The Battle of Growth Models: The Funnel, The Hourglass, and The Flywheel

In our hyper-digital world, marketing tactics constantly clash in a battle for the hearts and wallets of consumers. Startups are perplexed about how to win customers. They not only contend with the costs of deploying the wrong growth model but also with the mighty tides of attrition. Take what happened to Quibi in 2020.

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Quibi, the cautionary tale for subscription based startups

Startup: Quibi
Funding: $1.75 billion
Pricing Model: Subscription

Context: Quibi was a subscription based streaming platform that launched in April 2020. It offered premium short-form content, designed for on-the-go consumption — a mobile first approach to how millennials consume content. In October 2020, just six months after its launch, Quibi announced that it was shutting down due to its inability to attract and retain a sufficient subscriber base. While Quibi invested heavily in producing original content with A-list celebrities, it failed to meet audience needs and did not create strong user engagement loops.

Determining the right growth method will impact a business’s ability to achieve and sustain long-term growth. While we may all be familiar with the funnel, hourglass, and flywheel by now, and the marketing blogs have declared favorites, there is rarely thought given to the use cases that may require a business to apply one over another at a given point in their lifecycle.

Let’s examine these three models and unpack when to apply each.

I. Marketing Funnel — an oldie but goodie

The trusty marketing funnel is a battle-tested linear model that establishes the key stages businesses need to guide customers from awareness to conversion. Since funnels focus on moving prospective customers as fast as possible to the point of purchase, it optimizes for the following performance indicators:

• Reach: Increasing the target audience size at the top
• Sales Productivity: Maximizing prospect interactions while minimizing time and effort spent on interacting
• Sales Velocity: Shortening the time to close a deal
• Point of Sale Marketing: Increasing the amount of purchases or deal size at the checkout or contracting stage

Pros:

• The funnel is a digestible, linear representation of the buyer journey, making it easy to understand and build programs against.
• Marketers and Sales can quickly align, focus, and personalize their collective efforts on addressing specific buyers at key points.

Cons:

• The funnel prioritizes conversions by focusing on early stages of the customer journey and leaves out post-conversion activities, necessary for retention.
• Consumer behaviors are rarely linear, and the funnel does not account for non-linear paths.

When to use the Funnel

• Quick Conversions: If your primary goal is to drive immediate sales or conversions
• Rapid Lead Generation: It allows you to guide potential customers through a structured path, optimizing each stage for a specific action, such as signing up for a trial, then making a purchase
• One-Time Purchase Model: If your business relies on single transactional purchases
• Short Sales Cycles: If your industry is characterized by short sales cycles (typically e-commerce) and quick purchase decisions

II. The Hourglass — my personal favorite

Comment asking me why, and I’ll share.

The Hourglass is a siamese funnel that goes beyond the point of purchase and moves customers through stages like onboarding, product activation, engagement, and loyalty. It emphasizes increasing product usage and building lasting relationships. The Hourglass model prioritizes the performance of:

• Lifecycle Marketing: Automating customized communications to drive product comprehension and deliver ongoing value
• Early Product Activation: Increasing how quickly customers set up and utilize the product or service after purchase
• Lifetime Value: Increasing the amount of revenue a customer will generate through referrals and upsells throughout their lifespan as a customer

Pros:

• The Hourglass underscores the significance of product adoption and getting users engaged as quickly as possible.
• The Hourglass establishes clear lifecycle stages to build targeted content and programs against that can lead to improved customer comprehension, overall satisfaction, referrals, and increased lifetime value.

Cons:

• Measuring the effectiveness of the Hourglass can be intricate, as it requires tracking customer engagement, loyalty, and referrals.
• Developing and maintaining an Hourglass model is resource-intensive and can demand continuous content creation and effort.

When to use the Hourglass

• Longer product adoption cycles: For complex SaaS products, having clear lifecycle stages that align with each step of setting up your product will improve customer usage.
• Automating a lifecycle strategy: When building communications automation, the hourglass easily establishes key customer stages to build communications and content around.
• Maximizing customer lifetime value: When your business depends on repeat customers, subscriptions, or ongoing customer relationships, the Hourglass approach helps maximize customer lifetime value.
• Valuable word-of-mouth marketing: If your industry or product significantly benefits from word-of-mouth marketing and referrals, the Hourglass model can effectively identify the best customers and the right moment to evangelize your brand.

III. The Flywheel — the unicorn on the block

The Flywheel is a dynamic approach that prioritizes creating a self-sustaining growth engine by delivering an exceptional customer experience at every touchpoint in the buying process. Long before a customer purchases, the Flywheel model creates opportunities to provide value and share the brand — engagement loops along the way. This model prioritizes the following performance indicators:

• Velocity and Productivity: Increasing Marketing and Sales ability to attract customers
• Friction: Reducing points of friction across the full customer experience
• Engagement Loops: Increasing engagement opportunities to accelerate referral and network growth

As this model is the least visually intuitive, a real-world example of the Flywheel in action is Airbnb. By encouraging users to both host and travel, they create a cycle where hosts become guests and vice versa, driving ongoing usage and expansion.

Pros:

• The Flywheel is the most customer-centric growth model as it prioritizes customer feedback and satisfaction from the onset.
• It recognizes the potential of loyal customers and the compounding effect of referral marketing, contributing to higher customer lifetime value.

Cons:

• Tracking and measuring the effectiveness of a growth loop can be quite complex as it is not linear and relies on various interconnected data points.
• Developing and sustaining a growth loop demands ongoing product iteration effort and resources.

When to use the Flywheel

• For Network-based businesses: The Flywheel is particularly useful for social platforms and marketplace businesses like Airbnb, LinkedIn, and Poshmark, that operate on network effects.
• To go viral: Effective Flywheels create brand ambassadors that advocate and spark momentum around sharing a product, service, or initiative.
• For agile growth: Because the Flywheel prioritizes the customer at every point, this model can quickly pinpoint shifts in customer needs and behaviors, allowing for iterative, agile product development.
• Maximizing customer lifetime value: Like the marketing hourglass, the Flywheel model is ideal when your focus is on the long-term value of customers and leveraging the power of referrals.

Choosing between the Funnel, Hourglass, and Flywheel depends on your business goals, industry, and customer base. Be sure to consider your business’s specific needs and don’t hesitate to adapt your growth strategy to use a combination of these models as your business needs evolve.

Leave a comment letting me know which growth model you’re using for your business today. What works about it? What doesn’t work?

The opinions shared in this article are solely my own and are not endorsed by or affiliated with any particular organization.