Blog 69: What is a viral loop?

What is viral loop?

In blog 42, we looked at how a prospect traverses through the marketing funnel. There are 4 stages in a marketing funnel i.e., awareness, interest, desire, and action.

It is possible to convert this one-time customer (in the ‘action’ stage) into a repeat customer. Lifecycle marketing strategy helps us with that (refer blog 65 to learn more). In this ‘action’ stage, we can encourage an existing customer to refer our products to their friends and family. Significantly bringing down our customer acquisition costs thus boosting the top and bottom line (refer blog 55 for more on customer acquisition costs).

How do we get our existing customers bring in new ones? - who then bring in more and so on. The answer lies in creating a viral loop. There are inorganic and organic methods.

A. Inorganic methods involve incentivising our existing customers to bring in new customers. The incentives will include referral rewards, discounts, cashbacks, access to exclusive benefits etc. We need to ensure the incentives we offer are valuable and easily redeemable. These inorganic methods have a financial cost implication for the company.

For example, (refer blog 56 for more on customer acquisition examples):

Company: Paypal

·       Plan: Join, get $20 cash back. Earn up to $100 cashback for every 10 successful referrals.

·       Marketing funnel stage [AIDA]: Action (+ referral)

Company: Robinhood

·       Plan: For every successful referral, earn gift stock.

·       Marketing funnel stage [AIDA]: Action (+ referral)

B. Organic methods occur seamlessly without little or no intervention. These methods are mostly free and don’t cost much. If an existing customer is overwhelmed with emotions of trust and connection, they will voluntarily refer our product. Organic methods are broadly of two types, word-of-mouth, and touchpoint centric.

Word-of-mouth occurs when a satisfied user of our product will either talk or tweet about it. In a study by Nielsen, 83% of consumers trust recommendations from friends and family.

For example, a satisfied Airbnb customer will recommend that particular property to friends and family. In addition, if a user feels connected with a product/service, they are likely to share that experience. For example, the ice-bucket challenge became viral. It was started to spread awareness about a particular disease. The virality brought in significant attention and financial assistance.

While touchpoint centric occurs when elements of the product are embedded into the invitation shared by the existing customers. For example, sharing an Instagram post (with Instagram domain specific hyperlink) with a friend who is not on the platform. He/she would need to create an account before viewing the post. Thus, creating a viral loop. This method has four steps.

·       Send: Make it easy for an existing user to create an invitation (that will be sent to a new prospect). The invitation must be clear and concise.

·       Spread: The value we offer to both parties (existing customers and new prospects) should be attractive and meaningful.

·       Click: Decide the channels we will use; on which the existing customers will connect with prospects. This decision will depend on our target audience. For example, for some products social media platforms like Facebook and Instagram make sense.

·       Convert: Finally, have a system in place that can convert these new customers into future brand ambassadors. Bringing in future customers.

In blog 45, we talked about growth marketing and growth hacking. Growth marketing and growth hacking are similar, but the key differentiator is the mindset and the approach taken. The former is a long-term strategy while the latter is a series of short-term low-cost strategies (refer to blog 45 for more).

Viral loop is not the same thing as growth marketing and growth hacking. Viral loop is a specific strategy where existing customers bring in new ones. Viral loop can be a part of the growth marketing and growth hacking initiatives (refer blog 70 to understand Slack's viral loop strategy).

If done right, viral loop works as a continuous cycle unlocking significant growth. Thus, boosting user engagement and brand visibility.

Go through the list of 100+ referral marketing examples to get you inspired (https://viral-loops.com/referral-marketing/examples).

Jump to blog 100 to refer to the overall product management mind map.

All the best! 😊