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In this week’s issue:

• 💡 Discussing innovation by combining existing elements

• 📈 Breaking down the mechanism of growth loops

• 🤿 Diving deep into the AARRR Framework for startup growth

Reading time: 5 minutes

A Fresh Point of View

Stan's quote on creativity emphasizes that most innovations are incremental, combining existing elements to create something new. These combinations are accessible because the components already exist. Take the iPhone as an example, which merged existing cell phones with a large touch screen, spawning a new category: smartphones.

However, we must also recognize that envisioning entirely new concepts can drive groundbreaking changes. Uber, for instance, revolutionized transportation and consumption patterns, leading to the emergence of similar concepts, often called "Uber of X."

Implementing disruptive ideas is more challenging, as it demands profound changes on political, societal, or cultural levels. For instance, the increasing accessibility of AI like ChatGPT is set to have a significant, yet undefined, impact in the years ahead.

While building upon existing ideas holds value, we should not limit ourselves. We must continue to explore uncharted territory with our imagination.

Break It Down: Growth Loops

How does your product grow? You've got several path to explore:

• Ads

• Affiliate links

• Sales

• Social media

This is what is called a classic funnel: Pour more in, get more out. It's a tried and tested approach.

But let's face the problem with this approach:

• Acquiring new customers from scratch is hard.

• Funnels flow in one direction, lacking a continuous loop.

• Growth tends to be linear and limited.

Now, let's think more with loops. Growth Loops have the power to feed themselves, creating a self-sustaining cycle where the actions of one user lead to the creation of new users.

Here's an example for your SaaS: Why not create a financial incentive for your users to invite others?

Dropbox uses this technique by offering disk space to acquire new customers. Give them real added value, and watch the acquisition loop take off!

Testimonials.to also make use of this exact same strategy. Damon Cheng managed to embed himself in the website of other indie founders SaaS!

His flywheel is simple and effective:

• Either you "pay" him by having his app logo on your site, which brings him new users for free, and his loop continues to grow.

• Or, you can opt to pay $20 per month for the service.

Let’s Dive Deep: AARRR Framework

Let’s now deep on the AARRR Framework, a fantastic set of metrics that can make your startup sail the high seas like a mighty pirate ship.

These metrics are the secret sauce for measuring your company's growth in a way that's straightforward and easy to put into action. So, get ready to hoist the anchor, set sail, and uncover the treasures of the AARRR Framework!

Acquisition: Charting the Course

To ensure your startup's growth, it's vital to know where your users are coming from. Understand their journey, optimize it, and identify the marketing channel with the highest volume, lowest cost, and best performance.

Activation: Unleash the Aha Moment

The user's initial experience with your product is crucial. Conduct extensive tests, including landing pages and A/B tests, to quickly iterate and discover the "Aha Moment." Guide users to the point where they realize the true value of your product, ensuring they become repeat customers.

Examples include Facebook's requirement of 7 friends in 10 days or Twitter's recommendation to follow 30 people.

Retention: Anchoring Users

Regularly assess whether users are returning to use your product or leaving. Embrace your unhappy customers as a valuable learning opportunity. Implement automated emails to enhance retention.

Remember, for growth, your acquisition rate must surpass your churn rate. Failing to do so leads to a leaky bucket, draining your resources.

Referral: Harnessing the Power of Advocacy

Transforming customers into advocates is key. Encourage referrals after users have a positive experience or establish a systematic referral process with incentives by leveraging growth loops.

Monitor the viral coefficient, which indicates how many users each customer refers. For instance, a viral coefficient of 2 means one user brings in two new users.

Revenue: Navigating the Monetization Waters

Develop a solid plan to monetize your startup and increase revenue. Focus on maximizing customer lifetime value (CLV) while minimizing customer acquisition costs (CAC).

Aim for a healthy CLV:CAC ratio of 3:1, ensuring sustainable revenue growth.

That’s it for today! 🙌

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Thanks for reading and see you next week,

Marc-Etienne