Tag Archives: growth engines

Driving Revenue Growth via Viral Strategies

In The Lean Startup [RIE11], Eric Ries points out that only three techniques exist to drive revenue to a company:

  1. Paid. You can spend money with marketing and sales efforts to “buy” customers. See my earlier blog at https://www.offtoa.com/wp/?p=179.
  2. Sticky. You can enhance the customer experience so that current customers purchase more or return more often. See my earlier blog at https://www.offtoa.com/wp/?p=182.
  3. Viral. You can add specific features that encourage current customers to refer others to become customers. This is the subject of the current blog entry.

Whereas sales strategies focus on spending money to attract new customers and sticky strategies focus on retaining existing customers, viral strategies focus on generating new customers by relying on efforts of existing customers. Most social networking sites depend on the viral spread of their customer base; Facebook users, for example, share with their friends, who then become Facebook users. Any company that incorporates a referral program (where a current customer is rewarded for referring a new customer) is using a viral method as part of their business strategy. Other examples are Tupper­ware, where customers sell products to new customers at Tupperware parties; and Skype, where customers encourage colleagues to join so they can communicate. 

The above extracted from my latest book, Will Your New Start Up Make Money? Buy your copy in Kindle or paperback format at http://www.amazon.com/Will-Your-Start-Make-Money-ebook/dp/B00JOOZQNE.

Driving Revenue Growth via Sticky Strategies

Sales and marketing strategies (as described in my previous blog) focus on spending money to drive new customers to buy product. Sticky strategies are designed to increase the lifetime value of each existing customer (called CLV, customer lifetime value). These strategies include concepts such as (1) upselling, where you make efforts to convert customers buying lower priced goods and services into those buying higher priced goods and services; (2) enhanced customer experience, so fewer customers cease being customers (i.e., the goal is to raise retention rate), and (3) rewards programs, to reward customers for frequent purchases.

Freemium pricing is a special case of upselling in which you offer some services for free and entice a subset of them to upgrade to a richer set of features at a premium price. The philosophy is three­fold: (a) once some customers see how great the subset of features are, they will want the full set, (b) once customers experience what a great company it is, they will want to do (real) business with you, and (c) you have access to the non-paying customers’ eyeballs and contact information, and so you can carefully “sell up” to them.

Treacy and Wiersema [TRE93]’s concept of customer in­ti­macy is another technique for maximizing long term value of customers, as opposed to deriving the most out of any one transaction with customers. Start-ups can create strong customer loyalty by implementing cus­tomer intimacy as one of their core practices. Established companies with this strategy include the Broadmoor Hotel, Nordstrom, and Whole Foods.

The above extracted from my latest book, Will Your New Start Up Make Money? Buy your copy in Kindle or paperback format at http://www.amazon.com/Will-Your-Start-Make-Money-ebook/dp/B00JOOZQNE.