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sifatahmed
Jan 12, 2022
In Welcome to the Tech Forum
The word viral has recently gone through a period of virality itself—very meta, we know. Webster’s dictionary officially recognizes the word as rapid and widespread sharing via the internet. Thanks to the internet and the virality that came with it, traditional barriers to reaching millions of consumers have been shattered. The theory of Six Degrees of Separation, or that every person on the planet can be reached within six friends of friends within your network, almost feels overstated. How can one measure or even predict virality? We bet Kevin Bacon asks this very same question.1 What is the Viral Coefficient? Simply put, the viral coefficient is the number of new users the average customer generates. The viral coefficient is not simply the number of referrals a customer makes, it’s the number of those referrals that convert into customers. How to Calculate the Viral Coefficient? Here is a general formula for calculating the viral coefficient: Viral coefficient = C x R x CR / 100 C = Number of customers R = Average number of referrals per customer CR = Average conversion rate for referrals Let’s work through an example to highlight the importance of the viral coefficient: Take your number of current customers. Let’s say you have 100. Multiply by the average number of referrals your customers send their friends. So that’s 100 x 5 if each customer refers 5 colleagues. Find the percentage of referrals that took action. If 2 of those 5 referrals become paying customers, the conversion is 40%. Not put it all together. 100 customers sent 5 referrals. That’s 500 referrals total. If 40% of people sign up, you’ve gained 200 customers! Your viral coefficient is the number of users gained/initial users (200/100) = 2. This is good news. A viral coefficient of 2 means that every customer you acquire will bring in 2 more customers. A viral coefficient above 1 is advantageous to your customer acquisition costs because as users join through word of mouth and other unpaid channels, the CAC declines. Preparing for Virality All press is good press, right? Does this mean all virality is good virality? It’s great that customers are talking about you, maybe even feeding the fire of network effects. Virality can, however, have some negative side effects. If you experience rapid growth as a result of viral marketing and a meaningful increase in your viral coefficient, it could lead to a decline in overall quality as resources are stretched thin. Think products going out of stock, manufacturing ramping up to meet demand, and quality taking a back seat. Mobile apps and other software products can better handle the boost from viral loops, but they are still imperfect. If you do not have the capacity to serve an increasing number of users, once the floodgates open, the app will crash and new customers will not have the experience that they came for. Imagine your friend invites you to Disneyland, but when you arrive wait times are 2+ hours, rides break down constantly, and run at half their usual speed. Are you going to refer another friend? No chance. The Viral Spiral: Don’t Viral Out of Control Stay calm and viral on? Not exactly. Imagine this scenario. Exponentially more users are engaging with your app with every passing day. But before you pop the champagne, you realize it’s placing immense pressure on computational resources, causing an increase in technical issues and bugs within the app. Now you’ve got added pressure on support staff. These are the early stages of the viral spiral. viral coefficient spiral example of uncontrollable virality gone wrong Apps need to prepare for the Colombia Phone Numbers List possibility of the viral spiral by taking precautions to accommodate ever-increasing groups of users. Mobile and web apps need servers with dynamic scaling to increase available computing power with every incremental, or in the case of virality, step function increase in users. Another casualty of the viral spiral is customer support. As support staff is bombarded with customer issues, the patient and caring approach to support can be replaced with hasty and cold service. Customers no longer feel the human connection to the company which can reverberate through your viral coefficient. Becoming Viral by Nature It’s nature versus nurture. Viral marketing takes a nurturing approach to growth, with the intention of steadily increasing the viral coefficient over time. Some companies bake virality into their products. Take a product like Dropbox, for example. The entire business model is based on file sharing. So when one person uploads a file to Dropbox with the intention of sharing with a colleague, the viral coefficient is a baseline of 1. Most companies include buttons for social sharing almost as a default, but this is rarely enough for a meaningful increase in the viral coefficient. If your business model is not viral by nature, building in a viral component, such as a mutually beneficial referral program, is essent
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