conversion process. But you get a lot of the people love, you get a super efficient conversion process, you got the right pricing model, you’ve got all the right messaging now. Now when you go out to the channels, you’ve basically completed that transition to growth. You’ve got that product market fit, and now you have the big challenge of figuring out, now, how do I, how do I connect with my target customers in a way that I can cost effectively, cost effectively, grow this business as quickly as possible. And obviously, the most cost effective thing you can do is not have to spend money at all. So really fast growing companies are able to find free ways to grow their business and other companies. There’s nothing wrong with arbitrage. It’s it’s still free if you spend a dollar and you make to back it. It’s not like that will cost you anything. That channel made you money and but ultimately, ultimately, a lot of the paid channels are getting a lot harder. And and that, you know, if you if you come up with the right free channels, that they tend to have a lot more scale.
Bronson: Yeah, well, let’s talk about those channels a little bit and growth hacking kind of in general because, you know, you famously coined the term growth hacker, like I said at the beginning. So we have to talk about that word for a moment here. You famously said that a growth hacker is a person whose true north is growth. What do you mean by that? Because there’s been a lot of people trying to find it after you.
Sean: Yeah, I mean, I think. I think that ultimately well, I think kind of looking at the at the source of that that word a little bit more and why why I thought it was important to coin a term. You know, I don’t do that all day long. So there was something behind it. And part of it was that I was I was, you know, getting equity in a bunch of these companies where I’d done these short term, six month roles. And then I was, you know, I was basically doing a lot of that stuff. The odds for growth were there was a lot of the work that I was doing and I needed to plug somebody in capable of of taking the growth to the next level. And what I was finding is that the that the resumes of people that I was getting were very, very sort of cookie cutter marketing resumes. And when I looked around to see who was successfully driving growth at other companies, it wasn’t your sort of traditional marketer. It wasn’t the person who was spending a bunch of time on research reports. And and, you know, you know, there’s just a lot of kind of like, jargony stuff that doesn’t really move the needle that that that marketers kind of spend time doing. And and a lot of that is just to kind of try to mystify it so that so that everyone else just, you know, if growth happens, then if they’ve applied some marketing magic to it and if it doesn’t happen, then, you know, they’ll come up with some excuse like blaming sales. But I just I just didn’t have a lot of faith in kind of that traditional, that traditional marketing resume of of skills. And so what I was trying to do was, was actually have a actually a more constrained skill set. So if you look at your typical marketing book, it’s you know, it’s a thick book. It’s, you know, a thousand pages plus even in an early stage company that’s just hitting that the growth part. It’s way simpler than that. It’s it’s it’s basically you know, all are spent you need more dollars back or free channels. You need you need to be able to invest in those. And a lot of times if it’s if you’re investing in virality, you may not get a viral coefficient above one. So you may not get something that basically self propels business to being huge, but you might get something that’s going to going to give you a3x on every dollar you invest in other channels because you’ve got really good share and user get user kind of mechanisms there. And it’s, it’s really, you know, to me, everything that a growth hacker does should be focused on how does this impact growth? And the typical marketer just was looking at a whole broader how does it how does it affect the brand? How does it affect, you know, a bunch of just other other craft that may or may not have a connection to growth? Maybe in the long term it does. But in an early stage startup or in just our early growth startup, you just don’t have the luxury of thinking that much about the long term. It’s about it’s about user acquisition and getting as many users to experience it that must have experience and and creative and making that happen and understanding growth principles that tended to be the tended to be a different set of principles that most marketers were working like marketers have the of the four P’s a lot of times that you would sort of see this as sort of marketing hasn’t changed a whole lot in the last in the last 30 years and but marketing on the Internet is just a is a different beast where you just have a lot more visibility into what’s working and what’s not working. It’s very test oriented. And and that if you focus on the the levers that are most effective on the Internet, you’re going to be able to drive a lot more growth than if you sort of holistically try to try to approach it in a traditional marketing way.
Bronson: Yeah. So yeah, great distinction there. Let’s talk about some of those customer acquisition channels that maybe a marketer wouldn’t think about, but a growth hacker does. I’ve seen you kind of list out in order. Here’s the channels you try to attack and in this order for a reason. Walk us through this a little bit. First, you say viral channels. What do you mean by that?
Sean: So, I mean, I don’t really have a particular I mean, it might be an older presentation where I was just trying to give somebody a little if I were them, this would be the kind of generic order in which I would try to approach this. But ultimately, I’ll come back to the question of what I mean by viral in a minute. But, you know, ultimately, I think to be to effectively drive growth, you need to understand what’s unique about each situation and what are the channels that you’re going to be uniquely able to serve that situation. And so like on that list that I’m sure before I have things like SEO and CRM and things like that on the list. But if, if, if you have a product that. That people have the pain, but they aren’t aware that even a solution exists. There will be no search demand for the problem like so that ultimately you need to really think about is is the does the product have have some collaborative functionality in it that just just like LinkedIn. If you’re the only person on LinkedIn, it’s not very valuable that that ultimately it is all collaboration. You’re you’re basically posting your resume for other people to see it and you’re looking at other people’s resume and they build in all these sort of interactions in between who’s viewed my profile. Whoops, you know comment on this, you know, recommend the person now they’ve got, you know, vouch for their skills, whatever their endorsement skills I guess I said so you know they’re all about kind of really understand what what’s unique and building in interaction that that that drives retention and growth a lot more. You know how do I how do I invite all my friends to see my LinkedIn profile now that I’ve spent all this time on it, how do I spam my my my email so that it’s not, you know, I think where they were one of the first to do to do hooks into into into outlook for for being able to upload your outlook address book. And you know, similar type approach was taken with Facebook. Mm hmm. You know, that ultimately that ultimately, you know, there’s a lot of kind of gamey things that you can do. One thing that I that I would also kind of take a step back and say is that organic growth is a really powerful form of growth as well. And if you if you have if you have a great product that meets a need and you have really low friction on the sign up and you have a powerful promise and then your organic growth is actually going to be probably pretty strong even without any external channels. And that’s that’s something that we saw Dropbox. That’s something that we saw it evaporate. We saw it we saw it at a lot of these companies where when the product is just so good and and meets a need for people, word of mouth is by far your most powerful channel that’s out there. But when and also you know promote the event that you just created in in in Eventbrite like push it out on Facebook and and other sorts of things when you can take advantage of making sure that it’s covered by the search engines when you can minimize sharing friction. I’m one of the things that I just saw on Dropbox recently is that they is just a great example, and this is just me as an outside observer who hasn’t been involved with the company for a long time. So there’s no sort of company secret here. But when I save a file now and click on my little Dropbox icon up in the top, it says, Here’s the last three files that you saved. And then if you hover over it, it says Create Share link. So they’ve they’ve really reduced friction to create a share link that is going to definitely increase the likelihood that I’m sharing. And I was already doing it before, but now it’s so easy. I’m going to think about doing it a lot more. So you combine strong word of mouth with all of these kind of built in functionality to drive sharing and collaboration and things like that, and really kind of leveraging what’s unique about the product. So with my company, we follow a similar approach to what to what YouTube used that basically as people use our product, a lot of them have a survey by Wallaroo or Powered by Wallaroo and others see it out there, click on that link. And, and, and it drives that conversion. That’s how YouTube grew as well that, you know, the more that people uploaded videos, they made it really easy to then embed those videos in lots of places. And then, you know, you just it just kind of drove that that cycle of share. So that’s that’s really kind of what I mean by focusing on virality and also by focusing on what’s uniquely relevant for the company like Log Me In didn’t really have didn’t really have much, much in the way of sort of natural virality to it. It was much more of a solo experience. I’m installing it on my computer to remotely control a different computer. But now they have joined me, which is a, which is an online meeting product that is much more of a of a viral driver. So part of probably that was part of it came out with that after I left that that was probably part of their product roadmap. And even coming out with that is that, gosh, if we can, we can have a very viral product that goes out and captures market share and then cross-promote our, our other products that have been presented to satisfy users and and retain the monetize users. It’s a really good combination.
Bronson: Yeah. And as you think about the customer acquisition channels, do you think it’s fair to say that, you know, obviously you have to make it unique to your business so you can’t just go and try to be viral if your product isn’t viral. Right. But after you’ve kind of decided what works with your product, would you say focus on the free stuff first, then focus on the paid staff and then focus on kind of the Hail Mary passes of let’s interrupt people randomly when they’re on the Internet and see if we can create demand from nothing. Is that kind of the 1 to 3 in terms of the. Older you look at.
Sean: Yes. I mean, I think I think, yeah. Any of the free things that you can do, particularly the viral things, are going to add leverage to other channels that you get to work. So if each person. Basically Kels point seven additional people, then everyone you pay to acquire, actually you’re bringing in three and a half people. So you’re able to amortize that that dollar across multiple people. So it makes sense to do that first because pay channels that wouldn’t have worked. Now they only need to be a third as effective as they were before to work. So you probably you’re just again stacking the odds before those paid channels will work. The reason I like to start with search before I start with the fan generation and you kind of look at it either way. The problem with search is that it’s it’s constrained by the number of people that are searching. So it’s a constrained channel that you can never have more than 100% of the people that are searching for something relevant to what your product is. So even if you crack it, you, you, you don’t have sort of that unlimited, unlimited growth potential. So, for example, if. Compare that to, say, radio, if you figure out how to get radio to work in one market, that you can spend, you know, $50 acquiring a user through radio and that that user’s worth $100. You can repeat that in every radio market across the country. And and you have a super scalable channel that’s, that’s really creating demand for your product. But but demand harvesting tends to be a lot easier. And it’s and it’s good to, you know, if they don’t find you, then they’re probably going to find an alternative or a competitor or you’re making room for a competitor. So you want to make sure that you sort of cut off cut off access to those people, to all other alternatives, and and funnel as many of those people into your solution. And so it makes sense to kind of cover that early on, even if it doesn’t tend to be particularly scalable. I wouldn’t I wouldn’t obsess on making that channel work if if there’s not a lot of upside to it. So if you if you try to make it work and then you realize that in the best scenario with the with the volume of search that’s related to your product, you might get to two people a day when you’re already getting 1000 people a day. It’s just not it’s just not worth spending weeks and weeks trying to figure it out. If it if it if it’s not going to move the needle in your business.
Bronson: Yeah. At the heart of it, like you said before, it’s growth. And so we have to use common sense what’s going to actually grow. When you look back at all of our activity. Now let’s talk about quality a little bit. This is your new startup, new ish. It’s been around for a little bit now, but it hasn’t been public for very long. So what is quality? What does it do?
Sean: Sequester is basically it’s a lot of stuff that I’ve kind of talked about, a lot of stuff that’s sort of at the heart of how I approach things. It started as a way to engage users on your website to ask them what they’re trying to do, what problems that they’re having, and to be able to target very specific users at very specific stages in your conversion funnel to really gather the information that you would then use to drive AB tests. So that’s that’s kind of at the base of where the products are. That’s still how the majority of our customers use it. Now, it’s a little, little question that pops up in the corner of of the website. You can time it so it pops up a minute onto visiting this page or 10 seconds on to visiting this page or immediately. And, and you really just get it getting that understanding of what’s going on. You can also put it in products that we use it for people who are accessing their dashboard on the product to ask like the must have question and what how would they feel if they couldn’t use it anymore and what would they use instead? And so you can engage your your if it’s a web based product, you can engage your really passionate users as well and try to drill down. But I think that unique advantage is really in the onramp thing and flows and that’s that’s that’s really our quality to insights product and that’s what we’ve been doing for the last year and that’s got a pretty big user base. And then our quality to convert product is, is much more about taking that information and helping to drive value for the user through the interaction. So your, you know, if you uncover that they’re looking for something that will help them do X and you’ve got this so you’ve got an e-commerce site, then you can, you can actually give them a call to action screen that tells them, you know, we’ve got something that will do that, click here to go there, or you can auto redirect them or you can, you can serve a legion form based on I use it for special offers for people who have the right profile. I’ll give them a special offer for answering a few questions. And then. And then I drive half my leads just through. Yeah, answer three questions for 50% off them. And I actually don’t really care that much about the answers to those questions, but the fact that they felt like they needed to work to get that 50% discount, they’re much more likely to take advantage of it. And I’ve been able to generate a lot more leads for my sales team. But we’re really in the early stages of that product where we’re evolving a lot more different form sizes and it’s all about and they’ll be more automated things, but it’s all about really driving, driving the desired actions and empowering a marketer to to do all those things on their own. So once, once you have the code on your site, takes a couple of minutes to get on there. Then the, then the marketer has the ability to deploy these sorts of interactions anywhere on their site and sort of understand what’s going on and drive more people to the to the goals or to get.
Bronson: So when they log into Quora and they kind of connect these funnels, if they say this, do this, if they want to send them here, that’s all automated. It’s not an operator on the other end telling them what to do. It’s completely automated funnel based once you set it up.
Sean: Yeah. So we have an editor where you just basically you just map different answers to different actions or to follow one question and then you can just kind of set it and forget it and you can even use we integrate with a bunch of the chat products so that you can not waste your time chatting with people who aren’t qualified to go through a set of questions and then prompt an olark chat or, you know, different types of chats I got you.
Bronson: So is Kuala Roo kind of when people don’t have a Sean Ellis on staff, they install Kuala Roo and it gives them a little bit of Sean Ellis in their company. Is that kind of what this is?
Sean: I mean, the fact that I rely on it a lot, too, I think it’s you know, I mean, it’s just like anything else. It’s it’s it’s only as good as the person on the other end that that you still need to be creative. It’s just that, yeah, I get excited about tools like, like optimize early and unbalance and KISSmetrics and things that I used to be really reliant on other people within my company to do things that now, now when I want to do them, I can create a landing page. I can I can edit a live page with optimize early and publish that change as an AB test and start to start to do all the things that used to take me. Lots of pain on begging people to help me with things. And even when I had people who were capable of doing those things, I generally on the marketing team, I generally had an engineering team who said, no, no, we’re we’re not trusting marketing, touching the live site to do these sorts of things. So, you know, the the tools that are out there now, the fact that in the past I had Vas on my team to run queries. Now with KISSmetrics I can I can post information like once the from. She’s already in there. I can I can build the funnels afterwards to get a true understanding of of what’s happening and and pull down exactly. The users who’ve done action X and this and being able to pull down that list of emails and give it to my sales team and things that things that would have been impossible a few years ago. It’s just so great to have these tools that empower you. And I think quality basically fits in there where it gives you that qualitative understanding primarily right now, but that increasingly gives you the ability to act on that information and enhance a user’s experience on your website in the kind of automated programs that you can set up. Yeah. So we’ve been we’ve been on a hot we’re 25% month over month growth for every month since January, which is is if you if you kind of do the math, yeah, it’s basically a 300% increase in monthly, monthly revenue since January.
Bronson: Well, you know, I have to ask, how what what are some of the things you’re doing there? I mean, I’m sure you’re taking your own advice, everything you’ve said so far. But is there anything you point to that you haven’t talked about yet? Like, well, we did this and we’re working?
Sean: Well, one of the things that I talked about earlier is that organic growth is something that, you know, when you do the first two steps in the in the pyramid. Organic growth is something that really can be an important driver in a business. And I would say that right now, that’s that’s a big part of what’s driving us forward is just product improvements better, you know, reduction of friction. But when you when you really boil down our attribution, so much of it is through our powered by link through branded searches, 97% of our searches in Google are for quality of branded searches. So that means there’s strong word of mouth around the product because it’s delivering our promise for people. It’s, you know, word of mouth and blogs and press are kind of rounded out right now. And where we really didn’t we didn’t get to the drive growth stage until last month. So we have an actively been trying to experiment with channels until May 1st. And and and so we’ve got a lot of different tests that are in the pipe. Retargeting has been working really well for us. So that’s one thing that we find is that it does take multiple visits to to drive a conversion. So being able to stay top of mind for people, I would say still that we have we have at least another doubling in conversion rate through funnel optimization that we still need to do. And so it’s a part of it like it’s not always so cut and dry is like, okay, stop this step and move on to the next step. It’s, it’s sometimes different resources, but I think our, our, our conversion funnel is efficient enough that we can focus on driving growth. But there’s still lots of room for improvement in in enhancing conversions as well.
Bronson: Yeah. And now not only have you brought in 25% month over month for the last few months, you also really increased retention as well. I read recently, you guys tell me if I’m wrong, went from 60% retention to almost 90% retention. Is that right? First of all.
Sean: Yeah, I mean, that was in our most recent cohort. So that’s just looking at our own cohort level. After month three, we were we were really bad at retaining. And so like, I mean, and that’s a product market fit indicator to a large degree. And so until we got the product right. So basically one of the big changes that we made in, in February was that we launched this branching logic. So before that it was flat screen, just single question. And now now you can have so many like different choose your own adventure paths based on digging deeper and getting to the core of some information in a in a question process and then ultimately serving an action on the back end of that. And basically from about that time that our retention cohorts shot way up. So I would I would mostly credit products on that. And and that’s but that’s great. That’s, that’s what you want is because it’s so much more authentic and sustainable in the growth when, when good organic growth is being driven off of a great product and that but now I am obsessive about finding new channels to drive to drive growth even faster. And we’ve got, we’ve got some awesome stuff teed up that I think we’ll be putting out within the next couple of months. So keep an eye on it. I don’t want to talk about it yet because some of it’s going to work and some of it won’t. But but, you know, we’re investing in in things that that I think have a lot of potential. And but but that’s ultimately it’s about being persistent and and just velocity of testing and intelligence of what testing and and just putting out a putting out a pretty good testing schedule. And, you know, I’ve got to got a guy on the team that’s that’s able to put a lot more effort. Focus on growth than I had, who’s really strong. And so basically once we’re once we’re, you know, got kind of the right process in place and then it’s you never know what’s going to bite and what’s not going to bite. But you just you just got to keep being pretty tenacious about testing things.
Bronson: Yeah. Well, Sean, this has been an absolutely incredible interview. Even though it took us a long time to get Sean, it was well worth it. I have one final question for you. And you’ve covered this so many different ways already, but if you had to say what’s the best advice that you can give to any startup is trying to grow?
Sean: I would I would say that CEO can’t outsource the can’t can’t just abdicate growth it that so much of the upside in the startup is tied to its ability to grow and so much of that upside is owned by a founder CEO that they would be crazy to. Outsource it and trust somebody else, that that if there’s anything that you can see from from the growth hacker movement itself, is that the profile of someone who can effectively drive growth is not is not necessarily someone who’s got 30 years of traditional marketing experience that it’s really the profile is someone who’s who’s passionate about getting a great solution into the hands of the people who need it. And and particularly if it’s a founder who’s got an engineering background, they could play a huge role in driving that forward and they just have so much to gain from it that that would be my biggest advice is that it should be a partnership between the founder, the founder, CEO. A The entire team should really be focused on on being excited and passionate about getting the experience out there and that you should you should hopefully have the right type of person leading the charge who fits that growth hacker profile that that so many of us have tried to to define and capture.
Bronson: Mm hmm. Well, Sean, that is incredible advice to end on. Again, thank you so much for coming on Growth Hacker TV.
Sean: Hey, thanks for having me.