We all see them. Those companies with products that seem to sell themselves… They have a secret sauce; something that’s going on that just makes their products so much more engaging than our own.

These companies make us jealously look at our own products and wonder “How?”

How do some products seem to take hold in the market and spread effortlessly, while others don’t? It’s a good question and one worth answering.

Let’s take a moment to dig a little into the subject of product virality and impart some pertinent insights that will help you turn your products into viral sensations.

First off, there is a definite science behind product virality. It comes down to a few key points.

1. The viral coefficient formula
2. The strategies and frameworks
3. How to leverage these for viral growth.

Let’s first explore the concept of the viral coefficient and what this means for virality.

A viral coefficient is a number that describes how many new users a company’s existing users are bringing to the company. It’s a KPI that allows companies to quantify, track, and control for activities that encourage product adoption and customer acquisition.

It’s calculated using the formula:

VC = R x CR

Where:

R = Average referrals per customer

CR = Average conversion rate of referrals

To make sense of this it pays to look at an example.

Let’s say we have a company that is looking to understand it’s viral co-efficient as part of its growth planning strategy.

The first thing they must do is find R.

They do this by dividing the total number of referrals by the total number of current customers.

Let’s say this company had 200 referrals and 1000 existing customers.

This would make:

R = 200/1000

R = 0.2

Next is to find CR

They do this by dividing the total number of referrals that converted to new customers by the total number of referrals.

Let’s say this company had 20 out of the 200 referrals convert to paying customers.

Thus:

CR = 20/200

CR = 10%

The last step is to find VC.

VC = C x CR

VC = 0.2 x10%

VC = 0.02

In this example, the company has a viral coefficient of 0.02. This means that each current customer is contributing 0.02 new customers to the company’s customer base. That isn’t great…

For a product to demonstrate virality it needs to have a viral coefficient greater than 1.

Remember, the viral coefficient is the average number of new customers that existing customers are contributing to the current customer base. A number higher than 1 implies referral growth; the high the number the better.

So, what are this company’s options? How can this company improve its viral coefficient?

In practice, the answer to product virality is pretty simple. As the formula outlines, any increase in referrals, conversion rates or both will result in an increase in the virality coefficient. Therefore, there are two key strategies a company can implement to improve virality.

1. A strategy of increasing referrals, and
2. A strategy of increasing conversion rates.

A strategy to increase referrals means a focus on initiatives that will result in more referrals. The outcome of this strategy is more leads to convert into customers.

And, a strategy to increase conversion rates means a focus on initiatives that will result in a higher proportion of referrals converting into customers, meaning a more efficient use of the referrals we generate from strategy one. Both are important for optimal viral growth.

A company that puts these two strategies at its core will be a company that continually plans, tests, measures and modifies for improvements in referrals and conversions and thus their products will naturally be more ‘viral’ as a result.

Next, a good framework that allows us to segment referral and conversion initiatives is really important.

I personally advise companies to first segment their initiatives into either active or passive initiatives, where active initiatives require a level of active management and resource, and passive initiatives don’t.

Then to further segment these initiatives into either organic or paid.

Using both criteria to structure our strategic initiatives not only helps keep all initiatives tidy and transparent for management and staff but also help with resource allocation and budgeting at a board level.

As you can see, we as leaders can choose which initiatives might be appropriate to the situation at hand.

We might choose to allocate a budget to an active paid tactic like a promotion to increase referrals, whilst also setting our product team KPIs around self-onboarding, which would be a passive organic initiative to increase conversion rates.

Finally, and most importantly, like all things startup, coordination is key. Every activity within the company needs to co-ordinate to a broader goal and objective in order to achieve optimal vitality.

Getting objectives and initiatives to align is so important to ensure efficiencies are achieved that will optimize for virality.

This is true not only for marketing and sales but for all aspects of the business. Waste in all respects is the perfect antidote to virality, which isn’t what we want.

And there we have it, a roadmap to product virality and ‘how to go viral’ all laid out.

As a final point, product virality isn’t the sole domain of SaaS. All companies can benefit from measuring tracking a VC as part of their marketing efforts. It’s just a matter of applying this framework to your specific product and organization to optimize for referrals and conversions.

Good hunting!