"Growth Foops" might be the key to scaling you growth

What happens when you combine a funnel and a loop

Hi there,

When growth became a growing discipline, it was all about AARRR funnels, but as technology evolved and competition rose, funnels were no longer enough to drive growth.

While they remain necessary, loops emerged as a significant growth driver. Loops result in self-reinforcing growth.

Yet, too many businesses are still caught up in funnel thinking. While funnels offer a more complete focus on the customer journey than ‘traditional’ marketing, it still has some challenges.

Credit: Created together with Hello Growth for Funnels vs Loops article

Why funnels lost some appeal lately

With growing competition and acquisition costs, the linear nature of funnels makes them hard to use to build a sustainable business. 

Funnels imply that if you want more growth, you must keep investing more resources. And the amount per acquisition increases as you reach scale due to diminished return effects.

We need something more scalable.

In comes loops

Reforge has popularised growth loops. 

The loop-based growth is simple: I build an asset (and that can be a product) that delivers more customers with each customer who joins, thus creating an exponential growth curve. As a result, cost per acquisition decreases in contrast to linear channels.

They can be used not only to acquire new customers but also to build engagement and retention.

For example, Pinterest works with a powerful referral loop:

Credit: Created together with Hello Growth for Funnels vs Loops article

But whilst more efficient loops also have limitations: they need momentum to start and get going. Start a referral programme early on as a DTC brand, and you won’t see much of a lift, you need a certain number of users to make it work. 

Time for some “Growth Foops”

We can build a more robust growth engine by combining the power of funnels and growth loops. This article walks you through the evolution from marketing to funnels to loops.

Credit: Created together with Hello Growth for Funnels vs Loops article

The funnel fuels the acquisition loop until it exceeds the threshold of self-perpetuation. From this point on, the acquisition loop becomes the main driving factor of growth. 

A secondary retention loop prevents churn and further adds to the momentum of the acquisition loop.

Recommendation

In every edition of Growth Waves, I also share a related book, individual or newsletter to check out related to the week’s topic.

If you are curious to learn more about growth loops and funnels, definitely check out the full article, which was written together with Thorsten Strauss from Hello Growth and inspired this newsletter.

The second recommendation I have for you this week is to try and draw out your growth model:

Step 0: Ensure you have Product-Market Fit. With it, knowing what channels are right for you and retention will be easier to achieve.

Step 1: Map out your engagement and retention loops. For DTC brands, channels like email and SMS often play a heavy role in this, as well as retargeting ads.

Step 2: Identify potential channels and think about if they could be a loop, e.g. paid ads could help you run more ads if you have a short enough payback period.

Step 3: Build out the funnel. Often, these are brand awareness channels (more linear traffic sources), e.g. social media, PR, and influencers that help get your growth model up and running.

Step 4: Test and iterate the growth model. Review it regularly to see what is and isn’t working, and which parts of your loops need extra attention to be improved. 

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Growth models are a powerful tool for your organisation. They force you to think more critically about how you grow and align everyone in your organisation on what will lead to your growth. 

The first time I drew out the growth model of Heights when I was Head of Growth there, I ended up with about seven loops… too many! Having the model and analysing it together helped us focus in on the loops that really mattered and simply our approach to growth.

So, definitely take the time to do the same!

Daphne