Coined in 2010 by entrepreneur and startup advisor Sean Ellis, the term “growth hacking” has come to refer to any methods used to rapidly and inexpensively increase a company’s market share or user base. Successful growth hacking employs a wide range of tactics and talents, often incorporating elements of both data analysis and marketing, but this newly evolving field also brings with it a unique set of ethical challenges and concerns that continue to shift alongside it. While the primarily goal of growth hacking is often to reach the most consumers as quickly as possible, it’s also important to realize that this kind of approach can open the door for morally questionable growth strategies, which is why it’s crucial for new startups who want to maintain ethical, sustainable, and authentic growth to be mindful of their approach.
So how can an early-stage startup leverage the power of growth hacking without compromising their ethics? Let’s take a look at some of the key principles.
Many new startups find themselves in a rush to deliver a product or service to the market as quickly as possible, but a founder that is committed to ethical growth needs to understand that values can’t be put on the backburner. It will not get easier to establish a code of ethics when there are more customers, more revenue, and a larger community built up around the business; a culture of values and transparency needs to be defined before growth occurs. As Fog Creek Software CEO Anil Dash succinctly puts it, “Values can’t be put off for a later date. There is no dream deferred when it comes to building an organization that cares about these things.”
Defining your startup’s core values reflects what you want your company to be and where you want it to go. They serve as the bedrock for the startup’s culture to develop around, and a guiding light for major decision making moments. Most importantly, they represent the aspects of your startup that should never be sacrificed for the sake of growth.
The simple truth is that dubious and unethical growth strategies are often effective in the short term, which is precisely why establishing ethical principles early on is so vital. Growth hackers that are chasing KPIs with no concern for a company’s reputation or the trust of its customers are playing with fire, and crossing ethical boundaries in the pursuit of increased revenue often backfires with catastrophic results.
For a perfect example, look no further than the social app Circle. The app was designed to access your phone’s GPS system to show you what was happening nearby in real time, whether it be promoted events or sudden road closures. While the app gained some initial traction, it didn’t take off like its founder had hoped. But suddenly, Circle was ranking at the top of the app charts, boasting a growth rate of over 1 million new users a month.
Only one problem: this sudden success was largely the result of a growth hack gone wrong. Because the app scraped contact data from everyone who downloaded it, Circle was able to abuse SMS invitations, allowing users to automatically invite their friends to join the app as many times as they wanted. A sudden influx of spam invites rocketed Circle up the charts, but the people receiving dozens of invites weren’t happy. Swift and angry reactions to this tactic forced Circle to remove its invite system, and the app fell from the top of the charts into obscurity before eventually shuttering altogether.
Disregarding the best interests of your startup and its customers to focus only on the bottom line might result in temporary growth in revenue and market share, but undermining consumer trust and sabotaging the company’s reputation through exploitative or invasive marketing techniques is almost always a recipe for disaster in the long run.
So how can a startup approach growth hacking in a way that is both ethical and effective? It might help to think of your company like a magnet: the goal is to draw customers in by providing a quality, necessary product with a focus on accessibility and ease of use, and all of your growth hacking strategies should supplement this approach.
What this means is that offering a better product is still the key—growth-hacking is not a way to fix a poor product-market fit or paper over shoddy services. Using a lean startup approach to develop a minimum viable product that prospective customers actually want is still an essential first step, and the role of growth hacking is to then put as many eyes on it as possible. Both a great example and a great counter-example of this concept can be seen in two very different growth-hacking strategies carried out by Uber. When the ride-sharing app was in its infancy, it started out by offering free rides to tech conference attendees. It was a quintessential growth hack: it cost the company almost nothing, it provided a useful service, and it demonstrated proof of concept directly to the people who were most likely to amplify the company’s brand and endorse its services. On the opposite end of the spectrum, Uber’s tactic of organizing its employees to mass-purchase and then cancel rides from rival service Lyft demonstrates a highly unethical growth strategy that not only failed, but also made it easy to craft a narrative painting Uber as a company that would fight dirty to secure a larger market share.
Another ethical growth hacking strategy that gets results is savvy use of incentivization. Ideally, incentives should be used in a way that encourages referrals, word of mouth, and further investment in your company’s services. A great example of an ethical approach to this tactic can be seen in Dropbox: the app uses two free gigabytes of cloud storage as an initial hook to draw in users, and also offers a referral program where more free storage is rewarded for each new person that the user convinces to join. Dropbox then offers even more free cloud storage to users who link their social media accounts, leave a review, or use them as their default photo storage space, which means that the company can see improvement is several different metrics of growth from a single user, simply by offering incentives that already align with the service’s basic functionality.
The bottom line is that ethical growth hacking is not only possible but also the ideal way to sustain growth without sacrificing your startup’s core values or suffering a loss of reputation when questionable practices come to light. By defining a code of ethics right away, steering clear of grey-area marketing tactics, and focusing on the development of a quality product with a strong product-market fit beforehand, the right growth hacking strategies can breakthrough revenue plateaus and maintain growth with limited input of time and resources.
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Nectar is part branding powerhouse, part consultancy, and part digital marketing agency based in Manhattan.