What is Growth? (1/3)

This article is the first of a 3-part series on growth as a function of customer centricity.

  • Part 1: Background and Proven Frameworks

  • Part 2: Changing Consumer Preferences

  • Part 3: Authenticity-Led Growth


In 2023, B2B startups often look to the giants when informing their growth strategy. Founders choose between two popular frameworks: Product-Led Growth (PLG) and Sales-Led Growth (SLG), depending on their product offering and ideal customer profile (ICP).

Without a sales team, early-stage startups tend to lean on methods of PLG to generate leads, and founder-led sales to close them. Later on, as companies double down on growth-specific efforts (before and after product-market fit), they formalize strategies and values that drive how both processes and product are designed.

Startups are expensive to operate, grow and sustain (both $ and time), but they don’t really have to be. Given market conditions, venture capital deployments are getting tighter and longer cycles for capital raises are inevitable. Klaviyo’s recent S-1 shows that no matter what, capital efficiency is king for building a successful business.

🤑 Klaviyo has grown to ~$585M of annual revenue having burned just $15M since its inception in 2012.

Doing things that don’t scale are essential early on. Founder-led sales, manual emails, free products, social and content marketing, etc. Eventually some of that work needs to be abstracted, or productized, so that it’s repeatable and doesn’t take time away from roadmap priorities. The fastest-growing B2B tech companies today however take a slightly different approach than pure PLG or SLG. They’ve not only combined the two, but adopted a few important strategies from the Facebook consumer growth team of the early 2010s: take advantage of network effects, experiment constantly and design great user experiences through the whole funnel.

Until recently, venture-backed startups and tech giants alike dumped tons of money into headcount and marketing and sales efforts with little regard for unit economics. In a recession, that doesn’t fly. Capital efficiency is a business fundamental. The faster you find an answer to “How can I put 1 dollar into my business and get 2 out?”, the faster you grow. Right? It’s not that simple anymore, as traditional funnels evolve to accommodate both changing customer preferences and market conditions. It’s becoming easier to build a bootstrapped company, but harder to grow one.

What is Growth?

The role is so new that everybody has a different definition. I’ve even seen it described as “marketing for dudes”… but growth doesn’t discriminate. All definitions (to me) converge on acquisition, engagement, retention and expansion-focused activities using a healthy mix of marketing, product and sales data. Growth has a deep understanding of the company’s distribution channels and revenue drivers, and the ability to run data-driven experiments to move a number. Growth marketing, growth engineering and growth product management have become more popular roles as companies have recognized the power of growing and sustaining an audience.

The initiatives of a growth team vary by company vertical, distribution and acquisition strategies, among other things, but their responsibilities and goals are the same. Acquire customers, make them happy and retain them (as cheaply as possible). Early growth is all about seeing potential in a solution to solve a particular problem and potentially many more, as the TAM at day 1 isn’t a constant, it can increase by day 1000 or 2000 as a company grows. To get there, build a hypothesis, run experiments and use the results to form future experiments.

Brian Balfour (of Reforge) described growth in 2014 as a full-funnel activity. Early growth came from the synthesis of traditionally separated teams: engineering and marketing. Overlaps with marketing and product teams are inevitable, and important to distinguish. The ability to extract more data from every part of the funnel enabled a new crop of generalists to uniquely own other parts of the funnel beyond just awareness and acquisition.

Source: Brian Balfour
Source: Brian Balfour

Growth leaders have long debated the best time to hire a dedicated growth team, whether growth should be centralized or distributed, and what skills make for a good growth hire. Some say opt for early-career generalists, while others prefer hiring a growth leader to build a team under them. For more on hiring and growth team structure, check out Elena Verna and Andrea Wang’s recent piece in Lenny’s newsletter, not going to go on too much of a tangent here.

As cliché as it sounds, growth truly is a mindset, and a company value. Brian Balfour emphasized the idea of growth as an integration of engineering, design and data resources to improve all parts of the funnel. Growth-obsessed founders design both product and sales processes with acquisition, engagement, and retention goals in mind, and prioritize initiatives by how they impact revenue.

Framework vs. Strategy

Marketing, product or sales-specific growth strategies are initiatives to improve or optimize a part of the funnel. For example, companies will employ variable content marketing and SEO, community-building, email/sms and localization strategies as they scale, and experiment with different pricing models, sales enablement, product features, and much more. Frameworks are the ideological basis upon which the individual strategies, and brand, are built.

Product-Led Growth: let the product speak for itself

Your product is the primary driver of user acquisition and expansion. A great user experience allows people to onboard and enjoy the product themselves, without a demo or any additional guidance from a human.

Benefits: Shorter sales cycle, Lower customer acquisition cost, potential for virality, customer feedback loops

Risks: Product complexity, self-serve not always sustainable, no control of sales process

Expansion: Add use cases to find new ICPs

Retention: User experiences and customer success

Examples: Slack, Dropbox, Zoom

Sales-Led Growth: let your sales team speak for the product

Your sales team drives pipeline by building relationships, partnerships and nailing outbound. A well-oiled sales and marketing machine create a personalized experience and hands-on onboarding.

Benefits: Personalized interaction, individual deal structures, relationship development

Risks: Inflated teams, higher customer acquisition costs, longer sales cycle

Expansion: Upsells and/or cross-sells after initial purchase

Retention: Relationship management and sales collateral

Examples: Oracle, Box, Snowflake

Tactical Growth Marketing

I’ve seen mentions of a third framework of “marketing-led” growth to drive acquisition through educational and informative content, but this strikes me as more of a content marketing strategy (tactical, actionable) rather than a framework for growth (general guideline for both the marketing and sales funnels as well as product initiatives). Distribution is critical for acquisition, and data-driven engagement campaigns along with creative ones are critical to retention.

Note: B2C Growth is largely product-led. Selling to a consumer is all about providing the best experience and messaging to appeal to your audience. With a lot of consumer products (especially CPG), success comes down to distribution and channel(s) rather than pure sales methodology.

Why do you need both?

The growth team’s intimate relationship with the entire funnel allows them to own a range of initiatives, and understand that awareness and acquisition alone don’t lead to sustained business growth. The role exists to ensure that no piece of the puzzle is missing so that an experiment (or entire product) isn’t doomed before launch. Ideologically, the best growth teams embrace risky, innovative solutions, and viciously prioritize the end user.

Threads was touted as a Twitter killer. No matter your feelings about Elon Musk or Mark Zuckerberg, it’s easy to see that Threads had the ultimate distribution advantage at launch.. a 1 billion user captive audience. They may have been the fastest-growing platform yet, securing 100 million users in less than a week, but none of that “growth” was sustained. The right KPIs to use here are monthly, or daily active users (MAU/DAUs), rather than # signups. Real growth = retention.

Threads DAUs declined by 79% one month post-launch
Threads DAUs declined by 79% one month post-launch

Christopher Lochhead (Category Pirates) wrote a post on this pointing out Zuck’s mistake in not recognizing the category difference between FB/IG and Twitter. Yes, they’re both in consumer social, but all three apps serve different audiences in consumer social. Threads’ biggest downfall was that none of their features, nor marketing strategies differentiated them from Twitter. Distribution alone isn’t enough without any sort of differentiated brand to refer back to.

Threads attempted to solve the same problem Twitter already solved 10-15 years prior, not to mention FB/IG social graphs look very different than Twitter’s interest and knowledge graphs (for some of Twitter’s most active users). It goes to show that deeply understanding your audience is one of the most important aspects of growth, after nailing distribution. Explosive early acquisition led to limited sustained, active usage.

If there’s one thing to learn from Threads, it’s that growth strategies (distribution) don’t work without effective framework implementation (PLG, full-funnel thinking, etc.), and vice versa. Even in the same vertical (e.g. FB/IG/Threads in consumer social), growth levers dynamically change with audience expectations every few years. While PLG and SLG continue to be two prominent frameworks, they're not rigid dogmas. Growth frameworks are built around a product, business model, and audience. Strategies are prioritized based on context and high-level business goals to improve one thing at a time. As the market evolves, businesses are focused on doing more with less, recession-proofing their strategies and finding novel ways to engage an audience.

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