I want to discuss a challenge that many growth teams confront as they strive to create a significant impact within their companies. Growth teams are frequently tasked with pushing the boundaries of their product-market fit to find new segments and channels that can drive faster growth. When pursuing these new opportunities, be it through untapped marketing channels such as organic search or Facebook ads, or exploring new segments whether upmarket or downmarket, you might be able to drive an initial increase in acquisition metrics like sign-ups or first-time purchases. However, it's common for other metrics to look worse. Activation rates may decline, and profitability might suffer, leading to a perception that these new segments or channels bring in low-quality users.
The appropriate approach here is for the growth team to present this new opportunity and question whether the company is willing to do the work to validate and develop this new segment or channel fully. This might necessitate changes to the onboarding flow tailored specifically for these segments or channels, building additional features to solidify the product-market fit, and remapping metrics like Lifetime Value to set accurate targets. Coordinating with other teams such as those working on financial infra or core products is crucial to determine if the company is ready to dedicate the effort needed to find product-market fit with these new segments that may initially underperform.
This happened to me at Pinterest. Initially, Pinterest grew primarily through Facebook. When that channel unexpectedly dried up, we shifted our efforts to Google. The traffic from Google was not converting into sign-ups, leading to a perception that Google brought in low-quality traffic. We actually were just not prompting Google users to sign up at all. After creating a custom sign-up flow for Google, we saw a 50% improvement in the conversion rate. Despite this success, these new users were not activating or retaining well, reinforcing the belief that Google users were of low quality.
Instead of agreeing to that, we built a different onboarding experience for Google users to showcase the product’s value and help them build a habit. By redesigning the onboarding flow to consider that these users might not have existing friends on the platform and leveraging insights from their search intent, we significantly improved their activation rates. This success completed the loop of unlocking a major new growth opportunity.
This experience underscored the importance of being prepared to address downstream bottlenecks that emerge following a growth unlock. Growth teams must advocate for the necessary structural adjustments across the company to realize the full potential of these opportunities. This process involves persistence, coordination, and clear communication of the benefits. Sometimes, the decision might be to not pursue a new segment due to the amount of work required outside the growth team. However, growth teams should more proactively push these opportunities to their companies and better highlight their potential value, given the bias from non-growth teams about how certain metrics look initially.
I hope this discussion offers valuable insights into how growth teams can navigate the complexities of new segment and channel expansion.
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