Growth Newsletter #245

Churn kills a lot of products.

Acquiring new customers or leads is often linear (you gain X customers per month because you spend $YYYY on ads).

Churn, however, is often exponential (you lose Y% per month).

You completely stall out when your churn = your new acquisition.

For example, if you:

• Add ~100 customers per month, and
• Lose ~3% of your customers each month due to churn

You'll completely stall out once you have ~3,333 customers.

Here's a chart visualizing this "Growth Ceiling."

Ways to prevent stalling out and keep growing?

• Reduce churn (better product, better onboarding, etc)
• Crank up acquisition (more content, more ads)
• Make your product more viral

Let's focus on how to make your product more viral

A truly viral product grows itself—each new customer refers one or more other customers.

If you can achieve that, you have a completely self-sustaining growth engine where each user leads to another user which leads to another user (and so on).

This growth is typically measured by the "viral coefficient"—the average number of new users each current user brings in. If this coefficient is greater than 1, you're experiencing viral growth.

Here's a nice graph showing growth over time based on viral coefficients of 0.8, 1, and 1.2. As you can see, it goes wild once you go over 1.

(You probably heard a lot about the R factor during COVID, this is the same thing, except for product growth, we usually call it the K factor)

Virality makes your acquisition efforts easier

It drastically reduces your customer acquisition costs and accelerates your growth, creating sustainable momentum that ads alone can't achieve.

Imagine two scenarios where it costs you $50 to acquire each new customer:

1. Each new customer refers 0 new customers. To scale you need to keep spending $50 per customer—which will break because as you scale your CAC will generally increase as you target colder and colder audiences.
2. Each new customer refers 2 new customers. Therefore, it costs you ~$16.67 per customer because of the 2 free referrals. You can push ads much harder and have room to scale (particularly if those referred customers also refer customers).

Cracking virality is huge.

The two types of virality

One last stop before the actionable tips. There are two types of product virality:

#1. Internal virality: The product spreads from person to person in a company.

Design products that naturally spread within an organization—tools like Slack, Notion, or Figma achieved massive internal virality through seamless user adoption as one user in an org invites other users in the org.

#2. External virality: The product spreads from person to person across different companies.

Tools like Calendly or Typeform spread externally because users naturally send their branded links to new, external audiences.

We'll talk about ways to achieve both.

Viral products aren't built by accident—they're engineered.

Here’s how to give your product the best shot at organic growth.

1. Embed social features directly into your product

The best viral products are inherently social, and the user cannot get value from the product unless shared with someone else. Examples include:

• Calendly: People can't book unless you share your Calendly.
• Figma: You can't share a design or collaborate without sharing your Figma.
• Loom: You can't easily share your video without sending the Loom link (I mean, you could download it and send it, but the easy sharing is the real value prop of Loom)
• Dropbox: To get the most value, you need to be able to share the files.

When you design your product, consider ways to make it so the user can only really get full value by sharing it—even if it's not the core use case.

For example, Foreplay made a secondary product use viral.

Foreplay lets you browse ads that other advertisers run and save them to boards. It's super handy just for gathering inspiration.

To make it more viral, they also make it easy to share the boards you create and share individual ads you find and live on Foreplay-hosted and branded domains.

Here's an example of a board we made with AG1 ads:

2. Remove friction from sharing

Every extra step it takes to share kills virality. Aim for one-click sharing.

Some quick ideas:

• Ever-present obvious CTAs to share.
• Give options for sharing (links, emails, text, social)
• Auto-populate sharing messages to reduce cognitive load (e.g., pre-written referral messages).
• Make it free or really cheap to share

On that last point, Kyle Poyar gives some great ways to make it seamless to get new users in without it immediately costing the sharer money:

3. Remove friction from joining

Every extra step it takes for the referred user to get in and get value kills virality.

Some quick ideas:

• Have generous free tiers or free trials so people can instantly use it.
• Make it so they can get value without needing to create an account, but if they want to take action, they have to create one (like Figma lets you view a file, but if you want to comment or edit it, you need an account)
• Google/Facebook/Apple/LinkedIn account creation so it's quick and easy.
• Have templates and opinionated defaults to make onboarding easy.

4. Brand your product's outputs

When someone shares something from your product, make sure to take the opportunity to make yourself known:

• Add a "Created/Made with" badge. Note: a premium tier could involve removing that branding (like Tally, Typeform, Webflow, etc)
• Host the output on your domain. Examples: Notion, Webflow, Calendly, Foreplay, Typeform.
• Add your watermark when they export it. For example, when you download a video from TikTok it automatically adds TikTok branding:

5. Incentivize referrals

Sure, the best is when people share your product just by using it or because they can't shut up about it.

But with the right incentives, you can:

• Push people over the hump who wouldn't otherwise share
• Turbocharge the rate at which people share

Here are a few ways to incentivize referrals:

• Increase usage limits (more storage, more time, more whatever)
• Free product
• Free bonus incentives (swag)
• Contests
• Free credits (ex: supercharger credit
• Amazon gift cards or straight-up cash

This can either be with the typical referral or affiliate links, or you can build it into the product.

For example, testimonial.to shows its branding on free tiers.

On paid tiers, you can decide to remove the branding, OR you can keep it, but by doing so, you get 30% of the referred revenue from people who click it.

6. Give fun reasons to share

Rather than sharing the product, give users a compelling reason to share something about your product.

• Create badges, leaderboards, streaks, or awards users can share on social media or their LinkedIn profile. (Duolingo’s streaks, HubSpot’s certifications)

• People love to learn about themselves and share things that are core to their identity. Use data you have about the users to create shareable content. Think Spotify Wrapped:

7. Strategically prompt happy users to share

YouTube annoys the hell out of me.

It asks me to upgrade whenever I'm going through the Google 2FA flow—which is exactly when I have zero patience to consider upgrading and just want to log into to finish the task I'm focused on.

Asking for referrals is similar.

Don't ask whenever a user is in the middle of something.

Instead, do it after they've completed a big milestone where they're probably stoked.

8. Surprise and delight users

If you surprise and delight a customer, they will likely share their excitement.

Chewy, the pet food brand, did this best.

Here are insights shared in Marketing Examples:

"Every customer is welcomed with a handwritten card reminding them to call anytime:

They employ 100 artists whose sole job is to paint customers' pets. The portraits are then mailed to unsuspecting customers:

If they hear about a pet passing away, they'll send a bouquet of flowers and a condolence note:

And if you buy the wrong dog food, customer service will tell you:

Don’t worry about returning it, we’ll refund you, just donate the item to a pet shelter"

Not only does this build insane brand loyalty (in a commoditized market), it is also very likely someone will share these stories with friends and on social.

Quick takeaways for virality

• Try to make your product inherently viral.
• Remove friction for people to share and use it
• Brand your product's outputs
• Incentivize referrals
• Give fun reasons to share
• Prompt happy users at the right time
• Surprise and delight customers