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Phase 5
Growth Loops vs. Funnels
How does growth actually happen? Two of the most widely used frameworks are the AARRR funnel (Acquisition, Activation, Retention, Referral, Revenue) and growth loops. Funnels provide a clear, linear view of how customers move from discovery to paying. Loops, in contrast, are cyclical systems where each user action feeds the next, compounding growth over time. This module explores both frameworks, their strengths and weaknesses, and how to decide when to apply funnels, loops, or a combination.
A linear framework pioneered by Dave McClure to track customer journeys step by step: Acquisition → Activation → Retention → Referral → Revenue.
Strengths
- Simple and intuitive
- Useful pre-product-market fit
- Helps identify 'leaky' stages
Limitations
- Linear view treats customers as an end state
- Overemphasizes acquisition
A cyclical framework where user actions generate outputs that feed back as new inputs, creating compounding, self-sustaining growth.
Strengths
- Compounding flywheel effect
- Emphasizes retention and advocacy
- Maps well to products with network effects
Limitations
- More complex to design and measure
- Requires strong product-market fit
A Modern Hybrid
Popularized by HubSpot, the flywheel visualizes growth momentum where every satisfied customer powers future acquisition through Attract → Engage → Delight phases.
Strengths
- Customer-centric model
- Focuses on reducing friction
- Aligns the entire organization
Limitations
- More of a strategic mindset than a direct measurement tool
Choosing the Right Framework
- Funnels: Best for early-stage, acquisition-heavy growth; great for diagnosing conversion gaps.
- Loops: Best for products with recurring usage and virality (SaaS, marketplaces, platforms).
- Flywheel: Best for companies optimizing long-term customer experience as a growth engine.
Pro Tip: Use funnels for measurement, loops for design, and flywheels for strategy.