Ninety-two percent of SaaS startups fail within three years. This puts a premium on finding sustainable growth. But many SaaS startups fall into a trap when it comes to how they approach growth.
They’ve heard of growth hacking, and it seems like the right play with their current team and financial resources. So they Google “growth hacking tactics,” read a few listicles and blog posts about what’s working for others (there are many), and create a list of awareness and acquisition-focused tactics to try.
Time goes on, and a founder or CMO finds a few tactics that temporarily increase customer acquisition, but they always have to dip into their marketing budget to fund the next bump. Everything is so piecemeal and fractured that scaling up requires more financial resources. They want to scale up, but their growth engine is broken.
Growth hacking is a popular tactic for SaaS startups but is also misunderstood. Why some companies grow, and others don’t isn’t a matter of finding the right hack. They don’t just have “something” others don’t. It’s a matter of intentionally building a company deserving of growth.
In this blog post, we’ll dive into the definitions of growth hacking and growth strategy, the pros and cons of each, and why “Should I pursue growth hacking vs. growth strategy?” may not be the right question to ask.
Growth Hacking vs. Growth Strategy for SaaS Startups
As we compare growth hacking and growth strategy, let’s look at it through the lens of SaaS startup founders and team members' unique challenges.
Founders and their teams have to identify their market and where the real opportunities lie, evaluate the competitive landscape, and position their product or service to ensure it stands out. They also have to create a viable business model and pricing that fits the market, keeps them competitive, and helps keep their doors open.
Once they have customers, they have to focus on building loyalty and limiting customer churn. They have to do all this and more with limited funding, a short timeframe to grow, and the pressure to scale on top of it all.
In short, SaaS startup teams have a lot on their plate.
What is Growth Hacking?
Sean Ellis coined the term “growth hacking” to describe the sustainable growth approach used by hyper-growth companies like Facebook, Airbnb, and Amazon. Growth hacking focuses on finding creative, low-cost ideas that spur growth. It’s about figuring out why you grow and then trying to make that happen on purpose again and again.
Growth hacking is linked to Dave McClure’s “Pirate Metrics” marketing framework: Awareness, Acquisition, Activation, Revenue, Retention, and Referral (AAARRR; we refer to these as the six levers of growth). Growth hacking targets a specific lever to optimize in the pursuit of growth.
Content marketing, product marketing, and advertising are common growth hacking strategies, each with its own set of tactics, such as:
- Content marketing - guest posting on other blogs; inviting influencers to guest post on your blog; asking customers or audience where you should post content, then creating content for those platforms.
- Product marketing - gamifying the onboarding process; invite-only acquisition methods; referral incentives for the referrer and new user.
- Advertising - paid social media campaigns; pay per click advertising on Google; sponsored content.
Pros and Cons of Growth Hacking for SaaS Startups
Growth hacking is popular because of its nature as a low-budget and quick strategy. However, the lack of overall strategy one would get from slowing down makes it easy to commit the cardinal sin of startups: rushing to scale when the foundation to do so doesn’t exist.
Pros of Growth Hacking:
- You can implement growth hacks quickly across multiple tactics and platforms.
- Growth hacking generates a lot of data for measurement/comparison.
- Easy to implement in bits and pieces.
- Generally cost-effective and provides solid ROI.
Cons of Growth Hacking
- Can easily lead to quick hacks and shortcuts instead of developing a robust strategy
- Tactical nature means successes can be hard to sustain and scale
- Trying to copy what others have done ignores your unique advantages and opportunities
- Leans on tactics to drive growth.
What is a Growth Strategy?
A growth strategy focuses on leveraging and optimizing all parts of a business to set it up to scale successfully. The AAARRR framework is one part of a growth strategy, and in contrast to a growth hacking approach, all six levers of growth must be in operation at once.
A growth strategy zooms out and focuses on building an organization that deserves to grow and scale. It’s a more holistic view of the business and generally includes processes for:
- Identifying a target market and audience
- Crafting a unique brand narrative and positioning
- Developing a buyer journey
- Planning, building, and continuously improving a high-converting website
- Implementing a growth-driven design philosophy
- Building lead magnets to bring in qualified leads
In short, a growth strategy is a deliberate process for creating a strong foundation to engage your market, convert leads, and grow a startup.
Pros and Cons of Growth Strategy for SaaS Startups
The main drawback of developing a growth strategy is that it takes time to build your strategy out. However, by building a fa solid foundation for growth, your startup or early-stage company has less chance of crumbling.
Pros of a Growth Strategy
- Focuses on optimizing the entire business
- Meant to be scalable and sustainable
- Optimize the performance of marketing dollars for better ROI
- It helps identify unique advantages of your startup to use to your advantage
- The outcome is building a company that is prepared to scale
Cons of a Growth Strategy
- It can take time to flesh out all the pieces of a growth strategy
- There may be a lot of unknowns that will increase the time needed to create your growth strategy
- You may not have the knowledge inside the company to build out a growth strategy
The Two Questions SaaS Startups Should be Asking Instead
Let’s go back to looking at the growth hacking vs. growth strategy comparison through the lens of all the things startups have on their plate. Growth hacking vs. growth strategy is not really the question SaaS startup founders, CMOs, or VPs of marketing should be asking. Both have their merits and drawbacks.
The real question in this debate is not which approach works best, but “How can I set my SaaS startup up for sustainable growth while reducing the chance of failing?”
Sustainable growth requires a foundation focused on leveling up your entire company. Growth doesn’t happen randomly based on reading through a list of articles from a Google search. If it were that easy, everyone would already be doing it.
As Morgan Brown, co-author of Hacking Growth with Sean Ellis, said of growth hacking listicles:
“They look like they’re silver bullets, right? They’re full of unicorns and pixie dust and promises of like, ‘Hey, do these nine things and you’ll get remarkable growth.’ No great company was ever built on the back of a listicle.”
If you accept that growth stems from intentionality and a comprehensive growth strategy, then the second vital question to ask is, “Can I build this growth strategy myself, or do I need help?
The Six Levers of Growth are Crucial for SaaS Startups
We've seen growth hacking work, but we've seen the greatest results stem from developing a comprehensive growth strategy unique to each client we work withWith this approach, we’ve helped clients grow 10X over 36 months, as well as helped them raise over $90 million in funding.
How do we 10x clients’ growth over 36 months?
The starting point is our Growth Grader. You can use it to measure and track the six levers of growth within your company.
This free tool and video tutorials will help you identify what’s working, what’s causing friction in your buyer journey, and show how you improve month over month, quarter over quarter, year over year.
But hurry! The Growth Grader tool and bonus videos won’t always be free to access.