Growth Loops: Right for you? + 5 Steps to Design Yours [Template]

What is a Growth Loop?

A Growth Loop is a self-reinforcing strategy where your product’s output (like active customers or new content) automatically bring in new users, unlike traditional funnels that need constant input from you (new content, ad spend, etc). Growth loops can be seen in acquisition, retention, or referral, to create a cycle where each new user naturally brings in more users or keeps others engaged.

How Growth Loops work?

Alright, let’s dive into the nitty-gritty of Growth Loops. 🤓 Unlike traditional marketing channels that often require constant input (and let’s face it, a hefty budget that is constantly growing), Growth Loops are designed to be self-sustaining.

But here’s the kicker: many people think Growth Loops are only for viral, social, B2C products. That’s a myth! In my experience, Growth Loops can work for all sorts of businesses, from B2B SaaS to e-commerce and beyond. The key is to tailor the loop to your specific context.

So, when should you consider implementing a Growth Loop in your Growth Strategy? If you’re looking for sustainable, long-term growth that doesn’t rely on constantly pumping money into ads, it’s time to give Growth Loops a shot.

However, if you’re still in the very early stages of your business and haven’t nailed your product-market fit yet, you might want to focus on that first.

Feel free to drop a comment below if you’re wondering whether Growth Loops could work for your specific business – I’d be happy to chime in!

Growth Loops vs Marketing Funnels

Now, I know what you’re thinking: “Ward, I’ve invested a ton in my marketing funnel. Are you saying I should ditch it?” Slow down there, cowboy! 🤠 It’s not an either-or situation. In fact, Growth Loops and marketing funnels should be best buddies in your growth strategy, and the funnels should be leading!

A funnel ends with a customer. A growth loop turns that customer into your next acquisition channel.

Here’s the deal: companies should always start with building a steady funnel for initial growth until you get a serious audience of paying customers. This is your bread and butter – it’s how you acquire, convert & retain new customers through methods like paid ads or content creation. But once you’ve got that funnel humming along, that’s when you want to start focusing on Growth Loops.

Why? Because Growth Loops is where the real, exponential growth happens. They’re more advanced, sure, but they also have the potential for much bigger payoffs. While funnels are linear, loops compound over time and once your company gets bigger, the loops only get stronger.

But no, growth loops are NOT the new funnel, instead the funnel is fuel to your growth loop: if you don’t get new users into the loop, the loops never start.

The key is to use both in tandem. Your funnel brings in new users, and your Growth Loop keeps them engaged and brings in even more users. It’s a match made in marketing heaven! 💑

As a rule of thumb, I always advise my startup coaching clients (on how to focus on where to start with growth loops vs funnels):

• First, you need to focus on the AAA of the Pirate Funnel – “Are you able to attract & get customers at all?”
• Second, you focus on the RRR of that Pirate funnel – “Are you able to consistently get paid, retain customers and keep them happy?”
• Then, you can focus outwards with Growth Loops… – “How can we grow exponentially?”

Because if you don’t have a basic funnel pulling in customers at all, there’s also no one to kickstart your funnel 😉

5 Examples of Growth Loops Types

Let’s dive into some different types of Growth Loops, each with its unique way of working. We’ll explore 5 most common examples of growth loops (but there are more than five!), with some real-world growth loop examples to show you how they work:

• Viral Loops A viral loop occurs when users naturally promote your product through their own usage, leading to new user acquisition. The loop continues as these new users do the same. Example: SpotifySpotify’s loop starts when a new user signs up. As they use the app, they share their listening data. Spotify uses this data to create and improve personalized playlists, enhancing the user experience. This improved experience often leads users to share more, attracting new users and restarting the cycle.
• Referral Loops Referral loops incentivize existing users to directly invite others to use the product, usually with a reward for both parties. Example: Dropbox When a new user signs up for Dropbox, they’re immediately encouraged to share the service with friends. The incentive? Both the referrer and the new user get extra storage space. This direct reward system turns users into active promoters, continuously bringing in fresh sign-ups.
• Usage-Based Loops In these loops, the very act of using the product creates opportunities for growth by exposing new potential users to the product. Example: Loom Loom’s growth loop begins when a new user signs up and creates a video. When they share this video, recipients are exposed to Loom’s product. Many of these recipients then sign up to create their own videos or respond, restarting the loop.
• User-Generated Content (UGC) Loops UGC loops rely on users creating content that attracts more users, who in turn create more content. Example: Quora Quora’s loop starts when a user finds valuable content on the platform. This often encourages them to contribute their own knowledge by creating new content. As this content gets indexed and shared, it attracts more users, who then become potential content creators themselves.
• Collaboration Loops These loops leverage the network effects of collaboration tools, where each new user brings in more users through teamwork. Example: Figma Figma’s loop begins when a new user signs up and starts a design project. They then invite team members to collaborate. These team members, experiencing the value of Figma firsthand, often become new users themselves, restarting the loop by creating their own projects and inviting more collaborators.

And there are many more flavours, because it’s up to you to figure out what your customers are looking for and what fits their experience best. (But that’s what we talk about in the next section).

Remember, the best Growth Loop for your business might not be immediately obvious. It’s about finding what resonates with your users and aligns with your product’s strengths. Don’t be afraid to combine elements from different loop types to create something unique to your business. The key is to start with your users’ needs and motivations, then design a loop that naturally encourages them to drive your growth.

How to identify Growth Loop opportunities?

Now comes the fun part – spotting potential Growth Loops in your own product or service. It’s like being a growth detective, looking for clues that could lead to your next big breakthrough. 🕵️‍♂️

First things first, don’t fall into the trap of thinking your product isn’t “viral” enough for a Growth Loop. In my experience, even products that don’t seem naturally viral can benefit from Growth Loops. The key is to look for social behaviors, triggers, or habits related to your product.

To help you identify signs for potential Growth Loops in your company, I’ve developed a Growth Loop Framework that starts with a crucial “Observe” phase. This phase is all about understanding your users and their real-life scenarios. Here’s how to approach it:

• Describe the user’s real-life scenario What situation is your user in when they buy or use your product? What are they trying to achieve? This internal motivation / Job-to-be-Done is ideal to lean into. Focus on the whole process in line with your North Star Metric.
• Understand their motivation Why do users engage with your product? What drives them to act? Because when there is a big driver, that’s where there is already momentum for a loop.
• Look for existing social behaviors Are there any natural sharing or collaboration points in how users currently interact with your product? If they’re already doing it without you asking, you only have to make it easy for them/more rewarding through your solution.
• Identify internal/external triggers What events or situations might prompt a user to engage with your product or share it with others? Or for retention loops; what makes them think of your product (category)? Those triggers are the perfect moment of timing.

Or here are some very specific opportunities to look for:

• Do people often discuss your product or its outcome with others?
• Are there natural points in your user journey where sharing or inviting others would be beneficial?
• Can users create something within your product that they’d want to share with others?
• Does using your product give users a sense of achievement or status?
• Are there network effects that make your product more valuable as more people use it?
• Do users naturally want to showcase their work or achievements from your product?
• Is there a way for users to collaborate or compete within your product?

If you answered yes to any of these, you’ve got potential for a Growth Loop! The trick is to design features that encourage ongoing engagement and sharing, rather than just slapping a “Share” button on everything and hoping for the best.

Remember: the best Growth Loops often come from currently existing behaviour. That’s why it’s so important to look at your actual customers and not just copy from others, because you want to lean into behaviour that is already happening. You might be surprised at what you discover!

Step-by-Step: How To Build Your Growth Loop (+ Template)

Okay, so you’ve identified a potential Growth Loop. Exciting times! 🎉 But now comes the slightly scary part – actually implementing it. Don’t worry, I’ve got your back. Here’s a step-by-step guide to get you started with the Growth Loop Framework:

1. 1Map the loop — pick the one output you already create most (content, invites or data).
2. 2Define the trigger that naturally pulls users back in.
3. 3Make the action easier and more rewarding to take.
4. 4Turn the output into new reach for the next user.
5. 5Measure one number and iterate from there.

• Observe: Understand the core ‘Why’ Before you start building, write down why your users do what they do. This core motivation is the core of your growth loop. That is what starts the movement, keeps people going and makes people come back into the loop; because they want to achieve something and you give it to them.
• Design: Create Your Loop Blueprint Now, let’s design the loop:

Define the trigger: What’s the trigger and how to mimic that through our product?

Outline the user’s action: What is the user’s action and how can we make it easier/better?

Determine the output: What is the action’s output, how can we boost its impact & how can this feed back into more triggers? - Define the trigger: What’s the trigger and how to mimic that through our product? - Outline the user’s action: What is the user’s action and how can we make it easier/better? - Determine the output: What is the action’s output, how can we boost its impact & how can this feed back into more triggers? - Build a “Minimum Viable Loop” Start small and focus on the core mechanics of your loop. Do NOT go for perfection! Just launch the bare minimum. Look for quick wins that can demonstrate the potential of Growth Loops. It shouldn’t take more than 2 days of work to set up your initial version! - Start small & manuallyLaunch your loop to a small group of users. Collect feedback and data on how users interact with your loop. The more you can do manually, the faster you can launch & the closer you are to your audience for feedback. - (Expect to) Iterate There is a practically zero percent chance that you instantly nail a growth loop, so beforehand: Break down the entire process into clear, trackable steps. Then, determine what you’ll measure at each step. Then just keep running experiments on it. - Time to scale!! 🚀As you see positive results, gradually expand the reach of your loop, start to professionally build it into your product and then optimize it for your growth metric!

• Define the trigger: What’s the trigger and how to mimic that through our product?
• Outline the user’s action: What is the user’s action and how can we make it easier/better?
• Determine the output: What is the action’s output, how can we boost its impact & how can this feed back into more triggers?

By following this framework and taking an iterative approach, you’ll be able to create a Growth Loop that not only drives sustainable growth but also genuinely adds value to your users’ lives. Stick with it, and you’ll be amazed at the results!

How to Measure a Growth Loop?

Alright, you’ve got your Growth Loop up and running. Time to kick back and watch the growth roll in, You’ve got your Growth Loop up and running – great work! But the journey doesn’t end here. Measuring and optimizing your Growth Loop is where the real magic happens. Let’s dive into how to effectively track and improve your loop’s performance.

Firstly, if your company already has proper in-app tracking, stick to it! Otherwise, here are some popular options that would be nice to track user behaviour throughout your growth loop:

• Mixpanel/Amplitude: Great for event-based tracking and funnel analysis
• Google Analytics 4 (GA4): Offers comprehensive user journey tracking
• Segment: Allows you to collect data once and send it to multiple tools

Choose a tool (or combination of tools) that fits your specific needs and integrates well with your product.

Key Metrics to Track

While every Growth Loop is unique, here are some essential metrics to keep an eye on:

• Conversion Rate of every step in your loop: Simply check what is not adding value.
• Loop Velocity: How quickly users move through your loop
• Retention Rate: Especially for users acquired through the loop
• Loop Retention: Do users keep going through your loop? Otherwise it’s not actually fulfilling.
• Viral Coefficient: The number of new users each existing user brings in
• Customer Lifetime Value (LTV): Compare this for loop-acquired users vs. other channels, before the growth loop is fully integrated into your app and it turns out to be worth nothing 😬.

Remember, these metrics might look different for every business. The key is to identify the metrics that truly reflect the health and impact of your specific Growth Loop.

"Pro Tip: Use cohort analysis to understand how changes to your loop affect user behavior and your One Metric That Matters over time. This can help you distinguish between short-term boosts and sustainable improvements."

Pro Tip: Use cohort analysis to understand how changes to your loop affect user behavior and your One Metric That Matters over time. This can help you distinguish between short-term boosts and sustainable improvements.

Remember, optimizing a Growth Loop is an iterative process. It’s about continuous improvement, not perfection. So keep testing, keep learning, and keep growing!

Conclusion

Whew! We’ve covered a lot of ground, haven’t we? Let’s recap the key takeaways:

• Growth Loops are great opportunities! But they also still live next to funnels, so only move to growth loops if you have a proper funnel bringing in paying customers.
• The best growth loops come from really understanding your users. If you nail the intrinsic motivation, you can nail your growth loop.
• Setting up your growth loop is difficult, but keep it small & easy, and be prepared to iterate a dozen times!

Remember, Growth Loops are pretty difficult to pull of; both in spotting the right opportunities and then designing a useful loop as well. But; the potential for explosive, sustainable growth is huge.

Bonus tip: I think the growth book on Cold Start Problem by Andrew Chen is nice for this topic.

So, what’s your first step now? I’d recommend starting by identifying potential Growth Loop opportunities in your product or service using the checklist we discussed earlier. From there, you can start planning your first loop implementation.

And hey, if you get stuck or have questions along the way, don’t hesitate to reach out. We’re all in this growth journey together! 🚀

FAQs on Growth Loops

Absolutely! While B2B Growth Loops might look different from B2C ones, they can be just as effective. Still focus your attention on the same opportunities: where people talk to each other (about business), share with each other (about business) or get reminded (about your business). There are many example of growth loops about expanding inside a business or about hopping between companies.

That just really depends on whether you instantly nail the intrinsic motivation or not. If that’s right, the iteration process might show initial results in weeks. The key is to focus on leading indicators early on, like engagement rates or sharing behavior, before expecting to see significant growth in user numbers.

Not all Growth Loops require a social component. Consider loops based on user behavior, product usage, or value creation. For instance, a productivity app might create a loop where increased usage leads to more data, which improves the product, attracting more users. Retention Loops are also a big thing, or you can make the value sharing asynchronously!

Definitely! In fact, many successful companies need multiple Growth Loops to reach the levels they want. Different loops can target various aspects of your business or different user segments. Just be careful not to spread your resources too thin – it’s often better to nail one loop before adding more.