Growth Hacking as a Growth Mindset Process

Posted on Monday, 14. October 2019 in category Digital marketing. 6 min read • Written by

Matija Torlak

The industry of retail is changing. First rule of any business and especially retail is: “If our company is not growing above the market growth, someone else is growing faster, which means we will have problems in the future”. In 2018 the EU economy is stable with positive trends, GDP growth is positive, and sales in retail are positive, but the next question is: “Are we growing fast enough, did we utilize all the opportunities on the market?”. For management, these are relevant questions. How to stimulate the growth mindset can be one of the vital questions in today’s multichannel retail, in addition to the question of which channel to invest in.

Let’s first check the industry of retail: single-channel retail almost doesn’t exist anymore; multichannel retail is undergoing transformation to omnichannel retail (an expensive and difficult transformation); multiple channel retail is having huge problems with the channel strategy (the lack of transparency between channels has increased), so the main question is how to set the channel strategy so that all the channels are performing optimally and that we know that the retailer strategy will have long-term benefits.

By optimizing channels and searching for growth possibilities, the process of growth hacking is the right mindset to help businesses to establish a growth mindset and speed up the process of implementing the right changes which are vital for today’s and tomorrow’s growth.
A real-world example: In multichannel retail, the top level of management defined the main objective in its strategic plan, namely turnover growth; in the channel strategy, the expectations for online sales were the highest.
The retailer knew that the online sales channel had a team that was willing to experiment and had established a partnership with an external digital marketing agency, which was responsible for the analytical part. The idea was that the online team and the digital marketing agency would provide the growth machine with a clear objective, that is a 40% or higher growth in turnover in the online channel and a 38% growth in the net gross profit compared to the same period the year before.
The team used a growth hacking process in which they proposed 56 hypotheses in a single year. They used Google Analytics and an internal BI system for the analytical work; for A/B testing they used the VWO tool, and for customer feedbacks and heat maps they used Hotjar.

Growth hacking is defined as a process of rapid experimentation across the marketing funnel, product development, sales segments, and other areas of the business to identify the most efficient ways to grow a business (see https://en.wikipedia.org/wiki/Growth_hacking). Below are instructions on how to establish the growth hacking process in multichannel retail or any other business model.

The requirements for the growth hacking process:
1. First, there must be a reason why we want to grow, and we need to find a project lead who is willing to experiment and is ready to take the risk of experimenting.
2. We need to assemble a growth hacking team – a cross-dimensional team with a background in project management, marketing, sales, category management, and development.
3. The growth hacking team should have as many hypotheses for growth as possible; they should be curious, innovative and have an itch for learning. The hypotheses for growth don’t have to be proved at this point; curiosity is the driver in the early stage.
4. Assembling an advisory team – a team of senior managers who will interact with the growth hacking team in weekly sessions. The role of the advisory team is to help the growth hacking team (GH team) in the growth hacking process with their expertise and experience.
5. Analytical and development tools; the management of the company empowers the GH team and the advisory team to experiment on small-scale samples and test the hypotheses which are confirmed by the advisory team.
6. Define priorities; the GH team will provide the hypothesis which needs to be prioritized by the relevant KPI. The GH team and the advisory team define the priority KPI, which can be potential, time to implementation or any other.
7. Define the owner of the hypothesis, who is responsible for testing the hypothesis; the owner of the hypothesis usually provides the analytics and testing of the result.

What does the process of growth hacking look like?

The process of growth hacking has 5 phases:

Phase 1: Analysis

The GH team provides data analytics, selection of focus areas, performs a drill down operation on revenue, profit, channels, cross-sales, conversion rate, cart to detail ratio, sessions and many others…

Phase 2: Set the Hypothesis

The GH team or its member proposes a hypothesis based on the data sets which were analysed in Phase 1. Analysis, namely the hypothesis as to what kind of change or optimization will increase one of the KPIs that are measurable. The GH team needs to define the hypothesis development, hypothesis test, the owner of the hypothesis and the predicted result.

Phase 3: Getting Approval for Each Hypothesis

In weekly sessions, the GH team presents the hypothesis to the advisory team, which in turn provides feedback to the GH team and acts as its mentor. The main role of the advisory team is to evaluate, confirm or deny each hypothesis. This is the vital phase because the advisory team is the gatekeeper and determines the speed of the process. If the GH team is experiencing complications, the advisory team will help them; if the GH team has not prepared a sufficiently accurate analysis or hypothesis, the advisory team needs to mentor and help them with its knowledge and experience. The advisory team is fully informed, so the problem of a lack of process transparency is eliminated.

Phase 4: Performing Tests

In the fourth step of the GH process, after the advisory team has confirmed the hypothesis, the GH team performs the test and implements all the changes that were planned in the hypothesis. The GH team evaluates and measures the test and provides the relevant KPI, which was defined in the second phase of the GH process.

Phase 5: Learning and Approval for Scaling Up

In the last phase, the GH team and the advisory team together evaluate the test and confirm or reject the hypothesis which was executed. If the hypothesis is confirmed, the teams decide whether they will scale up the confirmed hypothesis from the tested environment to a live one, or from a small sample to a big sample. In the final phase, the learnings are vital as is the plan for transferring the learnings from a small entity to a large-scale operation or larger entities. With the final phase, the GH process delivers results on a larger scale.

Picture of potential KPI in the growth hacking process

Below is the result from the real-world example of multichannel retail with an objective of 40% turnover growth and 38% net gross margin growth. The team was assembled by two parties, namely by the retailer who appointed the lead of the GH team; the members were from an online sales team, and the retailer’s marketing team. The digital marketing agency provided 2 experienced analysts. In total, the GH team had 5 members. The advisory team had 3 members: the retailer’s head of category management and head of marketing, and the director of the digital marketing agency. The team didn’t use any external resources and only used existing tools. All the work was performed during the regular working process. The team used a growth hacking process in which they proposed 56 hypotheses in a single year. They used Google Analytics and an internal BI system for the analytical work; for A/B testing they used the VWO tool, and for customer feedbacks and heat maps they used Hotjar.

The process resulted in 56 proposed hypotheses; eventually 34 tests were performed and evaluated. Of these 34 tests, the team confirmed 18 hypotheses which were implemented in business operations, while 16 hypotheses were rejected and were not implemented in actual business operations. The result of the 18 hypotheses confirmed was 1.7 Mio EUR of incremental sales, while the online sales channel had a 54% growth in turnover compared to the year before and a 48% growth in the net gross margin.

The main learnings obtained from the implementation of the growth hacking process:

The team’s curiosity was the driver of growth. With basic authorizations, the GH team tackled issues such as:
Knowing and understanding the behaviour of consumers and customers; the result was the implementation of marketing metrics in the funnel of the webpage;
The importance of the positioning of products on the webpage, which was determined by the KPI (Closing rate per product position);
The importance of optimizing the CTA (call to action) activities; owing to A/B tests it was no longer a mystery which CTA graphics are better, because everything was tested. Due to testing, the discussion of what looks better was off the table, which optimized the efficiency of the team and the company as a whole no longer argued about which MKT activity looks better;
The company defined 7 different closing rates on the webpage; before that it had only one. Thus, the transparency and efficiency of the overall business operations increased;
Growth hacking improved the overall user experience (UX) on the webpage and led to the company establishing a new business team, which took over the UX and CX (the user and customer experience on all channels).

The mindset of growth was established in multichannel retail with a clear working process, in our case the growth hacking process. By empowering one team, which was aided and mentored by a senior team, they managed to increase the efficiency and value of the company as a whole.

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