Just recently, I stumbled upon a SAAS (Software As A Service) provider claiming that with its software one can net 114,485 qualified leads in just 30 days. Is it really true? Take a look the below calculator to check if the claim is indeed verifiable.
The basic premise of viral marketing is to utilize whatever tool(s) available to accelerate growth. This calculator gives the picture of what to improve to achieve the viral growth. You may start with the following numbers for the 1st step to 5th step respectively: 10, 10, 18, 2, 30. You will then see if the above claim is true.
Here’s the explanation.
First of all, you will not gain any viral growth if the viral factor is equal to or below 1. This viral factor, also known as viral coefficient (K), is the multiplication of the number of invitation sent by each of referrer with the rate of the conversion. Using the above-suggested numbers as a starter, you can see that the viral factor is 1.8 and the number of leads generated is 151,787. Thus, it’s confirming that the claim is indeed true.
Now, let’s change the conversion from 18% to 5%. The viral factor will change from 1.8 to 0.5. Take a look at the result, then play around with the cycle time (step 4) and viral duration (step 5). You will see that the maximum result is 20 leads/customers. There’s no growth at all!
Assuming that the initial leads to begin with are still the same, i.e. 10 leads, what factor then needs to be changed to have the expected growth? Of course, based on the explanation above, the factor that is affecting the viral factor is the conversion rate. If you can just increase the conversion rate from 18% to 19%, the result will almost be doubled. But, what if instead of increasing the conversion, you can only reach a lower conversion rate?
Here’s the interesting part. The second factor that influences the viral growth is the viral cycle time. According to David Skok, who, with his fellow expert invented the formulae, the viral cycle time is the time needed for a lead or customer try or sign up for a product, invite a friend and have the friend try or sign up for the product. In the calculator, try to change the viral cycle time from 2 to 3. You will see a significant drop in the number of leads generated. Try it again with 1. You’ll be amazed seeing the result.
With all the above said, the conclusion is obvious.
The viral coefficient must be greater than 1 to have viral growth
Viral cycle time is the biggest contributor to dramatic effect on growth
Back to the SAAS I mentioned at the beginning of this article. While now we are sure and certain that the claim is true, we still need to remember that tool is a just tool. How to utilize and make use of it is more important than anything else. Knowing customer motivation and reactions as they flow through the viral cycle is important. Making the lead and the invitees happy is what Dropbox does to grow phenomenally.