How businesses grow fast through growth loops

Growth loops are closed systems where the inputs, through some process, generate more of an output that can be reinvested in the input.

This framework works to generate compounding growth by reinvesting the output of one cycle as input of the next cycle - and the loop goes on.

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Growth Loops and Where to Find Them

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The compounding effect

In financial transactions, when you deposit a sum of money in the bank, that principal grows an interest and that interest thereafter in the next period becomes part of the principal, thus generating higher interest earned in the succeeding periods.

Similarly, in the context of growing users, old users can generate another number of new users.

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Organic vs organic loop

Attracting new users may be built in through the core product flow (organic) or gained through incentives (inorganic).

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Organic loops

User generated content

  • Users generate content and content is indexed in google or other search platforms (Wikipedia, Reddit, Pinterest)
  • Users generate content that can elevate their status and share it to their circles (eg: Quora, Medium)
  • Users create content and invite more friends (eg: Facebook, Twitter, Instagram)

Curated content

  • User resonates with the content and shares it with their network (eg: BuzzFeed)

Word of mouth

  • User believes the product is share-worthy

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Inorganic loops

Refferal loops - users receive benefits when sharing about the product

  • Incentivized referral - in the form of money, discounted products, premium access, increased usage limit (eg: Airbnb, Amazon, Dropbox)
  • Non-incentivized referral - users share for intrinsic reasons, because they can earn goodwill, social proof, and prestige

Paid marketing loops - generate revenue from new users acquired through marketing, then reinvest the recovered marketing cost and additional revenue.

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Superimposing loops

Building multiple loops within a product (e.g engagement loop superimposed with content creation loop in the case of YouTube)

Content personalization through the recommended videos feature keeps the users engaged and it encourages the consumption of more content.

On the other hand, Youtubers create content that influences and builds a community of followers.

As more videos are produced, more content can be consumed, and more subscribers are attracted - the bigger the community grows.

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Things to keep in mind when designing growth loops
  1. Product designed to be share-worthy, keep brand names upfront
  2. Post statistics and engagement should be visible (e.g in Deepstash - the number of reads, likes, and stashes are visible).
  3. Be aware there's minimum threshold and ceiling to every growth channel.
  4. Create superimposing loops that can reinforce each other.

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