Growth Loops: Are They Here to Replace Funnels?

Want to 10x Your Growth? Then Employ This Marketing Loop

Growth loops are a way for companies to create a product that will help them grow. They are the next step in the sales and marketing evolution of growth hacking, and they have also been dubbed as 'funnels on steroids'.

Will growth loops replace the traditional growth funnel in your product market and marketing campaigns? It certainly appears that funnels like the AARRR funnel are losing ground, and many of today’s fastest-growing companies are employing growth loops in their marketing initiatives to attract more paying customers and deliver exponential growth.

Here we compare AARRR funnels to growth loops and look at five examples where growth loops have resulted in stellar growth for the companies that have employed them.

What is the AARRR framework?

The AARRR model stands for acquisition, activation, retention, referral, and revenue. These explain the multiple steps of the AARRR funnel framework – starting with an offer to a potential customer that is relevant to consumers’ desires and ends with a sale or completion of a lead generation process to drive growth.

The AARRR funnel also allows marketers to identify when they have enough information about their audience so they can focus on specific customer segments.

Each of the steps is critical to the success of AARRR marketing, so they must be well-planned out before launching any new product or service.

How does the AARRR funnel work?

The basic idea behind an AARRR funnel is that when someone signs up for your product, they get something of value in return for their time and effort. You should make signing up easy to do.

Of course, the strategy relies on the power of a compelling value proposition to generate leads, sales, and customers. It works by making it more likely for consumers to act and continue down the funnel.

In essence, there are two parts to each step: the first is an offer, and the second is a commitment. The offer can be anything from free samples to discounts to free trials. The commitment is usually a purchase or subscription.

To optimize the AARRR funnel, you might use pirate metrics. Invented by Dave McClure, this is a way of determining where you should focus optimization of marketing along the funnel to optimize the use of your time.

Benefits of an AARRR funnel strategy

An AARRR funnel is used by businesses to improve their communication with their customers to drive better conversion rates and increase revenue. The benefits are substantial enough to make the investment worth the cost for any business, and include:

  • Higher conversion rates

  • Increased customer satisfaction levels

  • Reduced customer churn

  • Improved effectiveness and efficiency of marketing

  • Higher revenues

In addition, the time and money that sales teams save by adopting a funnel strategy can be invested in other areas of your business, such as product and service development or customer service.

Disadvantages of AARRR funnel marketing

The AARRR model focuses on acquisition and was developed when the marketing channels that the model uses were not saturated as they are today. This meant that these channels were far easier to exploit, and the acquisition was easier to scale.

The strategy is more commonly adopted by large corporations with the resources to invest in the kind of technology and data collection/analysis needed for success. Smaller businesses find this strategy less useful because they lack the required tools for accurate tracking of their marketing efforts.

Also, because the AARRR strategy focuses on customer acquisition, it can be difficult and costly to retain those customers.

What are growth loops, and how does a loop work?

Growth loops are a strategy that is focused on getting more customers and users by using incentives, content, and content distribution methods.

They are often used to generate new leads for your business and to help grow your customer base. When executed properly, they can be an effective way to increase brand awareness, because they derive growth through current users and recommendations.

Growth loops are viral in nature. People share your content with others, and they share with their networks, and so on. This organic virality improves the ROI of your marketing efforts by increasing conversions, revenues, and retention.

Benefits of growth loops

Adoption of growth loops into your marketing will help you to create and manage growth plans, track progress, and get timely insights into the customer journey as well as their pain points.

They allow you to track the progress of their product and adjust accordingly. You can test different strategies to maximize the growth potential of your product and you can easily see what is working and what isn’t. This allows you to quickly adopt changes to increase your product’s traction.

Growth loops also help you to prioritize work on the aspects of your product that will make it grow faster. You can focus on experimentation, without wasting too much time or effort on aspects that might not achieve the long-term success of a product.

In marketing, you get more freedom to create unique content and deliver it to the right person at the right time. It’s easier to create and test campaigns for product launches and to follow up with customers.

The disadvantage of growth loops

The problem with growth loops is that it places almost all emphasis on conscientious product design. A little tinkering will set exponential growth in action. 

Of course, products must be designed thoughtfully and to deliver to customers’ needs and desires, but growth loops can ignore external influences on engagement and sales growth. The product’s sales are considered to have grown only because of the revisions to the product. For example, influencers of sales could include:

  • First mover advantage

  • Paid advertising

  • Customer retention

Having said all this, there are many undeniable examples of success where companies have employed growth loops within their growth models.

5 Examples of growth loops that delivered huge success

Notable examples of exponential success using growth loops include:

  1. Netflix

Netflix and chill? Its machinery collects data on viewer preferences, refreshes its algorithm, and sends out marketing information based on this – to segmented audiences. The result? It continues to grow its user numbers on an exponential curve, from 50 million in 2014 to more than 200 million at the end of 2020.

  1. LinkedIn

In a decade, LinkedIn grew its user numbers from around 35 million active users to more than 300 million in 10 years. How? They experimented and then recommended that existing users invite people in their network to join.

  1. Revolut

Revolut, the challenger bank, is adding around 10,000 users each day. A financial platform that allows you to send money across borders, Revolut used viral loop strategies to get people to share content and recommendations with others.

  1. Pinterest

When a user signs up to Pinterest, the company activates relevant content for that user. The user saves or re-pins content they love, and that provides signals on quality for Pinterest to exploit for new existing and new users, by distributing to them. Other users find the content and sign up, and the wheel is set in motion again.

The result? Founded in 2010, Pinterest now has more than 475 million active users (up from 335 million in 2019).

  1. Peloton

Peloton started off as a small company that focused on building a community through user-generated content posts on social media platforms like Facebook and YouTube. Its huge winner, though, has been its connected fitness products (bikes and treadmills) and its marketing strategy

Peloton offers subscriptions and the technology that allows people to connect with other users as they ride through races and different countries from the comfort of their own homes. Users can share their results online, and this engages new audiences.

The result? 100 million subscribers and revenues that have increased 10x from around $200 million in 2017 to almost $2 billion in 2020.

Close the loop: Is building a growth loop your path to 10x growth?

When a company focuses on growing, it can sometimes become too focused on performance metrics that require more time and effort as opposed to focusing on customer retention. This can cause problems in terms of creating a positive experience for customers that lead them back time after time.

Some companies have found growth loops, which are ways of improving customer retention without increasing cost or performance metrics. Growth loops are important because they allow companies to increase revenue without relying on traditional growth approaches, which can be difficult and unsustainable over time.

If your sales have stagnated, or you are ready to take the next step to accelerate your growth, then growth loops should be in your growth strategies. They could be the ticket to 10x your growth.

Would you benefit from marketing expertise for your fitness business? Book a free call with Level 5 Mentors today, and learn how we help our clients to 10x their growth.

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