Welcome to ReferralHero, the best crew on the seven seas. We’ve caught more white whale referrals than anyone else, and are ready to help you track down your marketing dreams. Grab a harpoon and get ready to sail!
Since Hotmail took off in 1996, the endless potential of viral marketing has danced through my dreams. Call me Ishmael, I would do anything to harpoon myself a campaign that spreads like wildfire, almost of its own volition.
Luckily, over the years this virality has been studied, tested, and distilled into a formula. If you want the magic of a viral campaign, you need to maximize your K-Factor.
Let’s take a deep dive into the world of viral marketing, and see just how simple it can be to maximize your shot at the great white whale.
What is the K-Factor?
The K-Factor goes by many names, including the viral coefficient, the viral loop, or the growth factor. Ultimately, it tries to quantify that elusive thing that makes marketing campaigns spread like wildfire.
You may feel like an alchemist looking at the formula. I know I did. How can this simple equation be all it takes to go viral?
The equation in question is i * c = k where the factors are as follows:
- i = number of referrals per user - How many friends and family members does each individual user tell about your company?
- c = conversion rate - Out of all the referrals, how many are you able to convert into customers?
- k = viral ability - How likely is your campaign to grow exponentially or go viral?
You can see pretty quickly how this formula boils virality down to two easy-to-understand factors.
- Convince users to bring in more referrals
- Ensure your conversion rate is high
These two factors are a lot easier to conceptualize and capitalize on than simply following internet trends and hoping you get lucky. That’s part of what makes the K-Factor such an overwhelmingly powerful KPI.
How Does the K-Factor Affect Marketing
This formula manages to distill the guesswork and impossibility of “going viral” and turn it into a clear result of set factors. Rather than this white whale being able to dive beneath the surface and appear at random, you can now track its course and know exactly when you’re getting close.
By keeping this formula in mind, you’re able to craft your referral programs and word-of-mouth marketing strategies to get the best possible results. ReferralHero makes this easy by collecting the data you need and calculating your K-Factor for you.
A K-Factor higher than one (even a small decimal point higher) means you’re growing exponentially. This means you have far more people coming to your brand than leaving.
Ultimately, there are several ways this KPI can impact your strategy and outcomes including
- Cost Effectiveness - Referral marketing is already one of the most cost-effective ways to tell customers about your brand, but when you increase your K-Factor you can exponentially increase its effectiveness without increasing costs
- Exponential Growth - Every new customer brings in multiple referrals who, when they become customers, bring in multiple referrals themselves
- Trust and Credibility - The more people talk about your company, the more trustworthy you will seem to first-time buyers. This is boosted when your K-Factor encourages more people to get involved
Using ReferralHero’s metrics and customizable campaign strategies to maximize your K-Factor will only lead to more success.
For example, if your company has 1,000 customers and a K-Factor of 0.2, you’re bringing in 200 new customers per year with your referral program. By finding ways to boost your referral rate by just a little, and your conversion rate by just a little, you can up your K-Factor to 0.4 and bring in 400 new customers.
Using the K-Factor to Boost Success Rates
With two factors at play in the formula, there are two ways you can go about increasing your campaign’s K-Factor. By having the formula laid out for you, ReferralHero can help you decide which is the right path for you.
Maybe every one of your customers is referring one or two friends, but those referrals are hardly ever turning into new sales. This is a sign that you should focus on your conversion rates.
It’s usually not that cut-and-dry, so your team should be prepared to optimize both factors for a huge boost in virality.
Boosting Referral Rates
There’s a lot that goes into convincing people to share your brand with their friends. The original viral campaign with Hotmail was simple because it automatically included a link in each email that was sent, encouraging people to get their own Hotmail account. However, the success rate of referrals goes up significantly when the referrer is an active participant.
Let’s look at some tips and tricks for both encouraging your customers to refer new customers and helping them successfully convince their friends to check your business out.
Tip One: Boost Their Reputation
Research has shown that the largest deciding factor in whether or not someone shares a referral program with their network is metaperception. That’s a fancy way to say, what they assume people will think about them.
The problem is that people might see asking their friends and family to check out a business they like as annoying or problematic. There are tons of ways you can get around this including
- Shift Focus - Creating a referral program that focuses on the benefit the referrer will receive, rather than the benefit to the business. This can make them feel more personally invested in the success of the referral
- Make it Fun - Encouraging your customers to share their positive experiences with your brand on social media, which can also boost their reputation among their network
The most effective way to lessen this slight to their metaperception is by turning it into a gift they’re giving their network. By using two-pronged or prosocial benefits, you can get rid of those feelings of guilt and make people far more likely to start sharing referrals.
This means creating a structure where both the referrer and referee get something from the interaction. For example, Koho offers both parties $20 after a successful referral.
Tip Two: Have Great Rewards
That research study from earlier found that the second-biggest deciding factor after metaperception was the rewards. This should come as no surprise. As much as we want people to share our companies because they love it so much, this process is sped up considerably by offering them something extra in return.
There are several types of rewards you can offer to get people jazzed. If you’re looking for some help deciding, be sure to check out our article about the power of rewards!
Tip Three: Simplify Everything
Not only does a complex setup make it difficult for current customers to share your business, but it also makes it difficult for their friends to jump in. Make it as easy as possible for them to share by providing pre-made social media posts, email templates, and other shareable content.
ReferralHero offers a streamlined referral process and handles all the legwork for both you and your customers. Embedding links and not asking for too much information from referred customers will also make them more likely to complete the process.
This combined with the two-pronged reward system will bring people in faster, and boost your K-Factor exponentially.
Increasing Conversion Rates
Once people have been referred, the ball is in your court. It’s time to take a potential customer and turn them into someone who loves your company enough to continue the referral cycle.
Tip One: Customer Experience
From the moment they click the link sent by their friend to the end, referred customers need to have an excellent experience. If they feel satisfied and happy after making a purchase or trying out your product, they will be more likely to share their experience with others.
Make sure your product or service lives up to its promises and that your customer service is through the roof. This will show people why their friends were so excited about you in the first place.
Tip Two: Reviews and Social Proof
People are more likely to trust a product or service if they see positive reviews or social proof from others. Encourage your satisfied customers to leave reviews or share their experiences on social media.
Positive reviews can increase your conversion rate by up to 380%. When plugged into the K-Factor formula, that’s a monumental boost, so racking these up and getting a high star rating should be high on your list of priorities.
The Bottom Line
Referral marketing in and of itself can feel like a magical formula to bring in customers for a fraction of the cost of other campaigns. However, when you add a conscious building of the K-Factor, it becomes even more effective.
By providing a concrete focus on referral and conversion rates, the K-Factor makes it easy to keep your referral numbers rising and push you ever closer to virality.
With ReferralHero, you'll have all the tools you need to track down and capture the great white whale of referrals. Don't wait any longer - start maximizing your shot at success today!
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