Growth Hacking vs. Performance Marketing

Dr. Gero Kühne
Dr. Gero Kühne

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Each year, almost a million new businesses are born. And since all companies want to be successful, together they spend hundreds of billions of dollars on marketing annually. In such a competitive environment, it can be hard for any business to get noticed. And in order to break through the noise, it becomes more and more crucial to have an effective marketing strategy. In a marketing world that is developing almost daily, it is difficult to keep up and keep track of all updates. 

In addition to well-known marketing strategies and approaches such as performance marketing, growth hacking has been tremendously developing in recent years. How do you know which of the two methods you need and which one to choose? In this article, we’ll compare the performance marketing and growth hacking approaches to help you understand how each of them works.

What is growth hacking?

Growth hacking is an umbrella term that is used for strategies which concentrate solely on growth. A growth hacker is someone who uses low-cost and creative strategies to help businesses acquire and retain customers. Growth hackers are sometimes also called growth marketers, but growth hackers are more than simply marketers. 

Growth hacking requires an obsessive level of attention to data. You need to be watching the numbers constantly and need to be ready to evolve anything that shows signs of taking off. Growth hacking involves a great deal of experiments and follows a specific cycle, which is known as G.R.O.W.S., to find successful ways to grow business as cost-effectively and fast as possible. The steps in this process include 

  • (I) gathering ideas
  • (II) ranking ideas
  • (III) outlining experiments
  • (IV) working
  • (V) studying outcomes. 

It is important to note here that only one KPI is analyzed at a time while the process is taking place.

Growth hacking was initially associated with startups or small companies that do not have the same budgets or resources as their more established rivals. Instead, they came up with ideas that allowed them to avoid costly growth strategies and expanded fast to survive in the early stages. However, with time many large corporations and companies started using growth hacking as their main marketing approach.

Growth hacking case in business

A great example of growth hacking in the digital space is Dropbox. When Dropbox launched, it faced a highly competitive market, with little differentiation from other cloud storage services. Instead of relying on traditional marketing, Dropbox implemented a referral program. Users received extra storage space for referring friends, and their friends also got extra storage for signing up. This simple incentive program leveraged user satisfaction and word-of-mouth marketing to drive exponential growth.

Besides, Dropbox made it super easy for a user to share files. All the user had to do was copying the link to files. This gave Dropbox a huge exposure to potential users. Also, the process of signing up was simplified to a few easy steps. Thanks to the referral program and the user-friendly approach, Dropbox’s user base skyrocketed from 100,000 to over 4 million users in just 15 months, demonstrating how digital businesses can harness creative strategies to achieve massive, cost-effective growth.

What is performance marketing?

And what is performance marketing? Performance marketing means online marketing and advertising programs where advertisers pay marketing platforms when a desired action is finished, such as a sale, lead, or click. It’s all about maximizing the business’ marketing budget and a bottom line. Clients only pay performance marketers for producing profitable or agreed-upon results. This means that sales, leads, and conversions are paid for only when they are generated. 

The tactics of a performance marketing campaign often include supporting lead generation with awareness campaigns such as GDN campaigns. Because only if the company is known and the trust is in place, the focus can be placed on pure maximization of conversions.

Performance marketing campaigns in business

French jewelry manufacturer and designer PANDORA collaborated with Taboola in an advertising campaign to improve branding and conversions via content discovery and display advertising methods. This cooperation made shoppers spend more time on the PANDORA website, and over time, the conversion rate grew up to 130%. Finally, companies with mobile apps can also use performance marketing to boost app downloads. These downloads can result in more sales and revenue for business.

Are you dissatisfied with the results of your digital campaigns for search engine optimization (SEO), paid advertising, content marketing, or gamification? Let’s start with a short call for a free and non-binding exchange about growth hacking and digital marketing.

Dr. Gero Kühne

Owner

Growth hacking or performance marketing?

Now that it’s clear what growth hacking and performance marketing are, let’s see the main differences between the two:

  1. In performance marketing, the sales funnel typically comprises awareness, interest, decision, and action (AIDA funnel). In growth hacking, on the contrary, the funnel includes awareness, acquisition, activation, retention, revenue and referral (also known as the pirate funnel).
  2. The most measured performance actions (KPI’s) in performance marketing are cost per mille (CPM), cost per click (CPC), cost per sales (CPS), cost per leads (CPL), and cost per acquisition (CPA). On the other hand, in growth hacking, the most watched metrics are average lead close rate, monthly goals by channel, clickthrough rate, customer satisfaction rate, customer retention rate, and lifetime value.
  3. A big difference between growth hacking and performance marketing lies in the depth of optimization. In performance marketing, mostly only the marketing campaign or strategy itself is optimized. In growth hacking, if necessary, the business model itself is also altered. In the case of Airbnb, for example, in addition to technical “hacks”, the opportunity to have the premises photographed by a professional photographer was added as this was and is a need of the platform’s customers. This step was a major factor in making it stand out from platforms like Craigslist etc.
  4. Growth hacking is more lean and agile. The major characteristics of growth hacking are speed, readiness for alternative problems and solutions, data-driven decision making, and high level of “digital intelligence”. The top five characteristics of performance marketing include competence, strategy, credibility, accountability, and integration.
  5. Using performance marketing, your business pays attention to attracting, converting, engaging, and retaining users through online marketing channels, for instance, search, email or social media. In comparison, growth hacking attaches great importance not only to turning prospects into customers but also to retaining them in the medium and long terms. Ideally, customers recommend the products or services to others.

So, which approach to choose and do you have to choose at all? In fact, growth hacking and performance marketing are not mutually exclusive approaches. As already mentioned, even established companies with solid marketing strategies try to integrate growth hacking since performance marketing can exceed the cost/benefit limit, depending on the competitive environment (e.g. steadily increasing click prices in the CPC). In this situation in particular, it makes sense to reconsider whether you choose marketing strategies that attack the competition directly (e.g. bid on similar generic keywords in Google Ads) or somewhat more subtle and promising campaigns (avoiding opting for generic expensive keywords and focusing on long tail keywords or choosing another channel).

By the way, if you do choose a growth hacking approach in your campaign, you’ll want to read the article “9 Ultimate Growth Hacking Strategies + Examples”, which guides you through effective growth hacking strategies that will let you achieve impressive and sustainable results.

Recap

Regardless of which strategy you choose, it is important to keep an eye on the performance of the KPIs. Constantly analyze KPIs such as ROAS or return of ad spend. Become aware of how customers think about your product! It quickly becomes clear which channels are really profitable. Because after all, your business should be about driving results, increasing market share and, most importantly, exceeding customer expectations, and growing a strong brand that instills long-term loyalty in your clients.

If you have questions and want to find effective ways to reach your audience, let us know in the comments below. We can’t wait to hear from you!

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