What is a growth loop and can it be used for demand gen?
What is a growth loop?
As quoted from Reforge, "Loops are closed systems where the inputs through some process generate more output that can be reinvested in the input. There are growth loops that serve different value creation, including new users, returning users, defensibility, or efficiency."
Growth loops are more defensible, sustainable, and scalable in your go-to-market motion.
Here are some examples of best-in-class PLG (Product-Led Growth) companies utilizing growth loops:
Growth loops can also take many forms, such as:
Can a growth loop be used for demand gen?
Growth loops can absolutely be utilized as a part of your demand generation strategy! If it makes sense for your business and go-to-market motion, you should consider deploying this strategy, as it is incredibly effective when executed correctly.
Great question! So the Growth loop is a self-reinforcing system, where "the inputs through some process generates more of an output that can be reinvested in the input" (Andrew Chen). In a super simplified version, the new users create a sequence of actions (steps) which leads to acquiring more users and repeating the loop.
The Growth loops can be compared and projected based on:
- Growth Multiplier that shows how many new users can be brought from one user who entered the loop during all numbers of the loop’s cycle. It’s calculated as 1/(1-V), where V is the signups ratio between cycles. It basically shows if our loop is meaningful, compared to other loops.
- Conversion rate (%) between the actions in the loop. When designing our loop we outline all steps in the loop with conversion between them. It allows us to calculate the exact loop outcomes.
- Internal parameters inside the loop (based on its type). For example, the casual contact viral loop is calculated based on Branching, Time, and Ripple Effect.
Loops can be viral, content, paid, or sales.
Slack, Airtable, Figma, and Product Hunt use loops. For example, for Product Hunt: The user creates the product page → % of users launch their product on PH → % user shares Product Hunt page among the community → % people from the community registering on PH to upvote → % new people launch their projects at Product Hunt → the loop repeats. It’s a user-generated content (USC) loop, shared by the user.
I hope my answer will be useful for the community.