July 27, 2020

Why consumer startups should obsess over their Resting Growth Rate (RGR) with Kent Bennett - Ep 5

Fintech
Technology
Evelyn Howat

 Key Takeaways:

Consumer earthquake products turn their customers into their best marketers and advocates. This is the most important growth engine for a consumer startup. 

 While some companies use paid advertising to fill their leaky bucket, consumer earthquakes focus on building a product that people love so much that their own customers drive organic growth through social media, word-of-mouth referrals. 

 Here's the most important growth test: Without any paid marketing, do you still grow? We call this unpaid growth rate the “resting growth rate” (RGR) and it’s the best long-term predictor of efficient growth.  

 RGR is typically stable as a percent growth rate over time, and thus a positive RGR can drive compounding/exponential growth and help a company saturate a market without needing to burn insane amounts on paid marketing.  

 With a positive RGR, returns on paid marketing are much more efficient. Every customer acquired with paid marketing will turn around and drive more organic growth.  

 Beware the paid marketing treadmill. If your consumer startup depends on paid marketing for growth, then as time goes on you’ll need to increase spend on paid marketing to keep growing and as you scale the marginal cost of acquisition will increase making the problem worse over time.  

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