Engines Of Growth For A Startup

Every startup wants fast growth. Fast growth cannot happen with just plain vanilla marketing. Startup has to find the growth engine that will help it deliver growth. Marketing techniques will be determined by the growth engine chosen by the startup. A startup can even chose multiple growth engines.

The following are the 3 engines of growth mentioned by Eric Ries in his famous book ‘The Lean Startup’:

Viral
Sticky
Paid

Viral Engine Of Growth

We all know Corona virus. Even though COVID has ravaged the world I am a big fan of COVID in learning about virality. Virality is a big force. We all have been at the receiving end of it during COVID crises. Virality refers to the process where 1 person brings 1 or more people to the product. If 1 person brings 2 others and 2 bring 4 others, your product can grow very rapidly. There is no way for the users to defend themselves from product virus if the product is truly viral. This happened with COVID pandemic and this force was the reason WhatsApp became number 1 chat app in India in spite of its competitors using Bollywood celebrities to promote themselves. WhatsApp had very high word of mouth while the competitors had practically none.

Virality Coefficient = invitations sent per user X conversion rate (%)

Virality is the reason why Facebook, Instagram or Twitter became hits. The thing a startup has to do to make the product viral is to make virality coefficient more than 1. If 1 person brings more than 1 person then the product will grow exponentially. If 1 person brings only 1 person the growth will still be there but it will be slower. If 1 person does not bring at least 1 more person then the product is not viral and it will not grow virally.

Sticky Engine Of Growth

Sticky engine of growth refers to the stickiness of the user to the product. A good example is Uber. I first used Uber in San Francisco in 2015. Ever since that time I have been using Uber. The more a user uses a product the more they will spend on that product and more they will promote a product to others indirectly. I did not make Uber viral as unlike WhatsApp I did not bring multiple users directly.

Instead I used Uber for my commute outside my home city and even in home city while going to office some times. Many others would also have been motivated to use Uber after seeing me use it but I was not the lone reason for them using Uber. Thus my stickiness helped in growth of Uber but I did not make Uber viral directly.

In case of WhatsApp I directly brought many people to it. In case of Uber I indirectly brought multiple people to Uber but none directly.

Paid Engine of Growth

Paid engine of growth refers to the ability of startup to charge a large sum of money for the product so that it can spend money to acquire even more users. Byju’s is a great example of paid engine of growth. Their product costs Rs 40,000 generally and thus they would be having high margins. They can use this high margin to give high sales commissions and spend on paid ads in Cricket matches and TV channels.

A startup like WhatsApp would not have been successful if it used paid engine of growth instead of viral engine of growth. Thus a startup needs to understand which product will be able to use which engine of growth.

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Some startups use multiple engines of growth. Paytm is a good example. It uses all 3 engines of growth. Paytm is not as viral as WhatsApp but it is quite viral as a product. During COVID I asked my local shopkeeper to be paid through Paytm as we were not going to bank and thus were short of cash in lockdown days. Thus Paytm’s users put pressure on shopkeepers and friends to use Paytm if they need to take money from them.

Paytm is quite sticky also. Once somebody starts paying bills using Paytm they continue using Paytm for long time. Thus Paytm is quite sticky app. In fact using Paytm becomes easier for multiple services it provides once you become habitual.

Paytm uses paid engine of growth also. Paytm sponsors cricket matches extensively. Paytm is not having as high a margin as Byju’s but Paytm has raised a lot of capital and thus is able to use this engine of growth also.

Thus a startup should not blindly buy Google Ads or Facebook Ads for growth. It should focus on finding the right engines of growth and construct a marketing strategy around that keeping the right engines of growth at the core. Engines of growth chosen would also depend on the budget of the startup.

Author: Saurabh Jain (Follow him on Twitter : @skjsaurabh)

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