UGBA 167 Final Practice

Growth Marketing

A strategy that aligns marketing tightly with the product, data, and user journey to grow sustainably and efficiently, involving continuous, measurable experiments.

Double Jeopardy Law

A principle stating that larger brands not only have more customers but also enjoy slightly more loyalty, leading small brands to suffer from fewer buyers who are more likely to churn.

Penetration

The strategy of expanding the customer base to drive growth, which is more impactful than trying to increase the frequency of purchases from existing customers.

AARRR Funnel

A framework consisting of Awareness, Acquisition, Activation, Retention, Revenue, and Referral, used to map the user journey and target growth stages.

Awareness

The first stage in the AARRR funnel where users discover your product.

Acquisition

The second stage in the AARRR funnel where users take action to sign up or install the product.

Activation

The third stage in the AAARRR funnel where users reach a moment of value, often referred to as the 'aha moment.'

Retention

The fourth stage in the AARRR funnel where users return to use the product repeatedly.

Revenue

The fifth stage in the AARRR funnel where users eventually pay for the product.

Referral

The final stage in the AARRR funnel where existing users bring new users into the funnel.

Funnel Leaks

Points in the user journey where potential customers drop off, indicating areas that need improvement.

Cold Start Problem

The challenge of creating initial value for a product that requires users to be useful, leading to a catch-22 scenario.

Onboarding

The process used by companies like Calm to boost user activation by helping new users understand and derive value from the product.

User Behavior Change

The ultimate goal of growth marketing, focusing on altering how users interact with a product rather than just increasing brand awareness.

Cross-Functional Collaboration

The practice of growth marketers working with product, engineering, and design teams to ensure product value delivery.

Smart Strategies

Approaches that align marketing efforts with user behavior and growth, as demonstrated by companies like Dropbox and Airbnb.

User Journey

The complete experience a user has with a product, from discovery to retention and referral.

Measurable Experiments

Tests conducted by growth marketers to determine which tactics effectively drive user acquisition, activation, retention, or monetization.

Value Delivery

The process of ensuring that a product provides immediate benefits to users, often referred to as achieving the 'aha moment.'

Product Changes

Adjustments made to a product, such as onboarding flows, to enhance user experience and engagement.

Influencer Marketing

A channel used by growth marketers to reach potential users through endorsements from influential figures.

SEO

Search Engine Optimization, a channel growth marketers utilize to improve product visibility and user acquisition.

Atomic Network

A small, self-sustaining cluster of users that can survive on its own.

Cold Start

The reason why 'build it and they will come' is a dangerous lie in startups.

Network Effects

When your product becomes more valuable as more people use it.

Same-side Network Effects

More users attract more users, like Instagram followers.

Cross-side Network Effects

More supply attracts demand, like Airbnb.

Defensible Moat

Strong network effects that make it hard for competitors to enter the market.

Product-Market Fit (PMF)

When your product resonates deeply with a market: people use it, love it, and would be very upset if it were taken away.

Measuring PMF

Sean Ellis measured PMF by asking users: 'How disappointed would you be if this product disappeared?' If 40% say 'very disappointed,' you likely have PMF.

Fake Growth

Growth that occurs without product-market fit, leading to high user churn.

Penetration Pricing

Set low prices initially to attract a lot of users, e.g., Disney+ $6.99 launch.

Market Skimming

Set high prices early to maximize profits from innovators, e.g., iPhone launch.

Freemium Model

Offer basic product free, charge for premium features, e.g., Dropbox, Calm app.

Subscription Model

Charge recurring monthly/annual fees, e.g., Netflix, Spotify.

Willingness to Pay

Understanding your customer's willingness to pay and usage behavior determines which pricing model to adopt.

Partnerships

Collaborations that can be reseller, referral, or promotional to grow user base.

Mergers & Acquisitions (M&A)

Acquiring another company's tech, team, or user base to grow faster.

Headspace Partnerships

Headspace partnered with companies like Spotify and airlines to expand its reach without building a salesforce.

Growth Marketers

Professionals who focus on acquiring and retaining users once product-market fit is strong.

Flywheel Effect

Once the network spins, each new user helps bring in more users, reducing acquisition costs.

Scaling Red Flag

In an MCQ exam, anything about scaling before achieving PMF indicates a problem.

Calm's Focus

Calm focused early on product quality (guided meditations) before scaling brand marketing.

Partnership

Low CAC expansion opportunity.

Acquisition

Faster market entry when organic growth would be too slow.

Innovation Diffusion Theory

Success depends on how fast people adopt a new product.

Relative Advantage

Is it better than what people use now? Mimikai = better than DEET (safe + effective).

Compatibility

Does it fit their habits? Spraying it like normal repellents.

Complexity

Is it easy to understand? Mimikai explaining EPA approval (not trivial).

Trialability

Can they try it easily? Samples at REI stores.

Observability

Can they see results? Hard to observe no bug bites → barrier.

Growth Accounting Equation

Net Growth = New Users + Reactivated Users - Churned Users.

New Users

First-time joiners.

Reactivated Users

Users who churned but return.

Churned Users

Users who leave.

Retention

Keeping users coming back to use your product over time.

Customer Lifetime Value (CLV)

Estimates how much total profit a customer will bring during their relationship with your company.

Basic CLV Formula

CLV = (Average Revenue Per User × Gross Margin) × Customer Lifespan.

Average Revenue Per User (ARPU)

How much revenue you get per customer (monthly or yearly).

Gross Margin

Percentage of revenue kept after costs.

Customer Lifespan

How long they stay before churning.

Customer Acquisition Cost (CAC)

Measures how much you spend on marketing and sales to get one paying customer.

CAC Formula

CAC = Total Sales and Marketing Costs / Number of New Customers Acquired

Components of CAC

Includes Paid Ads, Sales salaries, Agency fees, Events, promotions.

Key Insight on CAC

If your CAC keeps rising while CLV stays flat = 🚩Danger.

Efficient Scaling Indicator

If CAC is lowering while retention is stable = 🎯You're scaling efficiently!

Activation

When a new user experiences the core value of your product for the first time.

Importance of Activation

Strongly predicts retention; poor activation leads to low long-term retention.

Activation Examples

Calm → First guided meditation session completed; Dropbox → First successful file upload; Uber → First ride ordered successfully.

Improving Activation

Better onboarding, guiding users to first success fast, removing friction.

Key Funnel Tip

If acquisition numbers are strong but retention is weak, check activation first!

DTC (Direct-to-Consumer) Brands Growth

Grew by cutting out retailers, allowing personal customer relationships and controlling brand experience.

Limitations of DTC Growth

Eventually saturate early-adopter market, leading to rising CAC and plateauing retention.

Market-Penetration to Market-Development Shift

DTC brands must shift when their core segment is exhausted.

Example Moves Beyond DTC

Casper selling through Target, Warby Parker opening retail stores, Glossier launching wholesale partnerships.

Challenges of Growing Beyond DTC

New competition, channel conflict, and new value propositions needed.

Differentiated Value

Better customer experience and better brand trust.

Early DTC Value Props

Focus on price and convenience.

Later-Stage Growth Demands

Expanding value, including brand emotion, multi-product ecosystems, and omnichannel shopping.

Customer Data Ownership

DTC brands know exactly who buys, when, and why.

Data Utilization

Used to iterate products, personalize marketing, and improve retention.

Direct Customer Relationship

Must be preserved wherever possible, even when expanding into multichannel sales.

Smart Brands Leverage

Email marketing, loyalty programs, owned apps, and community-building initiatives.

Multichannel Growth Strategy

Being available through multiple sales channels, but adding value in each new channel.
-Create new shopping experiences (Warby Parker in-store trials).

• Expand product lines (Casper selling sleep accessories).
  
  

• Personalize offers based on channel behavior.

Adding Multichannel Distribution

Only works if you also expand your brand meaning and product experience.

CLV vs CAC

Customer Lifetime Value becomes more important than Customer Acquisition Cost when scaling distribution.

Upfront Acquisition Cost

Expensive in new channels.

Building Loyalty

Reduces CAC pressure later.

Customer Acquisition Costs

Think about them and lifetime value jointly, not separately.

DTC Growth Limitations

DTC is great early, but limits growth.

Aligning Distribution Expansion

Must align with new customer segments and new value.

Multichannel Selling

Isn't just selling everywhere—it's adding differentiated experiences.

Owning Customer Relationships

Critical even when scaling into retail or third-party platforms.

Moneytap's Brand Positioning

Trust, Simplicity, Accessibility.

Mimikai Case

EPA-approved natural mosquito and tick repellent with a new active ingredient.

Relative Advantage of Mimikai

Effective like DEET, but non-toxic.

Compatibility of Mimikai

Application method (spray) matches current consumer habits.

Complexity Barrier for Mimikai

Difficult explaining 'clean but works' scientifically.

Trialability of Mimikai

Medium; possible but hard because repellents aren't easily tested casually.

Observability

Weak — it's hard to see protection unless bitten (observability = adoption barrier).