Growth Foundations: Acquisition Loops
GM!
I am writing this article with the intention of sharing insights that I have gathered over my years helping to grow brands, products, and communities. We’re all striving to create things that can positively impact people’s lives, and to do so, a deep understanding of growth mechanisms is invaluable. It’s not just about building a great product; it’s about getting it into the hands of users.
One method that has had incredible results in the tech industry is growth loops. Tech giants like Instagram, for instance, used (and still use) growth loops to skyrocket their user base and establish a dominant market position. But what are growth loops, how do they work and how can you create them for your product? I will break it down into two articles, this being the first.
Summary
Section 1 — Growth Loops, their Features, and the Two Macro Types
Section 2 — Acquisition Loops, and their Subcategories
Section 3 — Viral Loops, and the Stages of a Viral Loop
Section 4— Types of Viral Loops, and Easy-to-Grasp Examples
Section 5 — Measuring Viral Loops, and Examples-in-Action
SECTION 1 — Growth Loops, Their Features, and the Two Types of Growth Loops
Growth Loops Explained
Growth loops are essentially self-sustaining systems that fuel user acquisition, engagement, and retention for a product or service. Picture a never-ending cycle where users’ actions stoke the flames of growth, leading to more and more users discovering and adopting the platform. It’s a virtuous cycle and one that, if done right, can lead to explosive growth.
Key Features of Growth Loops
- Intentionality: Growth loops don’t just magically appear. They are carefully orchestrated cycles of inputs, user actions, and outcomes that lead to the acquisition of new users, or better engagement with existing ones.
- Reflexivity: In a growth loop, inputs or user actions are used to generate positive outcomes, which then spur further inputs or user actions. It’s a continuous cycle that keeps the momentum going.
- Sustainability: The beauty of a growth loop is its potential for sustainability. Each successful loop feeds back into itself, creating an environment for consistent, long-term growth. This self-sustaining mechanism is what makes growth loops such a powerful tool for expanding your user base and enhancing your product’s reach.
The Two Types of Macro Growth Loops
- Habit Loops: These loops focus on fostering repeated behavior among existing users, effectively turning these behaviors into habits. The process involves triggering user actions, rewarding the desired behavior, and reinforcing the action through positive feedback. Imagine it as a cycle of engaging, rewarding, and then reinforcing user behavior to ensure that they keep coming back to your product.
- Acquisition Loops: As the name suggests, these loops concentrate on acquiring new users. In this article, we deep dive into acquisition loops. The methods of acquisition can vary, encompassing everything from owned product channels to marketing/sales strategies. Tactics might include referrals, leveraging user-generated content, and more.
SECTION 2 — Acquisition Loops, and their Subcategories
Acquisition of new users isn’t a process that simply happens on its own; it requires intentionality and strategic planning. Traditional marketing funnels may come to mind when thinking of user acquisition, but there’s a more potent and sustainable alternative: acquisition loops. Unlike funnels, acquisition loops have the power to reinvest in themselves, creating a compounding effect that fuels continuous growth. This can be a game-changer for your brand, product, or community, sparking a sustainable fire of acquisition. So, let’s explore these acquisition loops in further detail and understand how they can transform your user growth strategy.
Let’s dive deeper into the four subcategories of acquisition loops.
The Subcategories of Acquisition Loops
- Viral Loops: These loops turn existing users into brand ambassadors, prompting them to spread your product and thus acquire new users. We dive deep into Viral Loops in this article.
- Content Loops: Content loops capitalize on the power of both user-generated and company-created content to attract new users. Whether it’s a user’s rave review or a compelling blog post from the company, the idea is to use the content as a magnet for new users.
- Paid Loops: Paid loops involve utilizing paid advertising or other paid channels to draw in new users or customers. It’s about strategically investing money to attract eyeballs and convert those eyeballs into users. This is typically the most useful once you have a clear monetization strategy.
- Sales Loops: These loops use sales tactics to acquire new users or customers. It could involve anything from a dedicated sales team reaching out to potential customers to using upselling or cross-selling techniques to convert current users into paying customers.
SECTION 3 — Viral Loops and the Stages of a Viral Loop
Viral Loops Explained
One heuristic you can use to understand Viral Loops is through Zombies (I know, I know, your users are cooler than that).
One of your existing Users is a zombie and will infect other humans around them, turning them into zombies. This creates a viral spread — pretty soon everyone is using your product!
Understanding the Stages of a Viral Loop
- New User Joins: This stage tracks the conversion of invited individuals into new users.
- Invite/Action: Here, we measure what percentage of new users take the desired action, such as inviting others.
- Branch + Channel: This stage considers the number of people exposed to the product or service from invitations.
- Response Rate: This final stage gauges the ratio of positive responses to total exposures. Typically the positive response is invited person joins as a new user, which starts the cycle over at stage 1.
SECTION 4 — Types of Viral Loops, and Easy-to-Grasp Examples
Types of Viral Loops
- Word of Mouth: This traditionally involves one person telling another about the product/service, independently of the product experience itself.
- Organic: In this type of loop, one user invites another to the product through natural, non-incentivized usage.
- Casual Contact: As one user uses the product, they inadvertently expose non-users to it.
- Incentivized: This type of loop covers situations where inviting new users is directly incentivized, often with tangible rewards like money, content, or special features.
Viral Loop Type #1 — Word of Mouth Loops
In word-of-mouth loops, one person tells another about the product/service outside of the product experience itself.
Pros: These loops cost the user nothing and tend to have a high response rate.
Cons: Attribution can be challenging and there’s no direct control of the user.
Examples of Word of Mouth Loops
OpenSea: You mention a new piece of art you bought and how you got it on OpenSea.
Uber: You arrive at a friend’s house and mention how you didn’t need to drive because you ordered an Uber.
Venmo: You start a new business and tell people that you don’t accept cash anymore but you do accept Venmo.
Amazon: You show off your new shirt and say you ordered it just yesterday from Amazon.
POAP: You talk about a concert you went to and mention you got a collectible from POAP.
Viral Loop Type #2 — Organic Loops
Organic loops occur when a user invites another to the product through natural, non-incentivized usage.
Pros: They incur minimal cost to the user and can achieve high volume.
Cons: Response/conversion rates can be low.
Examples of Organic Loops
Dropbox: You upload photos of a family dinner and share the folder so everyone can see them.
Uber: You ask a friend if they want to split a fare and send a payment request through Uber.
Loom: You create an explainer video and send a link to the team.
Slack: You want to chat with a coworker and send an invite to Slack.
Zoom: You’re hosting a team meeting and send an invite to Zoom.
POAP: You’re celebrating an event and send a mint link to claim a POAP.
Viral Loop Type #3 — Casual Contact Loops
Casual contact loops occur when a user indirectly exposes non-users to a product through natural use.
Pros: They come at minimal cost to the user and can achieve high volume.
Cons: Attribution can be challenging and the response rate can be low.
Examples of Casual Contact Loops
Zendesk: A non-user visits a website for customer support and notices the Zendesk logo on the chatbot.
Uber: A non-user walking down the street sees the Uber logo on a car’s rear-view window.
Bird: A non-user sitting at a restaurant notices a row of scooters with the Bird logo on them.
Ring: A non-user visiting a friend’s house spots a device on the door with a “secured by Ring” logo.
POAP: A non-user walking through a conference sees people exchanging POAPs on their phones.
Viral Loop Type #4 — Incentivized Loops
In incentivized loops, inviting users is directly incentivized, often with tangible rewards like money, content, or special features.
Pros: They can generate high volume and receive high response/conversion rates.
Cons: They can come with high costs to the company as each new user is incentivized to join.
Examples of Incentivized Loops
Dropbox: You want more free cloud storage, so you invite your best friend.
Uber: You want ride-share credits, so you send an invite to your sister.
Wealthfront: You want lower fees on your account, so you invite a brother.
Robinhood: You want a free stock investment, so you invite your dad.
Classpass: You want free workout credits, so you invite your girlfriend.
Coinbase: You want $20 in free Ethereum, so you invite your grandma to buy the top.
SECTION 5 — Creating & Measuring Viral Loops, and Examples-in-Action
Creating Viral Loops
When creating loops, it’s important to:
Define Why: Understand why a user would want to engage in the action.
Consider Action/Cost: Assess the friction or effort required from the user to take that action.
Measure Branching/Volume: Determine the frequency of the action and how many potential new users it might expose.
Examine Response/Return: Identify the number or % of users who may be acquired when exposed.
How to Measure: Establish the calculation method.
Example #1 — Organic Loop by Dropbox
Action: Users upload photos with friends and share the folder.
Why: Users want to share important content with friends.
Cost of Action: Minimal — just a few seconds and a text message/email.
Branching/Volume: Multiple times during the product life-cycle. 5x per year, for example.
Response: Requires true analysis within Dropbox product data
Measure: # of Users x % of Users that take Action (Invite) x Volume x Response = New User Growth
Example #2 — Casual Contact Loop by Zendesk
Action: Non-users visit a website for customer support and see the Zendesk logo on the chatbot.
Why: Users want to offer customer support on their website.
Cost of Action: None — the logo is on the product with no action required from the user.
Branching/Volume: Each time a non-user chats with the chatbot.
Response: Requires true analysis within Zendesk product data
Measure: # of Users x # of unique Chats x Response = New User Growth
Example #3 — Incentivized Loop by Robinhood
Action: A user wants a free stock, so she invites a friend to join Robinhood.
Why: The user wants a free stock.
Cost of Action: Minimal — just sending a text/email to a friend. However, this comes at a high cost to the product/company.
Branching/Volume: Several times during incentive campaigns. Let’s say 3x.
Response: Requires true analysis within Robinhood product data
Measure: # of Users x % of Users that take Action (Invite) x Volume x Response = New User Growth
Measuring Viral Loops — Qualitative vs Quantitative
You’ve come up with a few Viral Loop ideas and jotted them down following the above framework. The challenge now is to determine which ones are worth developing, how to measure their success, and how to garner support from your internal stakeholders.
This is where you consider the differences between Qualitative and Quantitative models.
Qualitative — The best place to start, and helpful for internal alignment
Meaning: Growth loops are written out in plain language and are designed to be easily explained.
Pros: Broader communication, brainstorming, strategic thinking.
Cons: Inaccurate quantitative measures, are not helpful for prioritizing or understanding outcomes.
Quantitative — The calculations that need to be done, and helpful for roadmap prioritization
Meaning: Growth loops are written out with numbers and mathematics, and are designed to be quantified.
Pros: Goal setting, strategic investments, directionally correct predictions.
Cons: Complicated, terrible for internal comms, gotta live in the numbers to truly understand it.
While diving into the best approach for quantitative models isn’t in the scope of this article, you can use the above “Creating Viral Loops” framework as a potential qualitative approach.
If you have made it this far, congratulations! You are on your way to growing brands, products, and communities with powerful acquisition loops. But remember, with great power, comes great responsibility.
About the Author
Hey, I’m Anthony Bertolino. I’ve been obsessed with start-ups, marketing, product, and growth since a very young age. For the past 7 years I have been focused on Ethereum and the new open global coordination system we’re all building together. Feel free to read some of my other work, and connect with me on Linkedin or Twitter.
