What is Viral Marketing? Learn Viral Marketing Strategies and Tactics –
More than 90% of all startups ultimately fail; nearly half of these failures result from problems relating to “running out of cash” and “price/cost issues”
“Virality”, which is what all modern-day startups must secure in order to scale exponentially, can be thought of in two ways:
- As a general term applied to the Internet: “The tendency of an image, video, or piece of information to be circulated rapidly and widely from one Internet user to another; the quality or fact of being viral”
- As a specific term applied to customer acquisition: “A phenomenon in which users acquire other users, usually through some referral mechanism built into the product on offer”
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We can understand the basics of viral marketing by looking at conventional vs. non-conventional marketing funnels.
- The conventional marketing funnel: businesses pay lots of money to drive traffic toward their products (websites, apps, etc.) in an effort to convert a small fraction of that traffic to active, paying customers.
- The viral marketing funnel: instead of a large number of potential customers transforming into a small number of actual customers, a small amount of actual customers help bring in exponentially more customers.
With viral marketing, each new user brings in one or more new users, who then bring in one or more new users themselves, and so on:
- in the use of a product (e.g., a new Facebook user organically suggesting that her friends give the social media site a try) and/or,
- in the operation of a referral system (e.g., a Lyft user circulating a referral code that allows him and the person who applies his code to each cash-in a free ride).
When it comes to viral marketing, the goal is to achieve a strong “viral coefficient”, i.e., the number of new users that each existing user brings over to your company.
For instance, a viral coefficient of 2.0 means that on average:
- 100 users refer an additional 200 users
- Those 200 users then bring over 400 more users, and so on.
Maintaining a viral coefficient above 1.0 significantly reduces your dependence on any sort of substantial marketing budget to keep growing.
And “Viral loop” is the term used to describe the process through which a user progresses from first encountering your product to then being incentivized to recommend it to others
It’s a loop in the sense that it functions as a continuous and expanding process in which more and more users are brought into the growing user base.
Let’s now take a look at some famous examples of startups that have nailed the viral loop phenomenon.
Many of these cases demonstrate just how successful startups can become despite using very little, if any, direct advertising/marketing to customers:
- Groupon: the group buying website Groupon offers users the ability to activate huge savings on attractive deals but only if a specified number of buyers are available to activate the deal. Over the years,Groupon has used this strategy to expand its user base by convincing existing users to invite their friends in order to take advantage of great deals on everything from food and recreational activities to beauty experiences and clothing.
- Dropbox and Uber: Dropbox, an ultra popular file-sharing website, and Uber, the largest ride-sharing service in the world, both offer their users attractive rewards for referring others to their platforms.Dropbox offered free storage space for all referred users when it first launched, helping the company to acquire 1 million users in the first 7 months of its operations. Uber’s dual-side referral code system — whereby person A receives a free $20 ride credit when person B, who also gets a $20 ride credit, signs up for Uber using person’s A unique referral code — is so successful that approximately 50% of new Uber customers arrive via referral.
- Instagram applied a cross-posting feature that makes it possible for users to automatically share their photos with their Facebook and Twitter friends, thus encouraging people from other social networking sites to sign up for Instagram in order to like, comment, and share their own photos.
- Facebook: the ultra-successful social media platform was one of the first web-based startups to leverage email invites, allowing new users to easily and quickly invite all their email contacts to join the site. Again, like Instagram, Facebook users were incentivized to bring their friends over to the platform because a)it was incredibly easy to do so and b) it made the Facebook experience more enjoyable (by allowing people to share their online lives with more friends, families, and colleagues).
- Airbnb achieved massive expansion by “hacking” Craigslist via use of a bot that allowed new Airbnb users to share their listings with many others, thereby creating a network effect that drew in other people.
- Hotmail: back in the day when Hotmail first launched, only 70 million people were Internet users. Nevertheless, Hotmail managed to grow its user numbers over time by including the tagline “PS: We love you, get your free email at Hotmail” in the footer of every email sent via the Hotmail servers.Neither Hotmail nor its users had to pay to transmit such a simple message around the Internet. Hotmail effectively created one of the first viral loops in the process, reaching 66 million users (nearly the entire market at the time).