Your Viral Co-Efficient Sucks and That’s Awesome

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Viral, is as buzzy of a word as it gets these days. For the most part, you might as well just talk about synergizing your mobile cloud scalable big data product. Under all the hype there is one big shiny nugget of gold locked in the viral message.

You don’t have to be viral, to grow from viral loops!

For some reason, this one shocking piece of information eludes thousands of otherwise very smart people.

When most people talk about “Going Viral” they think about consumer apps like Snapchat or videos like Gangnam Style. I say thank god this isn’t how viral works for everyone.

The Myth

If you’re building a SaaS application, or any app for that matter, you don’t need to go Viral to grow like a weed. In fact, if you add a viral loop on top of your other marketing channels, you can double your growth rate.

At this point I’m sure there are a few awkward looks on the other side of the monitor thinking “but viral is the answer and you just don’t get it.”

Well lets clear this up once and for all.

Introducing the K Factor

The standard way of measuring if you are viral is known as your Viral Co-efficient (K-Factor). If you have a K-Factor of over 1 you are officially viral. Conceptually, this means for every user you acquire they will bring at least one extra user with them.

For SaaS companies, the honest truth is that you probably won’t ever go viral. However, please don’t take this to mean you shouldn’t try to grow with viral loops. As long as you have a great product with repeat customers a K-Factor as low as 0.2 will still result in a FREE extra user every time a user signs up.

You should look at your Viral Loop as a mini-growth accelerator that will enhance all of your other user acquisition efforts.

An Example to drive it home

For example, let’s look at Shoeboxed, the receipt tracking tool. You can send Shoeboxed an envelope full of receipts and they will scan them, run them through OCR and give you back digital copies. A pretty convenient tool for those of us that hate paper, and definitely something worth sharing with your friends.

Well, that’s what Taylor Mingos thought, too.

Taylor is the CEO of Shoeboxed, and we interviewed them about their referral program. As it turns out, Shoeboxed is just like most every other SaaS apps — they aren’t viral. Unfortunately, while I personally have a couple friends that need Shoeboxed, on average people don’t get another friend to sign up. In fact, only about one in six people have a friend sign up, which means that Shoeboxed only has a K factor of about 0.16.

As it turns out, this isn’t a bad thing. In fact, it has given them a boost of growth. This is because for every user that they get from another channel, such as SEO, PPC or content marketing, they know that on average they’ll get 0.16 of a new user. It’s kind of like an interest rate on your user growth investment.

The Math

The beauty of the math is that it doesn’t lie, have an opinion and or get influenced by hype. I put together some simple calculations to illustrate just how much of an impact a K-Factor under 1 can have on your business.

If you assume that you are getting 1000 users every two months with Google Adwords. Then, assume that on average each of your users invite 4 friends, and those friends then sign up for your SaaS app at a 5% conversion rate. This will get you a K-Factor of 0.2.

i (# of invites per user) = 4
C (conversion % of invites) = 5%
K = 4 * 0.05 = 0.2

If we apply this K-Factor to your 1000 users of growth, you will get an extra 200 users For Free. Pretty amazing growth, even if it isn’t viral. This cycle repeats, so those 200 people will get 40 more, and that generation will bring on 8, and then 2. If we assume that the viral cycle (the time from signing up to having a friend sign up) is two months, then that K-Factor actually results in a total growth of ~1250 users every two months after a few cycles. So, a K-factor of 0.2 actually adds a constant 25% to your growth rate.

Generation 1  - 200
Generation 2 - 40
Generation 3 - 8
 ...
Steady state - 250

Now, look what happens when you boost your conversion rate, so that you have a viral factor of 0.5. Well, then your first generation will be 500 users, the second is 250, the third is 125, and so on, resulting in a steady state growth rate of around 1998 users (1000 from paid, 998 from invites).

Generation 1  - 500
Generation 2 - 250
Generation 3 - 125
 ...
Steady state - 998

So, a K-Factor of 0.5 can nearly double your growth rate from your other marketing efforts.

Here’s the chart. Here’s the spreadsheet.

ViralKChart

 

I know a few people that would be happy to double their marketing efforts, don’t you?

 

 

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