By Ankur Tiwari | Updated on 05-12-2019Follow @Ankurt04
Once you have the version 1 of the product (saas, ecom or service), its time to reach out to your audience in the most effective way. A perfect growth channel can effortlessly multiply the positive outcomes.
Once you have built the first version of the product [saas, ecom, service], found the best fit audience and develop a positioning, the next step is to choose a growth channel.
A growth channel is the medium through which you will reach out to your best fit audience and present your product to them through the positioning message. Whether you will choose to reach out to your audience over phone, in person, via email, on facebook or something else, will form your growth channel.
The choice of growth channel will greatly determine the:
Stewart Butterfield, the founder of Slack, says that "Communicating about the product more and more effectively" is one of the two key steps to build a great business (other being the product itself).
To make any growth channel work, an investment of time, efforts, money and opportunity cost are involved. This investment will go towards the preparation for the use of the channel, actual use of the channel and building enough traction to analyse its performance. This means once you have selected a growth channel, you are in it for anywhere between 3 to 6 months to say the least.
As a result, at a time, usually a business can focus only on one or two growth channels. Strategically too, building one reliable and predictable growth channel at a time, during the initial few years, should be the goal rather than being at 10 places at a time but not creating any impact anywhere.
"Poor distribution, not product - is the number one cause of failure"
This brings us to two questions:
Growth channels can be broadly categorized into paid and organic. There are costs involved in both and at no point in time you should assume any of these channels as free. ("nothing is free, even the things which are free")
Paid channels are the ones who already have direct access to your target audience. All you need to do is to design the message and pay the channel. Your message will be delivered to your target audience. These channels are best to quickly generate leads and grow sales.
A paid channel will be successful if the money paid to the channel (ad expense) is lower than the total net margin earned through the sales generated. In simple terms, if you are earning $50 as net margin from a sale, then the ad expense should be less than this value.
For different business models, the calculation of net margin can differ. For subscription based model, you will consider all future payments from a customer whereas for an eCommerce business you will consider all repeat purchases. In simple terms, for a paid channel to be successful, life time value (LTV) should be greater than Customer acquisition cost (CAC).
"For a paid channel to be successful, LTV > CAC, unless you run a risk of being out of money"
A number of paid channels, each with different characteristics are available for internet based businesses today:
Organic channels are the ones where you do not pay to make your message reach your target audience. Here, you leverage the inherent nature of the platform and quality of your content to reach your target audience.
To build an organic channel takes a lot of time, efforts and content development. However it is more stable and reliable channel than paid channels.
Most profitable organic channels are:
From a growth perspective, what you would want to do it to start with paid channels, get business rolling and invest some resources in building organic channels. A mix of paid and organic channels, both working together, can sail a business to success in all weather.
Selection of a growth channel depends largely on the nature of the business and availability of resources. Now 'nature of business' is broad term, and if I leave you with this, I have offered no help! Keep reading :)
You should select a growth channel:
Once you have answered these, you are ready to select and build the reliable growth channel for your business.
Let me know in the comments below which growth channel you plan to use.
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