What Is a Sales Funnel?
A sales funnel represents the process a user goes through from their first interaction with a product to conversion.
For a mobile application, it might look like this:
Ad → App Store → Installation → Sign-up → First use → Purchase → Repeat purchase
Each step represents a specific stage of the funnel.
Not every user will make it all the way through. Some will never install the app, others will not sign up, and some may use the app without ever becoming paying customers.
That is why funnels are often used to identify where users drop off.
Funnels Are Useful, but They Have One Limitation
A funnel naturally moves in one direction:
Start → Conversion
A user enters at the top and gradually moves toward the bottom.
Imagine a mobile app with 10,000 App Store visitors:
- 4,000 install the app,
- 2,500 sign up,
- 1,500 start actively using it,
- 300 purchase a subscription.
The funnel helps us identify where the biggest losses occur and which parts of the user journey should be optimized.
The problem is that when a user completes a purchase, they have reached the end of the funnel.
But what happens next?
This is where growth loops become interesting.
What Is a Growth Loop?
A growth loop is a cycle in which the output of one activity creates the input for the next.
Simply put:
User → Action → Outcome → New user or value → Next action
Unlike a funnel, the process does not end with conversion.
Imagine an app where users create content and then share it with their friends.
User creates content → shares it → new user discovers it → downloads the app → creates their own content → shares it
One user can therefore help bring in others.
That is the basic principle of a growth loop.
A Growth Loop Is Not Just a Referral Program
When people hear the term growth loop, many immediately think of:
“Invite three friends and get a free month.”
A referral program is just one type of growth loop.
There are several types that can be used in mobile applications.
Viral Loop
Users invite other users.
A typical example could be an app whose value increases when friends or colleagues use it as well.
Content Loop
A user creates content that subsequently attracts other users.
This could include photos, reviews, videos, or public profiles.
User-Generated Content Loop
Users create content that increases the value of the platform itself while also potentially attracting new users.
Paid Growth Loop
A user creates enough value or revenue to allow the company to invest in acquiring additional users.
For example:
New customer → Revenue → Marketing budget → New customer
Not every loop is therefore automatically viral.
Funnel vs. Loop
The simplest way to distinguish between the two approaches is to look at their underlying logic.
A sales funnel has a beginning and an end. It follows the user from their first interaction with the product to the desired conversion. The goal is to understand how many users move through each stage and where they drop off.
A growth loop, on the other hand, is cyclical. Its goal is to create a mechanism in which the output of one user activity creates the conditions for another user to enter the process. The user is therefore not just the end goal of the process but can also become part of the product's growth mechanism.
In simple terms:
Funnel: user enters → moves through the process → converts.
Loop: user takes an action → value or a new entry point is created → another user joins → the process repeats.
A funnel therefore helps optimize conversion, while a growth loop helps us think about how to create repeatable growth.
In practice, however, it is not a choice between funnel or loop. A successful mobile application can use both approaches at the same time.
How Can They Work Together?
Imagine a fitness application.
The funnel might look like this:
Instagram ad → App Store → Installation → Sign-up → Free trial → Subscription
This focuses on acquiring and converting users.
The growth loop could then look like this:
User completes a workout → shares the result → friend sees it → downloads the app → starts working out → shares their result
The funnel therefore helps turn a user into a customer, while the loop can help customers generate additional growth.
Why Are Growth Loops Interesting?
Traditional growth often works roughly like this:
More advertising → more users → higher costs
If you want to acquire more users, you need to invest more money into marketing.
A growth loop can create a different mechanism:
More users → more activity → more value → more new users
If the loop works well, growth can become partially self-reinforcing.
This does not mean that an app will automatically grow without marketing. It means that the product itself creates a mechanism that supports further growth.
How Do You Design a Growth Loop?
When designing a growth loop, it is useful to ask a few questions:
- What valuable action does the user take?
For example, they create content, invite a friend, or complete an activity.
- What does this action create?
It might create content, an invitation, a result, or another type of output.
- Who will see this output?
Existing users, the user's friends, or an entirely new audience?
- Can this output bring in another user?
If so, you may have the foundations of a growth loop.
- What motivates the new user to continue?
The new user needs to receive enough value for the cycle to continue.
Beware of “Fake” Growth Loops
Not every repeated activity is a growth loop.
If a user opens an app every day because they want to continue their workout, that is an engagement loop.
If their activity also creates something that helps attract another user, it can become a growth loop.
The distinction is important:
Engagement loop → the user comes back.
Growth loop → the user's activity helps create further growth.
What Should Product Teams Measure?
With funnels, teams can track metrics such as:
- conversion rate,
- activation rate,
- retention,
- churn,
- cost per acquisition,
- lifetime value.
With growth loops, we also want to understand things such as:
- How many new users does one user generate?
- How often is the loop triggered?
- How many people respond to shared content or invitations?
- How long does one cycle take?
- How much value is created with each cycle?
The goal is not simply to increase the number of users, but to understand the mechanism that creates that growth.
Funnel or Loop? Ideally, Both
Sales funnels and growth loops answer different questions.
A funnel asks:
How do we move a user from their first interaction with the product to conversion?
A growth loop asks:
How can one user's activity help create another user or generate additional value?
For a successful mobile application, both perspectives can be important.
A funnel helps optimize the user's journey. A growth loop helps us think about how the product itself can support further growth.
The strongest products therefore do not only optimize the funnel. They design the product so that using it can become part of the growth mechanism itself.