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