Whenever I see incentives in the wild, part of my brain begins to twitch.

Seeing a gas station membership program triggers the following thoughts:

Is the $0.05 discount covered by the profit made per gallon?

Is $0.75 enough to alter consumer behavior?

How much does this business care about retaining discerning customers?

How fixed is this discount? Is it likely to shift over time?

Once you start noticing these types of incentives, you find them everywhere. I was surpised to realize how consistently I'd been tuning them out.

This post unpacks my understanding of growth levers. I spent almost three years building them at Hopper (a mobile-first travel startup), and I can't unsee them.

I'm aiming to answer to four questions:

1. What is growth?
2. Why do companies build growth levers?
3. What are some real world examples?
4. As a consumer, how can I take advantage of these levers?

If you just want pointers, skip to the end!

Let's begin with a working definition.

What is Growth?

• Growth is Mint Mobile rolling out a cheaper cellular plan for folks who are 55 or older
• Growth is getting a free cookie on your birthday from your local coffee shop
• Growth is MacDonald's customers buying fries for a chance to win a Mini Cooper playing stamp Monopoly

Each of these strategies distributes value to consumers in an attempt to increase engagement.

But effectiveness depends on implementation. If the cookies are oatmeal raisin, or filled with sand, the strategy will likely fail. Nobody likes oatmeal raisin cookies.

If the strategy works, we can call it a growth lever. The company can pull the lever harder (or more gently) by altering the incentive.

For example:

• Mint Mobile could halve their discount for the 55+ year old plan
• Your coffee shop could offer two free cookies instead of one
• MacDonald's could distribute more prizes (perhaps guaranteeing a grand prize winner in each state)

A well-built growth lever can be adjusted repeatedly to fit the current goals of the business.

Growth levers rely on a story around why additional value is being given to consumers. The accompanying song and dance does two things:

1. It helps consumers view the information as "useful" or "special" instead of as noise.

Consider two Adidas push notifications to sneakerheads:

Hey! We still sell shoes!

20% off spring styles this weekend!

One of these I might be interested in, or absentmindedly dismiss - but the other would actively frustrate me. I know Adidas sells shoes, and its wasting my time by messaging me with nothing on the table.

2. It helps hide the fact that transactions are often still profitable for companies (even at a lower price point).

These stories follow several patterns to communicate value quickly, which I'm calling...

Value markers

Here's a working definition:

And a few markers we're programmed to look for:

• Exclusivity (not generally available)
• Scarcity (few in number)
• Urgency (only lasts for so long)
• Celebratory (a reason to feel joy)

Even when we know our local Bed, Bath, and Beyond has been running a "10% off everything! Store closing!" discount for six months, it's extremely difficult to realize "this isn't actually a sale".

In our above examples, the cell plan discount is exclusive to customers aged 55 or older. The coffee shop birthday cookie is celebratory (it's your birthday!), exclusive (it's not everyone's birthday), and urgent (24h). And the Monopoly game evokes scarcity for the prizes, urgency for the promotion duration, and is celebratory when you win (because winning prizes is lucky!).

Great growth levers are combinations of one or more of these markers (used to create a story), and incentives given back to the consumer.

What isn't Growth

Advertising

Ad campaigns do not fit within our definition of growth. Though well-designed ads encourage consumers to purchase more products, the ads themselves do not provide value directly to consumers.

It is possible to run ads referencing ongoing incentives, but nothing about the deployment of advertisements actually distributes value.

Undercutting competition

Occasionally, companies try to drive competitors out of business by slashing prices. Here's a wild story detailing Amazon programmatically lowering diaper prices to harm a competitor.

While the lowered prices do effectively pass value back to consumers, the lever isn't meant to be used for long. Once the rival goes out of business or is acquired, the undercutter can end the discount and charge what it pleases.

Let's exclude undercutting for two reasons:

• The goal of the "incentive" is to eventually remove the need for such an incentive¹ and charge the consumer higher prices
• No accompanying narrative is pitched to potential customers

Consumers are necessarily price sensitive, so undercutting prices will increase Amazon's share over time all by itself. But if Amazon throws up a big banner and says "It's our Drive Diapers.com out of business sale!", there's going to be accompanying media (and possibly legal) pushback. Consumers might also avoid purchasing from Amazon, seeing where that road leads.

Expiring or defective merchandise

Lastly, let's exclude discounts on products that have lost value. Grocery stores can't sell produce that's gone bad, and clothing vendors can't keep last season's styles forever. Eventually, the value of an aging good approaches zero.

Growth levers must be intentionally deployed. Companies need to choose to run these strategies, not use them as an escape hatch to recover diminishing value.

Why deploy growth levers?

So why do companies use them? Surely they're making their products less profitable, right?

Money left on the table

The most straightforward explanation is that sometimes selling a company's products can still be profitable, even when offset by value returned to the customer.

This is most easily observed for digital products with subscriptions. I tried to cancel my New York Times subscription a few years back, and was informed that the New York Times would be willing to sell me a $10 a month subscription instead of $15.

I was initially confused, since NYT made it obscenely hard to cancel². But my web and app traffic isn't going to make a dent in that monthly fee. Having a cheaper option stops some price sensitive users from walking out the door.

So is the Times making less profit than if I was still paying $15? Yes.

But is the subscription still profitable after the discount? Also yes.

Here's an article that digs into the observed gap, terming it "willingness to pay":

Willingness-to-pay (WTP) is the maximum price the customer would have paid for the product, which the economist claims is how much the customer values the product.

It's much easier to offer different price points for digital products than physical ones. Imagine spending $5 on your coffee, but seeing the person behind you spend $2.50 because they threatened to walk away when they heard the price.

Growing the business

On the other hand, companies also growth levers because they'll trade short term losses in hopes of eventually becoming profitable.

Here's a range of motivations for making that tradeoff, ordered by the maturity of the business (from "cash burning startup" to "publicly traded company").

1. Building a narrative for fundraising

Continual growth can be crucial for startups.

Month over month growth tells investors "we've built a product that solves a problem differently". Organic growth can take a product far, but if it starts to falter, levers can shore up the narrative at an important time.

Many startups are able to raise on the basis of continual growth, whether or not they're profitable. For example, Uber raised at least seven times before going public, even though it still wasn't profitable.

2. Building a network effect

Some products need a sizable user base before they become useful. Consider:

• Ride hailing (requires both drivers and riders)
  • Similarly, any other gig economy services like food delivery or task handling
• Social media (Bluesky for one user is a terse blog)
• Dating apps ("Reach other users to find love!")

These types of companies can heavily incentivize users if they run into trouble hitting the threshold their products need for success.

For example, here's the top result when I google "uber signup bonus":

Lyft has been around for a decade, and it's still using signup bonuses to keep its driver network in Washington D.C. healthy.

3. Improving unit economics

Scaling the business brings several benefits.

Growth helps a company...

• build dedicated factories for producing goods (reducing costs by becoming more efficient)
• negotiate better prices with providers of required goods or services (given stabler and growing demand)
• claw back profit from partners (under the threat of doing business elsewhere)
• spread fixed costs over more revenue

Physical products and digital services necessarily have different unit economics. But for both, profitability should increase with the volume of products sold.

4. Differentiating a business

For mature companies with competitors, a well-crafted set of levers can keep consumers choosing your business. Imagine that Starbucks starts a rewards program for loyal members, but Dunkin' doesn't have one. Some indifferent coffee drinkers will alter their habits because of the rewards program.

Real world levers

Let's walk through some real world examples and connect the dots.

Keep the following in mind:

• What customers do these levers target?
• Do these levers work for digital and physical products? Or only one?
• Does this lever offer many degrees of freedom? How gently or firmly can it be pulled to incentivize customers?

Sales

It's Autumn! Pumpkin spice chicken nuggets are here!

Seasonal sales have existed for a long time as a way for vendors of physical goods to move products before new merchandise comes in. Over the past 20 odd years, Cyber Monday and other seasonal sales have started for digital products and marketplaces too.

Example: Hopper's flash sales for app users.³

Here's a few screenshots:

The bet for my team (like many others working on Growth) was that we could trade short term profits for building out a loyal customer base. Profit margins on travel products are not equal,⁴ so we tinkered with discounts for each product iteratively - you can see hotel discounts above, but none for flights.

Variants

• New user sales (before a consumer makes a purchase)
• Welcome sales (after a user makes a first purchase)
• Season ending sales (digital and physical products have different goals 👀)

Vouchers

It's your birthday! Come in and celebrate with a cookie on the house.

Vouchers are one-off deals that are redeemable once (sometimes by entering a code). Because vouchers are issued to individual users, they offer a high degree of control.

Example: REI's 10th year membership anniversary discount.

This is great! 10 years is a nice whole number, and actually kind of does feel like something celebratory. $30 is a nice chunky number, and I'm getting nearly 20% off a purchase if I buy something near the minimum purchase value. There's some fine print (only valid for purchases over a certain threshold, and I only had 2.5 weeks to use the discount), but that's to be expected.

Vouchers are well-suited for personalization. REI should be able to determine my spending habits - they've got ten years of data. If they wanted to, they could personalize the voucher by putting the minimum purchase 20% higher than my typical spending (or run a series of discount amounts and percentages to see which increased revenue or profit the most).

Variants

• Basic discounts ($N or M% off your next purchase)
• Entirely free items (get a free good or service, possibly with a purchase or other restrictions)

Referrals

Seeing your sun, moon, and rising signs are cool, but don't you want to see your friend's? Invite them for half off your membership!

Referrals are programs that reward customers for bringing in new people (typically a purchase or an install). Products with a social angle are better suited to use referrals - privacy-oriented services attempting referrals are bound to make users slightly nervous.

Example: Copilot (a budgeting app for Apple devices).

Three months feels substantial (the annual membership is ~$100), but the referral only pays out when two new users subscribe.

This seems like a safe bet for Copilot - even though they hand back some of that discount to the user (3 months back), it's likely that the two users who subscribed will end up purchasing more than 3 months between them.

And though Copilot is a budgeting app, there's no social features or tabs anywhere. It's easy to have faith that my data is siloed, and my friends won't see me blow through my monthly ice cream budget.

Variants

• Free membership (for subscription-based services)
• Discounts or free items
• "Cash" or other stackable rewards (like points, miles, or gems)

Punch cards

Your tenth night at the Radisson is on us!

Punch cards are a way of offering an "Nth" product for free to a loyal customer. They're most useful for products that are roughly equal in value, so think books, coffees, or hotel stays.

Example: Tatte's coffee punchcard.

Punch cards also tend to work better with products that are purchased with frequency. Consider a "10th oil change free!" program. Unless you're going through cars like Brian O'Connor, it's going to take five years to earn that reward.

Variants

• Standard punchcards
• Tiered rewards (different rewards unlock at different stages)
• Buy one, get one (BOGO sales are basically the simplest punchcard program)

Cart abandonment

Hey! Those laundry baskets you were looking at are now 20% off. Still interested?

Cart abandonment is a way of offering a lower price point for customers who'd otherwise bail out of a transaction.

Example: a winback email from The Noun Project, sent after I cancelled my subscription.

It's especially easy for digital products to offer lower prices, because the actual cost of providing the user with the service tends to be negligible.

Variants

• Churned customers (waiting until a user unsubscribes)
• Digital cart abandonment (where a customer leaves a website with products in a shopping cart)
• Physically abandoning a transaction (haggling with your car dealer by literally walking away from the table)

Cash back

2-5% back on every purchase! (Some restrictions apply)

Accumulating rewards like cash back or points are great levers for businesses with a higher amount of revenue and transactions per customer. For rare purchases, or inexpensive ones, the accumulation of value doesn't stack up quickly enough to have impact. But for businesses that hope to see healthy periodic transactions from consumers, it can keep buyers locked in.

Example: Shopify's Shop Cash.

Shopify serves a wide variety of stores, so customers can apply the accumulated discounts to many different goods Shopify is the most sophisticated cashback program I've seen.

• Cash expires "discretely" over time based on purchase date, prompting a user to make purchases again soon
• Businesses using the platform can implement their own spending thresholds (before discounts become eligible) and discount multipliers 🤯
  • This is a fascinating way for businesses to learn more about consumer willingness to pay, while presumably being rewarded by Shopify for doing so
  • It also introduces competition between vendors to make Shop Cash valuable with high multipliers, which in turn benefits consumers

Variants

• Cash!
  • Tied to real currencies - $1 Shop Cash is worth at least $1USD
• Secondary currencies (like points, miles, or gems)
  • May allow a company to "flex" the power of the accumulated rewards up or down, which feels bad for users and / or may be illegal for pegged currencies

Loyalty programs

For only $100 a year, your sky miles accrue at double the rate! And you get unlimited use of our lounges.

Loyalty programs are perhaps the most complicated lever. They allow consumers to earn a variety of perks, either by subscribing or making repeated purchases. But for the implementer, calculating the cost (and eventual return on investment) is more complex because not everything boils down to a raw dollar amount.

Example: JetBlue's True Blue rewards program.

True Blue doesn't have a membership fee, but consider how complicated it is to implement for JetBlue. Each of the following perks has drastically different cost calculations:

• Added complexity to support preferential boarding process everywhere JetBlue flies
• Negotiating express lanes and priority treatment in various airports (fine print reads "dozens of airports")
• Comped drinks on each flight
• 5k points (which in turn discount flights at differing rates)
• ...15 rewards later...
• BLADE Airport Transfers - Travel between Manhattan and JFK or EWR in as little as 5 minutes with credits for 4 one-way BLADE Airport helicopter transfers. May be used by a Mosaic member (and eligible travel companions) in either direction when departing or arriving on a JetBlue flight.

Each different type of benefit represents a unique costs for JetBlue (which in turn means different amounts of value for users). Concientious users can and do poke around to determine what rewards matter to them. Implementing a complicated rewards program⁵ represents a significant risk for companies (and a bit of a gamble that chosen perks move the needle).

Variants

• Recurring membership (where users can buy different levels of status, and then are rewarded accordingly)
• Pay to play (where there are no recurring fees, and advancement is just done through spending)

Hunting for incentives

So how can you find and use these incentives to your advantage, while avoiding cheap value markers and other gimmicks?

Understanding business profiles

The first step is to understand the relationship between a business and its ability to use levers. The strength of growth programs is largely determined by the industry of the business.

Looking for profit and competition

With little profit, a company is hamstrung by its inability to return value to consumers.

With little competition, a company isn't pressured to contribute value.

But with an abundance of both, companies are willing to pull the levers in the hopes of beating out their competition. We can think of it as a success of the commons - the presence of many players with profit helps customers.

High margin, many competitors

Direct to consumer (DTC) brands tend to have high profit margins, since they can cut out many of the traditional steps in running a business. The space also tends to be more crowded as a result.

This is the sweet spot for growth levers.

High margin, few competitors

Profitable companies with few true competitors aren't under the same pressures to discount their goods. For example, Apple doesn't really run seasonal sales - consumers that want an iPhone aren't going to get an Android device just becauase they're on sale.

Hunting for discounts in this category isn't necessarily going to bear fruit, as these companies consider their products peerless.

Low margin, many competitors

Crowded industries that don't have much profit to share back with consumers may use levers, but likely won't be able to give significant discounts.

Getting a tenth free coffee or book might be all you can scrounge up.

Low margin, few competitors

Less profitable businesses tend to have little competition, because it's harder to break into industries where there's less money to go around. And these companies correspondingly have less to offer consumers, because pulling the levers quickly becomes unprofitable.

Consumers tend to be very price sensitive to staples, so healthy markets tend to force prices down on necessary goods.

So you can make $0.05 back on a gallon of gas, but even if you're filling your tank every week, you're not likely to save much over the course of the year.⁶

Don't expect any big wins here as a consumer, because products are barely profitable.

Understanding transaction patterns

We can also break down opportunities based on transaction types. Here's three categories to be on your guard for levers.

1. Infrequent, high cost, high margin purchases

Cars, sports equipment, expensive seasonal goods (winter coats).

Negotiating is unpleasant, but exceedingly valuable. Waiting for sales can have huge impact - if you don't care about having the latest model or this year's skis, you're going to save a lot.

2. Online purchases

Think DTC brands here and other retail goods hoping to tip you into buying their products.

Leverage redemption codes

Many online companies (especially direct to consumer) have spots for coupon codes during checkout. Try googling for discount codes for that business before making purchases, or abandoning your cart to trigger sales and other discounts.

Honey used to be a plugin that showed active discount codes (ex: WELCOME15, which might give new users 15% off).

It looks like it's been converted into a Shopify storefront clone, offering cash back and highlighting deals, but may be able to find discount codes. Tinker with caution here.

Attempt cart abandonment

A good first step is visiting a DTC website and poking around, without putting anything in your cart.

Wait two or three days.

If you don't get an email giving you a "welcome sale", go back and try adding products you're interested in to your cart, and then leaving the site.

This is an easy path to save 10-20% off, if you're not in a rush.

3. Subscriptions (especially digital ones)

Actively cancel your subscription, call people up, cause trouble. "Interact" with the business to test for lower price points.

I called Capital One for six years running and threatened to cancel my credit card because my promotional offer for "no annual fee" had expired. Every time I made the call, it worked.

Conclusion

Seeing and taking advantage of growth levers is a muscle you might not need to flex, but it can be fun. It's been a fascinating experience reconsidering how these programs work after building several of them.

If you made it to the end, thanks for reading! Happy hunting!