The impact of Growth Hacking on startups has been immense, accelerating the growth of the most successful startups such as Airbnb and Uber. The Growth Hacker has become a crucial role within startups. Growth Hackers are in high demand; especially those that know what they’re doing. As its role in startups has evolved, […]
The impact of Growth Hacking on startups has been immense, accelerating the growth of the most successful startups such as Airbnb and Uber. The Growth Hacker has become a crucial role within startups. Growth Hackers are in high demand; especially those that know what they’re doing. As its role in startups has evolved, the meaning and practice of Growth Hacking has evolved to a predominant focus on User Acquisition strategies. It’s a very important focus area.
But what if I was to tell you there is actually a much more crucial focus area out there? This focus area is called Funnel Hacking.
So, what’s the difference between Growth Hacking and Funnel Hacking, you ask? Surely, Funnel Hacking is just about building a sales funnel, you say. No, it’s not. Funnel Hacking is a methodology I have designed to solve a number of problems I’ve seen in the way startups operate. So, before I explain Funnel Hacking to you, let’s go through some of these issues that prevail in startups these days.
Startup Problem #1: The Bottleneck
There is one role in a startup that is constantly a bottleneck for forward movement. That’s the role of the software developer. Not because they are bad at their job, but because they have way too much to do. There’s always a huge backlog of work to do for the developer. So, any new task that comes up needs to be reviewed in light of this backlog and prioritized accordingly. This made me realize an opportunity: how can we reduce the tasks that fall into the developer’s domain? What are the types of tasks a developer is doing that perhaps should not really be in their purview? Let’s get back to that in a bit.
Startup Problem #2: The SaaS tool Minefield
How many SaaS tools has your company signed up for? Intercom, MixPanel, Salesforce, Mailchimp: the list can go on and on. And how much are you spending on them? Now, tell me how many of these tools are you truly getting value from? Are you paying for 100% but really only using 20% of the features? More importantly, did you actually choose the right tool for your business? How would you know? There are so many tools out there in each space that it’s impossible to spend enough time to test out and review all of these tools, so often you just choose what your buddy is using in his company. But how many of these tools has he bothered to try out? Are his company’s needs similar to yours? And what about the types of tools that you don’t even know about, and could solve a need that you’re currently building software to solve? The reality is there’s not enough time in the day to do a thorough analysis and match up between your needs and what is in the marketplace, and to do everything else that is demanded by your startup. So the opportunity here is: who can help you to figure out the best tools to implement for your needs?
Startup Problem #3: The Business Logic Engulfment
Back when I was designing and building software for corporates who had plenty of time and money to throw at this, we spent time identifying all the business rules that applied to the software we were building in advance of starting to code. And then, we might even find ways to set those business rules up so they were editable by the business people, perhaps through a business rule management system or by setting up a configuration module to manage a set of values and rules, so that the business could change these rules at will.Fast forward to today. In our efforts to move fast for our startups, we’ve reverted back to engulfing our business logic into code. The irony is, that in doing so we are actually slowing down the velocity of our startup because once again, we are relying on the developer to make any changes to our business rules. So how can we put this business logic back in the hands of our business people so they can make changes to them, using modern methods?
Startup Problem #4: The Cohesion Vacuum
In previous roles as a Business Analyst, Process Engineer and Integration Analyst, I would draw up process flow diagrams that would show the flow of a business process from a trigger in one system and how that data was meant to flow through other systems, what was required to be instrumented in each system and what data was required.Nowadays, as we leverage various different fit-for-purpose tools in addition to our custom software, we neglect to go through this process and arrive at a big picture flow for our systems, end-to-end. In the absence of this key task, and in our scarcity of time and resources, we let things fall through the cracks, assuming that someone, or something has it covered. It usually is not. Lost customers, lost revenue, and missed opportunities are all consequences of not creating an end-to-end process view of a customer’s journey.So how do we ensure we get good coverage and analysis of a Customer’s journey from end to end?
Startup Problem #5: The Chicken and Egg Dilemma
Many new startups train their focus in their early days on Customer Discovery – where the world learns about your product. They often spend a considerable amount of their hard-raised money on acquiring eyeballs for their startup. But it’s often the next steps of the customer journey where they fail to invest a good proportion of their attention (and funds): converting the customer, and retaining the customer. Without focus on these key steps, a startup’s Customer Acquisition Cost will soar through the roof. But in order to figure out what works to convert your customers, you need to acquire some users. And this is the dilemma that startups with limited resources are faced with – focus on attracting users or focus on converting them.
Startup Problem #6: Untapped Free Revenue
There’s another area of focus that is neglected by many startups, and that is seeking ways to increase revenue from existing customers. The acquisition cost for this additional revenue is nil, so it’s essentially free money – all a startup needs to do is present the offer to their users. Increasing Lifetime Value should be a key priority for every startup.So why, you ask, don’t startups focus on doing this more? Well, partly the answer goes back to Startup Problem #1: The Bottleneck. However, if we could enable our business-focused team members to act on this, without having to rely on a developer, I’m pretty confident they would spend more of their time on this goal of getting more revenue from existing customers.
Startup Problem #7: The Missing Role in your Startup
Have you ever felt like there was a disconnect in your Startup between your CTO, Product Manager, Customer Success team and Marketing team? Each of these roles has a specific focus and whilst everyone is putting out fires and moving fast, there is often a lack of consideration for how everyone can work together seamlessly. Moreover, your Customer Success person sees problems that the customer is experiencing, but isn’t empowered to stop those problems from recurring. Your Product Manager is struggling to capture information in the right way to know if new features or other experiments are effective in achieving goals. Your Marketing Person would like to send emails to a certain segment of customers but hasn’t got the data to support that segmentation, and doesn’t know how to acquire that data without bothering the developer, who is over-allocated.Enter the role of the Funnel Hacker. A Funnel Hacker has a goal that is very different from all of these roles. A Funnel Hacker’s primary focus is to implement the underlying infrastructure to enable each of these roles to do their job better. To empower non-technical team members to experiment and iterate without developer involvement. This may sound like it’s too good to be true, but with a little bit of up front effort, you can change the entire way you startup operates, and enable it to move faster.
What is Funnel Hacking?
While Growth Hacking is focused on bringing as many eyeballs to your site as possible, Funnel Hacking wants to make the most of the eyeballs that come your way and convert as many of them as possible, and then once converted, extract as much value as possible. This may not sound all that new to you. What is new is exactly how Funnel Hacking does so. And it all comes down to this: The one underlying principle of Funnel Hacking is empowering your non-technical team members to move fast and iterate without developer involvement. In so doing, your team members feel unencumbered when experimenting and iterating on their funnel initiatives. This is extremely powerful. Startup Problem #1: The Bottleneck is one issue that everyone I talk with, from startups to corporates, connects with. I have never met anyone that said to me that their developer is sitting around trying to figure out what work to do because they have nothing on their plate. How many times have you come up with an idea you want to implement and then the second thought you have is that you don’t have the developer resources to implement it? I’m guessing you’ve lost count. I know I have.And that’s where the Funnel Hacker’s toolkit comes in. It removes business logic from code and puts it back in the hands of the people that make decisions about it – so they can make changes to it without writing code, without deploying a software release (solving Startup Problem #3: The Business Logic Encapsulation). All it requires is access to the right tool(s) in the Funnel Hacker’s toolkit.
The Funnel Hacker’s Toolkit
1. The Customer Funnel
With Funnel Hacking, we have an 8-stage funnel that applies to almost any business. Its power is that it provides a framework and a common vocabulary for discussing what needs to be done.
Every stage of this funnel has a goal and a set of tools and practices associated with it.
Get User to discover your product
Get User to sign up for Trial or Purchase
Get User to convert to paying customer
Educate User and Respond to Questions & Issues
Support Subscription & Payment
Encourage Greater Spend
Retain Customers longer
Get new Customers from current Customers and Partners
In Growth Hacking, the majority of focus is on the Discover stage of the Funnel – getting users to discover your product. In Funnel Hacking, most of the focus is on the subsequent 7 stages.The common pitfall that many startups fall into is focusing primarily on this Discovery phase.They drive a whole slew traffic to their site through various Growth Hacking tactics, and then they lose most of their leads in the next 4 stages of the funnel (Familiarity, Trial, Support, Purchase).This has the impact of driving up their Customer Acquisition Cost (aka CAC) which doesn’t look good to their bottom line or to their prospective investors.Then once they’ve successfully acquired a customer, they forget to maximize their revenue from this customer, that has already demonstrated purchase intent. So in the final 3 stages of the Customer Funnel (Upsell, Retain, Refer), they miss out on their opportunity to maximize customer value. This restricts the potential of their Customer Lifetime Value (LTV).A good Funnel Hacker keeps up to speed with the best of breed tools out in the marketplace and understands the strengths and weaknesses of each (solving Startup Problem #2: The SaaS tool Minefield).
2. Fit for Purpose Tools
The key to Funnel Hacking is being able to choose the best and most suitable tools for your business and connect them together in a smart way, such that you can pass information between them about each user of your platform, whilst retaining the best of breed tool for each capability. The less attractive alternative is to choose one of those monolith applications that claim to do everything but don’t do anything very well. So, how do we do that at Funnel Ventures? We use an integration product called Segment. It enables us to pass information between all of our favorite tools so we don’t have to compromise on quality, in favor of integration. So your next question will likely be, “But what about all those cool tools that don’t integrate with Segment?” We have an answer to that as well. We’ve built a custom Zapier app that allows us to connect any Zapier-enabled tool to Segment. Check it out here, and request an invitation to our private Zapier app.
Growth Hackers have “growth hacks”, Funnel Hackers have “playbooks”. While a growth hack’s effectiveness is often short-lived, a playbook’s lifetime is unbound and less susceptible to the changing tides.A playbook is a way to document a process to achieve an outcome for one or more stages in the Customer Funnel. A playbook will show the end-to-end process and how each of the tools interact with each other (solving Startup Problem #4: The Cohesion Vacuum). You can find our publicly available playbooks here to get an idea.All playbooks are triggered by a specific event. This triggering event is most likely sourced by an event coming out of your platform, but it may also be sourced from one of your key tools, like your billing system or NPS tool.
Example playbook diagram sourced from the Funnel Ventures Blog
A Funnel Hacker must identify all the events and data to be sent from the startup’s platform. It takes a certain amount of understanding of the current and future goals of each startup to construct these events in the most optimal way, so that they work for now but also for the future, when your product, marketing and success team members want to implement an initiative to achieve their goals, without developer intervention. This article from Amplitude provides some good insights into how to construct them best for analytics purposes. Of course, there are several end systems that will receive these events and profile data, so a good Funnel Hacker will factor in the needs of all of the receiving systems in designing the data taxonomy.
4. Single View of a Customer
The concept of being able to collate everything about a customer into a cohesive view is not new. It’s been a goal for many years, if not decades. But it has always seemed somewhat out of reach, especially to startups that are relatively cash strapped.Now that we can integrate our systems via integration tools like Segment and Zapier, this goal is no longer out of reach. There are several tools you could use to create this single view of a customer. The image below is extracted from one of my favorite tools, Drip, and represents all the events that have been applied to a customer:By collating all of a customer’s actions and their profile data into a tool like this, we’re now able to build highly personalized flows that can achieve any number of the goals in our customer funnel including the following: convert a customer during trial, upsell an existing customer, re-engage and retain a customer, ask a customer for a referral.
So that’s an introduction to Funnel Hacking. If you’re wondering how all of these Startup Problems identified here are addressed by the Funnel Hacker’s toolkit, here’s a matrix that sums it all up:
Founder & CEO
Audrey Melnik is the Founder and CEO at Funnel Ventures. A startup founder and consultant with more than 20 years experience in technology and startups, she is the creator of the Funnel Hacking methodology.