Recently, I’ve been studying the The Lean Startup by Eric Reis. He talks about various growth engines and I love how it describes viral businesses. So I’m borrowing his concept and adding some thoughts of my own.
For the purposes of this post, I am not discussing creating one viral campaign. I am instead focusing on products or services that are inherently viral themselves. In other words, they don’t use sticky growth (subscriptions) or paid growth (print, TV, radio ads, etc).
How do you identify viral products or services?
Going viral is every business owner’s dream. A lot of folks talk and blog about viral products and services and yet, not many describe the key attributes that create viral products.
An actual viral growth engine relies on users to sign-up new users.
Something in the very nature of using the product makes or encourages others to use it. Consider Facebook. Using Facebook requires your friends and family to use Facebook. Using Hulu in no way requires my friends to use it too. That’s why Hulu has to rely on a different growth engine (Note: Companies such as Hulu try to encourage a viral effect by adding share buttons on content pages, but their growth isn’t actually viral based).
Users of viral products are constantly advertising or signing other users up through some mechanism built right into the product. Hotmail added one line to the bottom of every email that said something to this effect, “Get your free Hotmail email account here,” and they sold for $400 million.
How do you track viral success?
Despite all of the talk about going viral, not many are talking about the metrics and key performance indicators (KPIs) that give marketers and business owners information about their viral success.
Typically, we all focus on daily sales data or profit contribution but that does not tell you anything about whether or not you are having viral success. In fact, those numbers may be very misleading.
A viral growth engine requires tracking the rate at which users are signing other users up.
For example, if you you find that the rate is below one, then you are going to plateau pretty quickly. If you are right at one, then you will have a slow, steady climb. But if you are above one (meaning users on average sign more than one other user up over some time frame), then you will grow exponentially.
I hope you see the power of this distinction.
Sales and profit are great but not so great when your growth engine is broken because you never paid attention to how well you are getting new users.
In a nutshell, what should you focus on?
If you have a truly viral product, one that has users signing users up:
Then start using the right metrics to track your effectiveness. Calculate the “sign-up” or “referral” rate. And build out features or mechanisms that ease the process of encouraging or signing others up.
If you don’t have a truly viral product:
Stop trying to go viral! Switch the type of growth engine you are relying on to either paid or sticky and start tracking metrics such as retention or profit margin.