4 growth models explained on the business model canvas

When we talk about growth, we talk about revenue growth, ideally in an exponential manner where revenue growth outpaces customer acquisition. Growing a business isn’t one-size-fits-all. Each company’s growth depends on how well its strategy aligns with its business model. Here we will talk about 4 leading growth models. No company can survive with just one of them but most select and optimize one before moving on to the next.

How Slack grew by satisfying customers like no other

Sticky growth is all about retaining customers and keeping them deeply engaged. For Slack, this meant creating a product so indispensable that customers would find it hard to switch to a competitor. Slack seamlessly integrates into daily workflows, offering features like real-time messaging and third-party app integrations. This deep integration has led to an annual churn rate of just 3% for paid teams, far outperforming the industry average of 20-30% for collaboration tools. Retention, measured through churn rate, is the key metric here—with anything below 5% considered excellent. Slack’s ability to embed itself in team communication ensures sustainable growth by reducing churn. Create a must use/have product and create amazing customer relationships for sticky growth. You can even argue that Slack doesn't have customers but have a community (including the SlackBot).

How Dropbox acquired more customers then it reached

Viral growth leverages the power of network effects, where existing users bring in new users. Dropbox epitomized this model with its innovative referral program. By offering free storage to both the referrer and the new user, Dropbox incentivized sharing and turned its user base into a highly effective acquisition channel. During its peak, Dropbox achieved a viral coefficient of approximately 1.5, far exceeding the average for SaaS companies, which typically falls below 1. The viral coefficient—the average number of new users each user brings—is the key metric for this model. Dropbox’s success with this approach highlights the importance of channels and customer Segments, more specifically turning acquired customers to autonomous and free channels. While viral growth can plateau once the most active users have been tapped, Dropbox’s referral program drove exponential early-stage growth.

How HubSpot optimized its digital marketing spend for growth

Paid growth relies on marketing and advertising to acquire customers, but it only works when the numbers add up. HubSpot’s strategy involved targeted advertising campaigns across search engines and social media, ensuring their messaging reached potential customers actively seeking marketing solutions. A critical metric for paid growth is the CAC-to-LTV ratio, which should ideally be 1:3. HubSpot has historically aimed for this benchmark and successfully achieved it over time, far outperforming the average SaaS ratio of less than 1:2 in early stages. Their data-driven approach and emphasis on valuable content offerings, such as ebooks and webinars, helped engage potential customers and nurture them through the sales funnel. Paid growth ties directly to Cost Structure, Revenue Streams, and Channels. Another key word to research is unit economics. HubSpot’s success demonstrates the importance of aligning marketing investments with long-term customer value.

How Airbnb utilized the power of platforms for growth

Two-sided marketplaces or platforms thrive by connecting two interdependent groups, creating value through their interactions. For Airbnb, growth hinged on building trust between hosts and guests. Features like user reviews, secure payment systems, and host guarantees ensured a high-quality experience for both sides of the marketplace. This strategy helped Airbnb achieve an impressive Gross Merchandise Value (GMV) growth rate of 35% annually in its early years, well above the typical marketplace average of 20-30%. GMV, which measures the total transaction value on the platform, is the key metric for two-sided marketplaces. On a platform model, your success depends on finding customer segments which need each other and activities and resources required for an excellent experience for both parties. Balancing supply and demand was critical to maintaining the platform’s value and achieving sustainable growth.

So...

These growth models aren’t mutually exclusive. Many successful companies use a combination of them. For instance, Airbnb leverages both a Two-Sided Marketplace and Paid Growth strategy. Mapping these models to the canvas can help you focus on the right areas to optimize your growth.

• For Sticky Growth, focus on Customer Relationships and Value Proposition to ensure you’re delivering consistent value and creating strong retention mechanisms. Aim for a churn rate below 5%.

• For Viral Growth, pay attention to Channels and Customer Segments by creating sharing incentives and designing mechanisms to encourage user referrals. Optimize your viral coefficient to exceed 1.

• For Paid Growth, align your Cost Structure, Revenue Streams, and Channels to maximize the efficiency of your paid campaigns. Maintain a CAC-to-LTV ratio of 1:3 for sustainable scaling.

• For Two-Sided Marketplaces, balance Key Activities, Key Resources, and Customer Segments, to ensure a healthy platform. Target strong GMV growth by maintaining equilibrium between supply and demand.

When fine-tuning your business model, decide which model most resembles what you currently do and what you want to achieve. Laser focus on respective building blocks of the business model canvas and move on to the next one.