Let’s start with the key components of virality in a SaaS model.
5 Components of viral growth in SaaS
1- Viral Loops:
What is a viral loop?
Products that are designed to have an organic flywheel of customer acquisition are considered to have a viral loop. This is the ultimate form of product-led growth as companies can leverage their products to keep growing at roughly the same MoM growth rate a.k.a grow exponentially while not spending more on acquiring customers. In more financial terms, they leverage virality to maintain or even reduce acquisition costs while scaling.
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Creating A Viral loop
A viral loop is embedded into the product, it is designed in a way where it naturally gets shared and works between at least two parties.
The products are solving a common problem in such an intuitive way that their use organically exposes them to new users which are captivated by the intuitive product, signups are encouraged and made easy by having call to actions and access within the exposure window.
So essentially every time a user uses them they are actually doing a demo of the product and facilitating customer acquisition.
It is the holy grail of product led growth.
2- Viral Co-Efficient > 1
WHAT IS A VIRAL COEFFICIENT? How to calculate it?
The viral coefficient, also known as the K-factor is a metric that measures the number of new users that a current user is referring to a business. It is an efficiency metric that highlights the efficiency of your viral loop.
To calculate the viral coefficient, the following formula can be used (with a worked example provided):
- Multiply the current number of users (e.g. 100) by the average number of referrals each user makes (e.g. 10)
- Multiply the result by the conversion rate of those referrals (e.g. 15%)
- Divide the result by the current number of users (e.g. 100)
If the viral coefficient (K) is equal to or greater than 1, for every user acquired, an additional user (or more) will be gained through the referral process.
For instance, if the initial users each send out 10 referrals, resulting in 150 new users, and those 150 new users each send out 10 invites, the user base continues to grow with each round of referrals.
A viral coefficient of less than 1 can still be beneficial if other marketing channels are utilized. For instance, if a viral coefficient of just under 0.2 is achieved, and an initial user base of 100 people generates an average of 4 referrals per user, the referral process can still grow the user base by 24% in addition to any growth achieved through other marketing channels.
As the user base continues to grow through other channels, the referral process will continue - and assuming the viral coefficient stays constant, every batch of 5 new users will result in 1 additional user.
3- Network Effects:
We explained earlier that viral loops are created when a product is collaborative in nature.
In viral SaaS products the user experience is architected in a way that these become more valuable as more users join the platform, meaning, each “new” user that joins the platform adds value to the “existing” user base. As more people join, the network effect kicks in, making the product more valuable to all users, which then attracts even more users, creating a virtuous cycle of growth.
4- Frictionless Onboarding:
To achieve viral growth, the onboarding process must be seamless and intuitive, requiring minimal effort from users.
There is no sales touch in viral loops, so the product needs to do the selling itself, which means the user needs to do a self checkout. This requires near 0% friction between a customer hitting the signup button and then entering / using the product.
Think of a product where you went in and got the job done (resize an image, converted a format, created a design etc) and you only had to do a Google SSO signup to download the finished product.
See how seamless it was to use and sign up for the product.
5- Gamification / Incentivisation:
Adding gamification elements to a SaaS product can increase engagement and make it more likely that users will invite others to join. For example, a point system or rewards program can incentivize users to refer others to the platform.
Understanding the pain points and needs of the target audience
Examples of successful viral loops in B2B SaaS
Zoom:
Zoom is a video conferencing tool that uses a viral loop to acquire new users. When a user invites others to join a Zoom meeting, they can easily sign up for an account and start using the service. This encourages users to invite others to join their meetings, creating a viral loop that helps Zoom grow.
Trello:
Trello is a project management tool that also uses a viral loop to acquire new users. When a user invites others to join Trello, they get access to the user's boards and projects. This encourages users to invite others to collaborate on their projects, creating a viral loop that helps Trello grow.
Slack:
Slack is a team communication tool that also uses a viral loop to acquire new users. When a user invites others to join Slack, they get access to the team's channels and messages. This encourages users to invite others to join their team, creating a viral loop that helps Slack grow.
If you have used any of these products yourself you would now start to see how they have created a viral loop. The use of the product naturally grows its user base.
Strategies for Achieving Viral Growth in SaaS
Identify the right customer segment for your B2B SaaS product?
Choosing the right customer segment is harder for you if you are a fresh start-up with no data on potential customer behaviour and engagement, the only way to go about choosing a customer segment is to do a/b testing on multiple segments at a time and aim to monitor 3 key metrics.
1- NPS score
2- Sales cycle length
3- Viral COEFFICIENT
Ideally you want high NPS and a short sales cycle which would translate to customers driving sales for your product at a high velocity and viral coefficient as close to 1 as possible.
What if you are not a fresh start-up and have some data on your customers and tested different cohorts? In this case you are sitting on a gold mine as you already have the data that our young start-up mentioned above needs to collect. The metrics remain the same with the addition of engagement and retention metrics to better inform strategy and customer experience.
Creating a referral program that incentivizes customers to share your product
A well executed referral program can help you manufacture virality even if the product is not intrinsically geared for it naturally. The idea is really as simple as customers bringing you more customers, and that is exactly what a well crafted referral program does.
If you want some inspiration to develop a good referral program, I would recommend studying Uber’s referral program strategy that drove significant growth for the rideshare start-up.
Implementing a free trial or freemium model
We have talked about how viral growth is basically the holy grail of product led growth. The popularity and adoption of freemium is becoming widespread as people realize the long term effectiveness of first party data that the model brings along with the ease of access that makes demonstration of value easy.
The challenge with freemium though is the upfront CAC, it is a high investment model and is mostly suited to well funded and VC backed start-ups.
But if you are keen on implementing this structure you should take a leaf out of Open Ai's book of product led growth. Open AI unlocked a multi billion dollar valuation for its product ChatGPT in a matter of weeks by executing a freemium model.
Here is an in depth case study on the company.
Here is a general case study on freemium models by Research gate.
Overcoming Common Challenges in Viral Growth Marketing
While viral growth sounds amazing, like everything it comes with its challenges. And the best way to describe the struggle of having viral growth is best described as “ Learning to fly a plane at a 1,000 kph on a 100,000 ft altitude”.
But what does that mean on a tactical level you ask? well:
- First mover advantage + disadvantage
As the first mover in the market you will have an edge over the rest of the market as they will have significant catching up to do but you will be at a disadvantage as their will be little data to benchmark yourself against. - Copy Cats
You will start seeing replicas almost immediately as the news of your success starts to spread. - High velocity product development
At that rate of growth it becomes increasingly hard to remain fluid and keep adapting to the market/consumer needs and reflecting that in your product. - Maintaining product-market fit while scaling
This ties back into the product development point somewhat and refers to blocking out the noise from your feedback loops which might lead your strategy astray into the dark world of no product market fit. - How to keep users engaged and prevent churn
Customers do not care about how fast you are growing, they want service and value no matter your scale and problems. And that is a huge challenge with hyper growth as your customer support and satisfaction can suffer if you are not careful.
So there you have it folks, now you know how to unlock hyper growth for your SaaS start-up. Goodluck with the journey and as always,
Happy Marketing!
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