Going Viral

The viral case is somewhat different than a paid engine of growth. While this is free from a financial point of view, it’s expensive in terms of time. The idea is to create content which people naturally want to share. Once you have their attention, you include some kind of call to action which then turns into a conversion , like a sale, or a micro conversion, like getting an email subscriber.

virus.laura billings.jpg

virus.laura billings.jpg

Once people hear about your idea or your product, then they decide whether to buy it or not, and also whether to share it or not. Nowadays, it paradoxically seems easier to convince people to buy your product than it does to get them to share it (at least for me). 🙂

Matthew Lieberman, author of “Social: Why Our Brains Are Wired to Connect” and professor of psychology says:

We always seem to be on the lookout for who else will find this helpful, amusing or interesting, and our brain data are showing evidence of that. At the first encounter with information, people are already using the brain network involved in thinking about how this can be interesting to other people. We’re wired to want to share information with other people. I think that is a profound statement about the social nature of our minds.

The main reason viral growth tends to be a massive growth engine is the fact that once you get beyond a certain tipping point, the sharing will be so extreme that it reaches disproportionately many people. Numerically, if you see it as a coefficient, it will be multiplied with each person (or step), and that number can quickly get disproportionately large.

My high school math teacher had a good example of this compounding effect. Would you prefer to get $1 mln today, or one penny today, two pennies tomorrow, continuing to double that amount for the entire month? This is, of course a trick question, designed to put teenagers in their place. The compounding penny option ends up being a much larger amount than the initial million.

The good thing about a viral growth engine is that it’s pure profit. As you don’t spend any money on building initial awareness, any revenues you do make are fully yours. If you do have financial constraints initially this can be a good place to start.

The main drawback of viral growth is that results tend to be highly unpredictable. Depending on how effectively you make your content unique and engaging, people will be more or less willing to share it. More often than not, all it takes is one share from someone with a large audience, and it will give you a big spike in traffic. It’s just that it’s difficult to get those initial share, particularly if no one knows who you are.

Manufacturing Engagement

The hard part is writing content good enough that people want to share it with their friends. To some extent, you can pre-test this by using what Andrew Chen’s twitter technique. He writes potential headlines as tweets, and then sees if anyone interacts with it. Once the idea is proven, via a favorite or a retweet, he uses that as a basis to write a longer piece on that topic. As a result, his growth hacking essays tend be highly focussed on his target audience’s needs. As a result of forwards, he effectively “clones” his existing audience. The content people forward tends to attract other interested in the same type of content.

Another approach is to use a service like “whattowrite.org”. This is a website where you can create a backlog of writing ideas, and then have your exisiting audience vote on them. This way you are naturally spending your time writing things which is attractive for them. It’s effectively a vetting and prioritization system for content, similar to prioritizing features in agile software development.

Choosing Influencers

One way to approximate who might be able to reach your customer is using metrics like Klout which is some kind of a weighted average based metric of the amount of influence one person has, based on the raw numbers of followers, fans, and friends they have on social networks.

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So for example, Noah Kagan has a guest blog post on Tim Ferris’ blog about launching a product. Kickstarter is his platform of choice. He needs to get the word out quickly, but doesn’t want to be nagging lots of people many times. He’ll quickly lose friends that way.

In fact, he correctly identifies that the 80/20 distribution probably applies here. As a result, he knows that a small number of his existing contacts weild a large influence on social networks. He explicitly goes through all of his existing emails he’s ever received, and ranks the senders by Klout score. This narrows his focus to a handful of people who actually can make a big difference, with very little additional effort, simply because they already have a large audience.

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By spending a lot of time and effort on the people who actually can make a difference, Kagan manages to reach a large number of people very quickly. The actual details aren’t that important. Whether you set up joint ventures or figure out how to draw in big influencers in other ways, the principle is the same. Treat people in your network with disproportionate influence well, as it doesn’t take much additional effort from them to reach a lot of people.

Malcolm Gladwell points out that there are three different types of such influencers. Mavens tend to like sharing good deals with their numerous friends. Connectors like to share friends from unrelated spheres for mutual benefit, simply because they themselves have disproportionately larger networks than most people. Salespeople are exceptionally good at persuading others to their ideas.

From their point of view, though, a common issue is that they are concerned about their audience. Typically, someone who cares about his or her audience, will filter exactly what is recommended. In fact, that’s probably one reason why people follow them in the first place! Such an influencer will only share something “share-worthy”. It can’t look like spam or junk mail. It ideally is unique and engaging. They often serve as curators for their audience.

Influence Path Analysis

There is a deeper layer here, though. What’s actually the most useful is not really just looking at your target market, but also seeing who influences them. In particular the final buying moment tends to be driven by a handful of close people which sway their decision towards one product or another. This comes from PR. It’s called influence path analysis.

By mapping out the path your customer takes when buying, you can identify the influencers which are actually important in their buying process. The key is to work back from a purchase. Ideally this will be something you can get from your existing customers, right after they purchase.

Understand how your customer actually makes their decision to buy will help you create a similar environment for future customers. This type of analysis can be done without necessarily having customers, as it’s more of an attempt at empathizing with your prospects. You can then iterate on it, as you speak to actual customers later. If you know who the main influencers are in your niche, from the point of view of your customers, then you can use that to your benefit.

On Hatching Chickens, Eggs and Startups

industrial_chicken_farm.socially_responsible_agriculture

industrial_chicken_farm.socially_responsible_agricultureYou may not have not realized it, but launching a new product-based startup requires that you navigate a number of chicken-and-egg problems successfully. Which comes first? While seemingly logical, there are a number of preconditions which you need to meet in order to stop being a startup and become a real business.

I once visited an industrial chicken farm. I had a friend who bought a chicken farm with some investors, hoping that he could turn it around. As it was initially in a state of disrepair, his primary effort focussed around re-establishing a clear marketing and promotional strategy. The original owners only thought of themselves as chicken guys. As a result of that mindset, they had inadvertently positioned themselves as commodities. They could only compete on price.

In fact, he discovered, not only were there 39 different types of chicken-each serving a different purpose either when sold in retail or for industrial purposes, there were a number of things he could do with the eggs. One of the most profitable he discovered at the time was to sell dried eggs as an intermediate component of various baking mixes. For example, pancake mix is just flour and dried eggs. The rest depends on what you do with it. He ended up turning it into a 12 million dollar business.

As a business founder, your primary aim is to make money with your new product idea. Unfortunately, if you don’t have money to invest, you can’t make more money. That’s the first big problem you need to solve. What comes first then, the chicken (the earnings) or the egg (investable product idea)? That’s just the beginning of your worries.

Here are a handful which I’ve experienced both in my previous attempts to launch products, and from my discussions with entrepreneurs:

  • don’t know how much time to invest in a specific idea, if you don’t have much resources and you have mouths to feed
  • don’t know who your clients will be, so you can’t figure out the most common need in a particular niche
  • don’t know how to reach buyers, because you haven’t decided who they are
  • don’t know what to sell, because you aren’t sure what will be attractive enough for people to want to give you money
  • don’t know how to position yourself against competition, because potentially anybody is your competition (since what you sell defines who you’re competing against)
  • don’t know how to approach potential investors, because you don’t feel confident or clear enough about your idea
  • don’t know how much money to raise to implement your idea, because that depends on the scope of your idea
  • don’t get customer feedback, because you don’t have any paying customers yet
  • don’t know how to describe your product attractively for prospects, so that they are instinctively pulled towards your idea
  • don’t know what to charge, because you don’t know what you’re selling yet: units, transactions, monthly recurring service, spread, upfront, freemium
  • don’t want to hire more staff to free yourself up to do more valuable things because you don’t have enough money

There’s a very simple way out of this complex mess. To succeed as a business founder, you need to make money first. Ideally, you can re-invest this money in the business.

To get money, you need a sale. For a sale, you need a prospect. To convert a prospect, you need an offer. The offer is the starting point, then, of all business ventures. If you have a powerful offer, you can then proceed to figure out the remaining pieces based on trial, error, and experimentation.

The beauty of starting with the offer and dashing to the sale is that you can re-invest the revenues you earn into improving the offer. Revenue is the lifeblood of every business. Once you have revenues growing, you can redirect the revenues to invest in the business to help you improve the offer. In the case of a product business, this will typically mean actually building out the product.

Why not start with building your business systems around that? Try iterating on that as quickly as possible.

To summarize, if you want to break out of the chicken-and-egg logical loops, here is the sequence you need to iterate on quickly:

offer -> prospect -> sale -> money -> improve offer

Once you get money, reinvest it in the offer. Rinse and repeat.

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