Growth Hypothesis | Glossary

Definition:

Tests how new customers will discover a product or service. Your growth hypothesis needs to explain your business’s strategy in obtaining and retaining customers, so it can eventually transform those customers into a sustainable source of cash flow.

Ries lays out three separate engines of growth for a startup to determine how customers are going to buy their product:

  1. The Sticky Engine of Growth. This concept is maintaining a greater organic customer growth rate than your customer churn. Basically, customers gained > customers lost, therefore net new customers increases.
  2. The Viral Engine of Growth. Here we have relying on existing customers and word of mouth to spread news of your product and essentially carry out your advertising for you.
  3. The Paid Engine of Growth. Lastly, we have paid advertising. TV commercials, billboards, magazine ads, etc. Enough said.

Further Reading:

Book: The Lean Startup by Eric Ries

 

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