Lean Startup Chapter 10: Grow

Take Aways from Chapter 10 - Grow

• Big Idea: Engine of Growth, how to drive growth in customers

• Sustainable growth: New Customers come from the actions of past customers
  • Word of mouth
  • Side eeffect of product use
  • Advertising or marketing funded by revenue
  • Subscription based, recurring revenue model
• Types of Growth Models
  • Sticky Engine: Relies on repeat purchases; focuses on churn
  • Viral Engine: Effective use requires customers to attract new customers; focus on viral coefficient
  • Paid Engine: Revenue feeds customer acquisition: focus on customer aquisition cost and lifetime value of customer

Detailed Outline of Chapter 10

• Growth
  • Sustainable growth is systematic and excludes one time campaigns and actions
  • Comes from the actions of past and existing customers
  • Four ways in general:
    • Word of mouth and referencing (people recommend your product to others)
    • Simple side effect of using the product (people see you using it and want to use it too; or in order to use you have to recommend)
    • Advertising (you spend money to get people interested in your product)
    • Inherent repeating model (subscriptions or consumables that have to be repurchased)
  • Sticky Engine of Growth
    • When your growth comes from retention of existing customers
    • attrition, retention or churn rate: fraction of customers in period n who don’t renew in period n+1
    • new customers added in period n+1 must exceed number of existing who dropped off
    • Focus on either attracting more new or getting the ones you have to renew
  • Viral Engine of Growth
    • When your growth comes when use of the product inherently attracts new customers
    • “viral coefficient” = How many new customers a single customer brings along, and after how long a delay
    • viral coefficient should be > 1 to get exponential growth
  • Paid Engine of Growth
    • When your growth comes from the simple ratio of customer acquisition cost vs. per customer earnings
    • Simply add more money to customer acquisition and you get a predictable amount of earnings from that
    • LTV of a customer tells you how much you can spend on customer acquisition

Discussion Questions for Chapter 10

• What are actionable metrics vs. vanity metrics, and how are they used?
• Why is growth important? What is the ‘engine of growth’
• Analyze Keurig Coffee Maker in this context
• Sticky Engine
  • What is it and how does it work?
  • What is the critical measure to say whether it is working?
  • What is a non-software product that exhibits this?
• Viral Engine:
  • what is it, and how does it work?
  • Whats the critical component? (Feedback loop)
  • What’s a non-software product or service that has a viral engine?
  • How would you determine the viral coefficient?
• Paid Engine:
  • What is it and how does it work?
  • How do you figure out LTV of a customer?
• Under what conditions does he engine of growth change?
  • What worked before is not working any more
  • Now something is possible that was not possible before because of scale.
• Can there be more than one simultaneously?
• Can there be more than one source of revenue simultaneously?
• How do you ‘tune’ the engine?