Building a Product from an Idea : The Lean Startup Way

We all have ideas. We all have felt the need of having something more to an existing solution or an alternate way of doing something which we often do. Startups and products are born out of this. The good part or maybe the sad part is that there are thousands of such ideas and products that spring up every day and it becomes increasingly difficult for these products to succeed in the market.

Of course having a great founding team with the right mix of technical, marketing and design skill set would go a long way in helping the product to wade through the clutter and be noticed but it still doesn’t guarantee the success of the product. It’s often easy for a founding team to lose direction early on in terms of what’s the right product that people are willing to use, or better, willing to pay for. There is an even worse scenario which I have often seen among founders when they try and convince themselves that the features and the products that they are building is the right solution based on intuition and practically zero metrics to back their claim. That’s suicidal.

It’s imperative for a startup to follow the Lean methodology’s Build-Measure-Learn loop. But before you enter the build phase, your first step should always be to do Research and understand the market you are going to target.

Research

First things first. One wouldn’t want to waste a significant amount of resource on an idea which has relatively zero market potential. So always begin by understanding the true market potential of your idea. You can start by asking yourself a set of questions initially:

  • Will my idea address a genuine pain point, if yes, what is it?
  • Who will be my potential customers and where can I find them?
  • Who are my competitions?
  • How different is my idea from what my competitions have?
  • Will I pay for a product like this? Would anyone pay for the product I intend to develop?
  • Are there are regulatory constraints?
  • What would my rough budget be and what would be the resources required for a basic product?

I’m sure you won’t get comprehensive answers to a lot of these questions but then the point of asking yourself all these questions initially is it helps you understand the market and the opportunity you are going after and sets the context right. Googling will give you sufficient inputs which will enable you to take a call on if it’s worth pursuing further. If you want to understand things a little deeper, do a survey or shortlist a set of people who will in the future be interested in the product and try and get their opinion on if they would actually pay for such a product (To be honest, at this stage it’s difficult to really understand if the users will pay for it at this stage, but do get opinion from people nevertheless.)

In already established markets there would be a fair number of research reports which you can leverage to understand in detail the market you are going after. An easier way would be to use Google Keyword Tool or Market Samurai to understand the demand for your idea. It’s always easier for a startup to build something in a space where there is an existing demand and is not fully saturated than to carve out an entirely new market. I am not saying that’s not possible but with limited resource at your disposal in your early days, trying to create a new market might not be the best option.

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Just did a search on Google KWT for the term Video Games and see the results. It has a fairly good number of searches worldwide. The KWT also gives you a set of related keywords which might help you even segment the entire market.

It’s important at this stage to try and segment the market you are going after. Having a generic solution won’t help at an early stage. Segmenting the market you are going after gives you a much better chance of validating your idea. The Idea can be expanded on to other segments as and when you grow and become mature. Also, make a shortlist of your competition and their offerings. This would give you a fair bit of understanding on the current market demand for various features and would allow you to understand how your product is different from your competition.

All of this helps you in getting a Problem/ Solution fit. It’s good to get a feel of the market even before you start prototyping and building a product. Like Eric Ries mentions in his Lean Startup methodology, it might be a good idea to just create a landing page and put up a “Register to get an Invite Option” and check how many click through to register and actually register. This is a trend followed by a lot of online startups and especially Apps. One of the most important tactics for an app’s pre-launch marketing strategy is to build up a landing page with an option for the users to subscribe to be notified when the app goes live. This would also enable you to get a feel of the solution you are suggesting for a problem. Again, the problem here is that often people without proper segmentation and without trying to get their target users to come on to the page would conclude that the idea has no demand in the market. This is why it’s important to segment your market and know your core group of audience. Hunt for them on forums, groups or anywhere they are available if you want to make people discover your webpage for free or else use Google Ad words or any of the Ad solutions to target your core group of audience. Understand if there is a demand for your solution.

The next stage in the product lifecycle is to develop an MVP (Minimum Viable Product) that would actually enable you to reach out to customers, engage with them and understand better the demand for the product.

Minimum Viable Product

The concept of a Minimum Viable Product was introduced by Eric Ries, the man behind the Lean Startup movement. In his own words :

The idea of minimum viable product is useful because you can basically say: our vision is to build a product that solves this core problem for customers and we think that for the people who are early adopters for this kind of solution, they will be the most forgiving. And they will fill in their minds the features that aren’t quite there if we give them the core, tent-pole features that point the direction of where we’re trying to go.

So, the minimum viable product is that product which has just those features (and no more) that allows you to ship a product that resonates with early adopters; some of whom will pay you money or give you feedback.”

According to me, it’s always a difficult task clearly understanding what exactly is “minimum viable” as far as your product/ idea is concerned. It would be different for each idea and category. Understand that if the product is as is any other competitor and there is no differentiation then the product you are shipping is in no way a “minimum viable” product. Focus on your core value proposition and how your product is different from the rest. If your differentiation is purely the experience that you give your users then ensure that when you ship out your MVP, you enable your customers to have that experience. Minimum Viable Product does not mean that you roll out a crappy product. In fact that would be suicidal as with Social Media these days it does not take a lot of time to completely kill your product or brand with a negative word of mouth. Of course the MVP can have bugs and there would be hundreds of features that could be added later. The early adopters that you manage to get are always going to give you a leeway and that’s because they genuinely need and value the core experience or the core feature your product provides. So ensure that the core proposition is in its entirety is reflected in the MVP.

Steve Blank in his book outlines the four stages to the Customer Development process with the following success end goals:

  1. Customer Discovery – Achieve Problem/Solution Fit
  2. Customer Validation – Achieve Product/Market Fit
  3. Customer Creation – Drive Demand
  4. Company Building – Scale the Company

This is a great framework for someone operating with the Lean Startup methodology. The initial research phase and the development of the MVP falls under the first bucket where in one achieves the Problem/ Solution fit. This does involve effort however you do significantly cut down on the unnecessary resource you would have spent otherwise on trying to create something which has no demand in the market only to realize that after you have pumped in all of your money and effort.

The Second phase of Customer Validation is where one achieves Product Market fit. This is the stage where in you actually try and sell your MVP and or make your customers to use it to tweak and bridge the gap between the Product and the Market.

Achieving Product/ Market Fit:

How exactly does one determine whether you have achieved product/ market fit? Different people will give you different definitions for Product/ market fit

“Product/market fit means being in a good market with a product that can satisfy that market,” according to Marc Andreessen

Andrew Chen

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Sean Ellis has created another metric for determining Product/ Market fit. He suggests asking existing users of a product how they would feel if they could no longer use the product. According to him, achieving product/market fit requires at least 40% of users saying they would be “very disappointed” without your product.

For me the whole idea of getting a Product Market fit is nothing but getting to a point with your product when a particular segment of the market which you have identified as your initial target segment embraces your product so that you can grow your company/ product scalably. Achieving Product/ Market fit as early as possible is crucial for any product as it allows you to then focus on company growth and not on iterating and pivoting the product. Spending significant money and effort on growth and marketing at this stage before product/ market fit is not an advisable strategy.

For a consumer company like Zoomdeck, Andrew Chen’s numbers stack up well. It’s important for startups to constantly measure during this stage and understand the behavior of their users. One needs to craft and test several value propositions, user flows, conversions, user interactions to effectively achieve a product/ market fit.

The priority here is to focus on the macro metrics, the right ones. Understand that optimization of micro-metrics comes at a later stage once we achieve product/ market fit. There are various macro metrics that matter; you may refer to Dave McClure’s AARRR model.

  • Acquisition – How many people landed on your website coming from a marketing campaign or through viral channels that you are tracking and then you acquire the user.
  • Activation – The user uses your product and completes a core action on the platform.
  • Retention – What is your churn? How many of the users you have in your user base are active? How many stopped being active and why?
  • Referral -How many of the users that are using your product are willing to refer to others?
  • Revenue -How many users are willing to pay you of the ones that are using the service?

During this stage out of the 5 macro metrics Dave suggests, there are only two that needs to be tracked comprehensively. They are: Activation and Retention.  Of course Acquisition is important as well because for measuring and optimizing activation and retention there needs to be sufficient users. But then the idea here is to not spend and focus on acquisition but to focus on Activation and retention in a core segment by minimizing your acquisition cost and optimizing it. Try and figure out the best and most effective channels to let your target audience discover your product and allocate a budget accordingly. Social Media these days provide a great channel for enabling your target users to discover your product, so utilize it to the maximum effect possible.

Try and map out the important actions on the platform that corresponds to the macro metrics : Activation and Retention.

Activation:

For a product like Zoomdeck, the activation process typically starts with the user signing up, uploading a photo and then adding a spot or by adding a spot on to another photo on the platform. ‘Spots’ are annotations on images which can be used by people to highlight any interesting element or story on photos. One can even link the spots to video, audio, maps, products, wikis, social profiles and more

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One has to decide on the percentage numbers for each of these macro-metric: Personally I consider 30% active users the day after signing up as a healthy sign for a consumer internet product

Retention:

Retention is nothing but getting the users back on the site regardless of the engagement they have on the site. You can define retention as mentioned or tie it to certain key actions on the platform. In general for a consumer product which is both creation and consumption based, it might be good to just consider the activity of the user coming back to the site as retention. For eg: Facebook or twitter might consider retention as the case of users just logging back in to the site. Engagement, however, is a different concept where a platform like Facebook or twitter would want the user to perform any major/ core user action on the platform like sharing content, liking or updating status or tweeting etc.

A good retention rate would be different for different consumer products/ apps depending on the nature. It would also depend on the customer usage cycle which tends to be shorter for a social gaming app while it tends to be a little longer for a platform like Zoomdeck. So based on your product’s customer usage cycle and general trend in your niche/category decide on your target retention number/ time frame ( 1 Day, 7 days or 28 days) to achieve.

Measure and iterate on both these macro-metric to get to Product/ Market fit. Use Funnel and Cohort analyses to better understand the user flows and the churn at each stage so that you can identify and improve/ rectify the non-required or wrongly crafted features and flows. Breakdown each user flow to understand in depth any issue there is. The idea here is not optimization for efficiency but the idea here is to validate your MVP. People often relate A/B testing with changing colors of the Sign Up button, yes, that might be a good way to improve on the conversions in some cases, but getting to product Market fit is all about validating your MVP, to get people to buy into the features or the experience it provides and then make them repeatedly come back to the platform. There would various broad scenarios:

Have high arrivals but low Conversions: Tweak your messaging and positioning to check if that helps in conversion. Also, ensure that the incoming traffic is composed of people you assume to be your target audience.

Have low arrivals but high conversions: Work on the channels to bring in more targeted traffic. Groups, Forums, Meetups etc of target community would be a great start. Try and improve on the keywords you chose for your PPC campaigns.

Have high conversions but low activation: Ensure people understand the interactions on the platform. Is it too difficult to understand or complete the core action on the platform? Would an interactive guide in the beginning help the user understand user actions on the platform?

Have low conversions but high activation: Are you bringing in the right traffic on the platform? Is the messaging right on the front page? Is the signup process easy enough or have you made it too difficult? Is there a clear call to action on your landing page?

Have low activation but high retention: A good sign to have a high retention number. However lower activation would mean either people are not interested in the core activity you have considered or people are not given an easy enough option to complete the core activity on the platform.

Have high activation but low retention: Low retention could be due to lack of interest in the product and it’s core feature. A product which genuinely solves a problem for a sect of people would have high retention numbers. Products which are not a must but is a luxury like Quora would need to constantly remind people and get through the clutter to improve on their retention numbers. Work on either.

The whole cycle would look something like the figure below. Keep measuring all the important metrics, learn and iterate on important features/ flows till you get to product/ Market fit. The earlier, the better.

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Post achieving Product/ Market fit, the company can focus on user growth and leverage their marketing spend to speed up the entire process. Utilize the best and the most effective channels to scale further. In the next post, I will cover in detail utilizing Funnel and Cohort analysis to measure each of the important macro-metric described by Dave in his startup pirate metrics, two of which we comprehensively track during the process of achieving Product/ market fit.

If you want to grow big, you have to beat the biggies!

Business success stories always inspire us. There are various types : the rags to riches story, the ones involving outsmarting and outmaneuvering competition, the exceptional in execution story, the stories involving how one went bust before springing back up – all of them are quite inspiring and at the same time fun to re-visit. The ones that tops the list for me are the ones who outmaneuvered and outsmarted the biggies in a head on competition. Compiling a list of few of the most amazing stories:

The Dow Story

Herbert Dow founded Dow Chemical in Midland, Michigan when he invented a way to produce bromine cheaply. He sold the chemical for industrial purposes all over the US for 36 cents per pound at the turn of the 20th century. He couldn’t go overseas, however, because the international market was controlled by a giant German chemical cartel that sold it at a fixed price of 49 cents per pound. It was understood that the Germans would stay out of the US market so long as Dow and the other American suppliers stayed within its borders.

Eventually Dow’s business was in trouble and he had to expand. He took his bromine to England and easily beat the cartel’s fixed price of 49 cents per pound. Things were okay for a while until a German visitor came to Michigan and threatened Dow that he had to cease and desist. Dow didn’t like being told what to do and told the cartel to get lost.

Shortly thereafter German bromine started appearing for sale in the US for 15 cents per pound, way below Dow’s price. The cartel flooded the US market, offering the chemical way below their own costs, intending to drive Dow out of business. But Dow outsmarted them. He stopped selling in the US market entirely and instead arranged for someone to secretly start buying up all the German bromine he could get his hands on. Dow repackaged it as his own product, shipped it to Europe, and made it widely available (even in Germany) at 27 cents per pound. The Germans were wondering 1) why wasn’t Dow out of business and 2) why was there suddenly such demand for bromine in the US??

The cartel lowered its price to 12 cents and then 10 cents. Dow just kept buying more and more, gaining huge market share in Europe. Finally the Germans caught on and had to lower their prices at home. Dow had broken the German chemical monopoly and expanded his business greatly. And customers got a wider range of places to buy bromine at lower prices.

Dow went on to do the same trick to the German dye and magnesium monopolies. This is now the textbook way to deal with predatory price cutting.

Source: Herbert Dow, the Monopoly Breaker

Rafael Tudela’s Business Empire:

Rafel Tudela is a Venezuelan oil and shipping businessman. He is the quintessential street-smart executive.

He has built a billion-dollar business from scratch in less than twenty years. He seldom deals in written contracts because his word is his bond. He has always made his own breaks. And his principal business, which is oil speculation, relies on his constant process of seeing opportunities where no one else does and taking advantage of them.

In other words, Rafael Tudela is a genius at taking the edge. One of the best illustrations of this –of how he has the facts, knows what people want, and figures out a way to give it to them- is the story of how he got in the oil business in the first place.

In the mid 1960s, Tudela owned a glass manufacturing company in Caracas, but, a petroleum engineer by training, he longed to be in the oil business. When he learned from a business associate that Argentina was about to be in the market for a $20 million dollar supply of butane gas, he went there to see if he could secure the contract. “If I could get the contract,” he told me, “then I`d start to worry about where I`d get the butane.”

When he – a glass manufacturer operating alone with no previous connections or experience in the oil  business – got to Argentina, he discovered his competition was formidable: British Petroleum and Shell
Oil.

But feeling around a little bit he also discovered something else: Argentina had an oversupply of beef which they were desperately trying to sell. By knowing this one fact –his first “edge,” so to speak- he
became at least an equal to Shell and BP. “If you will buy $20 million of butane from me,” he told the Argentine government, “I will buy $20 million of beef from you.” Argentina gave him the contract contingent upon his buying the beef.

Tudela then flew to Spain, where a major shipyard was about to close down from lack of work. It was a political hot potato and an extremely sensitive issue for the Spanish government. “If you will buy $20 million of beef from me,” he told them, “I will build a $20 million supertanker in your shipyard.” The Spanish were ecstatic and delivered a message to Argentina through their ambassador there that Rafael Tudela`s $20 million of beef should be sent directly to Spain. Once again he had found the edge and taken it.

Tudela`s final stop was in Philadelphia at the Sun Oil Company. “If you will charter my $20 million supertanker, which is being built in Spain,” he told them, “I will buy $20 million of butane gas from you.”

Sun Oil agreed, and Rafael Tudela fulfilled his desire to get in the gas and oil business.

Excerpt from the book: “What they don’t teach you at Harvard Business School.”

ASUS’s Story:

Dell computer used to outsource the manufacturing of their motherboards to a Taiwanese company.

Then, one day that little company presented Dell with a new offer: they could start assembling whole computers for Dell. For Dell, this meant higher profitability: they’d have the same revenue, but with a lower cost base. For some reason the Taiwanese didn’t seem to care as much about profitability, only cash. But that’s probably because they’re still a bit backwards in Asia and don’t have any Harvard Business School-educated MBAs to teach them otherwise.

Anyway, that arrangement worked out well. One day the company came back to Dell with a new offer: they could take over Dell’s entire supply chain. For Dell, that meant even lower costs, and so even better profitability. After that arrangement was put into practice the company came back to Dell and offered to start designing computers for them. Brilliant! Dell could now focus on its core competency,branding, and let the Taiwanese do all the unglamorous work of actually building the damn things.

After that arrangement was put into practice the company took another trip to the US, but this time they didn’t visit Dell. They went to Best Buy, and offered them PCs that were as good as Dell’s but at a significant discount.

Softsoap and it’s acquisition by Colgate

“Back in the 1970s, liquid hand soap was sold by one guy: Robert Taylor, and his small company Minnetonka.  It was his invention, and he knew he was on to something big. Test  audiences loved the product and, despite barely having enough resources  to do so, Minnetonka decided to go all in and make a push to take the  product nationwide.

There was only one problem: Nothing he was selling could be patented.  The concept of liquid soap wasn’t new, and simple pumps had been around  since the dawn of civilization. As a result, Taylor knew several huge  soap manufacturers were ready to happily steal his idea the very moment  it looked like it could succeed on a large scale. Armed with superior  resources and the ability to quickly R&D an imitation product, the  industry giants were ready to crush tiny Minnetonka.

Taylor, however, was ready for this. Before any other company had the  chance, Taylor decided to go shopping one day and bought a few plastic  pumps. And by a few we mean FUCKING ALL OF THEM. There were only two  companies nationwide manufacturing those little pumps, and Taylor ponied  up $12 million — more than the total net worth of his company at the  time — and ordered 100 million of them,  effectively buying every single pump these two companies would be able  to manufacture for the next year or two.

Anyway, without the part required to dispense the soap, there was  nothing the major companies could do but sit and watch Taylor slowly own  the entire market. His product would become known as SoftSoap, Two years after his little stunt, Colgate-Palmolive  would be forced to just buy SoftSoap from Taylor for $61 million.”

Reference : http://en.wikipedia.org/wiki/Softsoap

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~Inspired by this thread on Quora

Making your products Viral : Understanding Virality

One of the major challenges for a marketer or an entrepreneur is to get users and grow for an eternity. Paul Graham would tell you that you ain’t doing it right if you are not growing by a minimum of 5-7% Week-on-Week. And there are plenty of channels one could use to grow, be it the Press, Text Ads or Visual Ads, Partnerships. All of these techniques require money to be spent proportionally to the amount of visits/ click throughs or conversions you are going to get. Wouldn’t it be so much better if we could get hundreds of users for an eternity for virtually no marketing spend. This is where the inherent Virality of products help.

 What is Viral growth? Viral growth is nothing but an existing user bringing you new users either through a generic invite sent on any of the platforms the potential user is on or by directly using the product ( sharing a file link on dropbox) or by any means possible. Google with gmail was phenomenally successful in creating a viral growth. Google initially started with a base of 1000 people who were given a limited number of invitations to share with friends/ family. Gmail finally went public in the year 2007 but by April, 2006 Gmail had through viral referrals grown phenomenally to a base of 7.1 million users. Quite incredible. Products like Instagram, Dropbox, Youtube etc grew rapidly to a million users through virality.

As with any product the key to being successful in growing virally is to have a world-class product, a product people would love to use and would love to share with their friends. Word of Mouth is a great, free channel for products to grow. But that’s not the only way to build virality in to your products. Look at products that grew phenomenally and you would understand that they built in and utilized at least one or two incredibly viral features in their products. Let’s examine the various viral features a product could have:

1) Inherent Virality : It’s incredibly difficult to achieve this type of virality in all products. There are certain products and niches where the products are inherently viral like gmail or Whatsapp or facebook. These products thrive on users inviting others users because the user gets no value out of them without his families or friends or someone else. But do understand that the easier you make it for a user to invite his friends or family, the more invitations they send out whereby increasing your virality.

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2) Signature Virality : Remember the messages “sent from my Blackberry” or “Sent from my ipad”? This type of virality encourages people to include the messages as signature because they think it makes them cool. Again, you would need a world class product that people would aspire to use to truly achieve this. Could you imagine someone using the signature “sent from my Nokia?” Kidding. But yeah, the point is to spread the message like Hotmail did with a simple “ Get your free email at Hotmail” signature and grew rapidly from a nominal base to 1 million in 6 months and in the next 5 weeks to 2 million. Remember this was a time when there were only 70 million Internet users and in 18 months they had about 12 million users.

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Paypal with their autolinks on ebay is another great example. It automatically inserted Paypal logo to the bottom of each of the listings of the sellers who used Paypal. This was incredibly successful in making Paypal grow virally.

3) Incentivized Virality: Companies like Fab.com or Dropbox are great examples of this. They incentivized their users to send invitations to their network for either monetary benefits or extra storage space in the case of Dropbox. It worked and people brought in an incredible number of referral traffic. Think of Affiliates as well. They thrive on this. The company grows and sells products by incentivizing the affiliate marketer to sell more or bring him more buyers. Amazon has achieved an incredible amount of success through their affiliate networks.

My facebook feed is filled with shares from this new to be launched service :Trevolta

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Of course one is going to share this with their friends, there is no better thing in this world than travelling around the world on someone else’s money! 🙂

4) Embeddable Virality: The biggest example of this is Youtube. Youtube was not the only video sharing website available during its initial stages but what made Youtube a leader was when they made the videos embeddable. People started embedding Youtube videos on their website and with it Youtube amassed massive views and made itself visible to an incredible number of people. This shifted the balance in youtube’s favor and there was no looking back.

5) Social Virality: In this case, Products depend on Social Network like facebook, twitter, pinterest etc to rapidly spread their base. There is a psychology behind Social virality. The key here is always to give people a set of tools to create something awesome which they would want to flaunt with their social graph. Instagram exploded because they could make photos beautiful and people loved flaunting their good looking self to the world. Services like twitter or Scoop.it grew virally because they allowed people to project a certain persona. Even the content shares that are done on any of these networks is in effect a way for a user to project a certain type of persona. If one could get this aspect right, then the product is a sure shot bet to grow virally. What I like about Twitter or Tumblr is the re-tweet or re-blog option which enables a user to create content effortlessly while actually he or she is curating content. It increases engagement on the platform and also gives a sense of satisfaction to the user that he or she is actually creating content.

I guess it’s easy to understand virality but its difficult building virality in to a product and even more difficult trying to measure it accurately.

For measuring Virality, one needs to understand two components:

  • Viral Coefficient
  • Viral Loop time

Let’s assume the scenario where:

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This implies that each user brings you an additional user within a time frame of 10 days ( the Viral Loop time), which is absolutely incredible if you are able to achieve it! J As we had discussed earlier there are different types of virality and in this case we are assuming a simple scenario where each user is sending out invitations to get their friends in (it could be incentivized or simply because your user loves your product)

Now if we were to look at the growth the product would have by the 20th day:

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Understanding Viral Loop time is important because Virality is inversely related to it. The shorter the Viral loop time, the better virality one would be able to achieve. Imagine if the Viral loop time in the earlier case was 1 day, ie, each user invites a set of users and the new user signs up all in a day’s time. That would make the user acquisition 5 times faster than the earlier scenario and your table would look like this:

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Let us plot a graph to understand our growth curve in the first scenario:

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Assuming a product has a viral coefficient that is equal to or greater than 1, it results in a steep upward growth curve. In reality a product having 1 or a number greater than 1 as its viral coefficient throughout its lifetime is impossible although there might be intervals during which the product shows such a viral coefficient. In reality a viral coefficient of 0.4-0.6 for a product is extremely good. Now let us consider such a scenario where the Viral coefficient is 0.5 assuming the rest of the numbers remain the same from our earlier example.

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And if we were to plot this on a graph, the growth curve would look something like this:

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The growth curve flattens out after a particular interval. It’s important for growth hackers and marketers to understand that in reality for most of the viral product this is how the graph would look like if they only depend on user acquisition through virality. So it’s important to plan out the metrics in such a manner that you constantly boost up user acquisition from other channels as well to have a steep growth curve which a product requires to be successful.  Remember Paul Graham and his number for the ideal growth rate for a startup? Utilize not just the virality of the product but also other channels like Press, Market Places , Creation of Viral Content, Paid Advertising or anything that boosts traffic and discoverability of your product/ service which drives conversions in order to maintain an upward trending growth curve.

Now if I were to simply consider the scenario earlier described with users sending ‘n’ invites and x% converts from them giving us a Viral Coefficient of K=n*x%, then the User Base at any particular point of time would be (considering only viral growth):

User Base (t) = User Base(0) * (K ^ (t/vlt +1) – 1)  /  (K-1)

(where vlt is the Viral loop time)

[Reference: David Skok’s article]

The above is not a comprehensive model as there are various things we have left out which includes:

  • The sending invitations process is always staggered. We have just assumed it to happen in one go. If I were to give an example – Imagine dropbox, you will always end up inviting people in a staggered way as you interact with them and share docs with them. It does not happen in one go. And If I were a user of dropbox and If I were to stop using it all together one fine day, then dropbox loses out on any referral signups from me.
  • The churn your product will have as it affects the above mentioned parameter.
  • We have not considered virality across the many channels and the different forms of virality.
  • We have also not included the saturation of a particular channel. If I were using a platform which has a total base of 10Million as the target base for sending out invitations, once I cover the entire user base I can’t rely on the formula.

The Viral Loop

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The viral loop highlighted in the diagram is what can be called as the single viral loop. It’s important where it’s possible to have a double viral loop to fasten your user acquisition. This is possible especially in case of Social networks. Like we discussed earlier, retention is a key component that defines the Viral Coefficient. An increased retention will result in increased Viral Coefficient and hence a faster user growth. There are simple techniques one could do to improve retention and engagement on the platform. This forms part of the double viral loop. Re-connection always increases engagement and retention and hence it’s important to re-connect people by prompting them as well as by making it easy for them.

For ex on LinkedIn, after we sign up, it prompts us to export contacts from our address books and re-connects us. This removes the friction normally people will have in searching for people and then connecting with them. Also, it helps in retaining dormant users. This is a technique employed by many of the Social networks to bring back dormant users on to the platform. Notifications on follow improves your chances of brining back dormant users.

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This simple step resulted in an increase of 16% in the number of invitations sent. Check the stats below:

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Source: http://www.slideshare.net/joshelman/josh-elman-threegrowthhacksgrowconf81413

Or in case of twitter they take you step by step through the various things one can do on twitter and by it helps you in getting content on your feed and making you follow a few popular people on login itself. It alleviates any friction the user will have initially to engage on the platform and also interacting with the popular users sets the context for them to get active. In doing so Twitter achieves more invitations and requests sent to users and prospective users and also re-connections and engagement between existing users. That’s a double viral loop.

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Similarly, it’s important for any marketer to understand the viral loop of their product, one would have to iterate and measure to understand in detail the parameters and the best possible viral loops.

At Zoomdeck, we are creating a platform for making photos interactive. A User can spot anything interesting inside photos to ask a question or add notes or add spots to highlight an interesting story or experience about an element inside photos, then make it much more engaging by linking the spots to audio, video, products, people, places or any link relevant. Users would be able to discover and share the stories and elements in photos using interactive spots and have contextual conversations around each spot. We have a web version, an iOS app and an embedding option which along with viral content shared across various Social Media sites would be a key driver of traffic and user acquisition for us. When I look at the various channels of virality for Zoomdeck, I have:

  1. Embedding: Bloggers and Publishers embedding Interactive Photos on their website. Similar to how Youtube utilized embedding as an important element of their Viral growth.
  2. User joins Zoomdeck, takes photos and makes them interactive by adding spots. Shares it with their friends and family (Invite). ( This will have a longer Viral Loop time) Similar to how Instagram or Pinterest built their viral loop.
  3. Directly recommends the product to their contacts through the invite option in the app or in person.
  4. Sharing of Interactive Photos they find interesting on Zoomdeck( Content) on Social platforms ( Facebook, twitter or Pinterest). Their network discovers, finds it interesting and shares with their friends. ( This will have a much shorter Viral Loop time) The advantage of having content that is viral in nature is the Viral Loop time significantly reduces as you are providing ready made things for people to share and not asking them to create which is always time consuming and requires an effort and hence would always have friction. A Youtube or Twitter is a great example of this.

The four basic viral loops in the case of Zoomdeck as mentioned above would each have different conversion ratios. While the first option and the fourth option would enable Zoomdeck to reach a much larger base of audience and that too multiple number of times, the conversion percentage is going to be a lot lesser than the second and third option where in our chances of conversions are much higher. Similarly, the Viral loop time for the first and fourth option would be much lesser than the VLT number for the other two. So measure the various parameters continuously and optimize for the ones that give best results.

Importance of Seeding :

Imagine for calculation purpose the current user base of a product as 5000 and consider only the 2nd and the 3rd channels of virality listed above as the growth channels for easiness in quantifying. (Assume a Viral Coefficient of 0.6 and a Vlt of 10 days) We would have a table that looks like this

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And our user graph would look like this:

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Now, assume acquisition of a constant number of users from other channels, we have (all values are hypothetical):

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Seeding initially is critical as that’s what enables the viral growth to kick in. In the first example we flatten out our user base after 2 months. This is why seeding should always be an ongoing process to leverage maximum value from virality or else we should have a viral coefficient greater than 1 to have an eternal upward curve for our user graph which is very difficult to achieve throughout the lifetime of the product. There would be short bursts when the viral coefficient is greater than 1 and would result in phenomenal growth especially if you are on a larger base as well but not through the lifetime of a product.

Key-points:

  • Virality is something that should be inherent in the product. It’s important to design and incorporate virality during product conceptualization itself.
  • Always measure and track various metrics to understand what works best and dig deep into those channels.
  • Iterate as fast as possible to understand the best viral channels. The longer the iteration cycle, the longer it will take for you to spot your best viral loop.
  • Reduce the number of steps required to do any action that results in virality. Make it as easy as possible for the users to send invitations. Understand that the easier you make, the better your metrics would look.
  • Two factors that influence Virality are: Viral Coefficient (K) and Viral Loop time (Vlt). Increase ‘K’ and decrease ‘Vlt’ for rapid growth.
  • Retention and re-connection are important factors that help in Viral growth.
  • Important to seed users initially.
  • Exponential growth from Virality kicks in after a threshold limit. Make use of various channels for seeding the initial audience.
  • It’s very difficult to achieve sustaining growth through virality where you require a viral coefficient greater than 1. Hence, compensate for this and balance it out by seeding users through other channels as well – if required paid channels also to maintain momentum.

References:

http://www.forentrepreneurs.com/lessons-learnt-viral-marketing/

http://www.linkedin.com/today/post/article/20130402154324-18876785-how-to-model-viral-growth-retention-virality-curves

http://andrewchen.co/2007/07/11/whats-your-viral-loop-understanding-the-engine-of-adoption/

Growth Hacking : It’s about being creative, smart and a lot of hard-work!

Making your product/ service or platform discoverable and increasing its visibility across the web is one of the most difficult yet the most important task for an entrepreneur or a blog owner. The best way is always to try out all the channels available to you and then gauge the conversions from each of those channels so that you can invest more time and money on the ones that’s giving you the best results. The strategy that’s best for you would also depend on your product and the niche you are operating in. You could split the strategies you could adopt into push and pull or paid and non-paid strategies.

I’m going to leave out the AirBnB or the Mint.com example which is quoted very often as examples of growth hacking. Sure, they were incredibly successful with their ideas and execution and I am sure you have already come across them as well. There would always be certain incredibly brilliant idea that would apply to your product or niche. Let’s leave those out for now and in this post explore the generic pull techniques one could employ. Of course these strategies would require plenty of your time and effort. Nothing comes for free! J

1) Blogging

Blogging is one of the most proven and effective strategies for gaining visibility and establishing yourself as a thought leader. If used in the right way and provided the quality of the content is awesome, it could easily be the best channel to drive traffic. You would want to have blog posts that are read and shared. So ensure that you create quality content, try and analyse what sells or are the most popular blog topics in your niche. Take note of the ones that’s trending and write your own version for best results.

One can adopt various Blogging strategies including what the content and theme of the Blog should be. It’s more important to understand your target audience before you decide on the contents of your Blog to drive maximum traffic. You could either create your own Blog Page or else you could get to post a few as a Guest blogger on Blogs having your target audience. I would suggest you to definitely have your own blog but also try and get yourself a space or two on a few of the more popular blogs in your niche. The advantage of guest blogging is that you open up your thoughts, ideas & your product to a large audience in one go. All along try and build your own blog site as well, because there is nothing like having a large following on your blog as you have complete control over your blog. You don’t necessarily have that control over someone else’s blog and can’t aggressively push your product or services for an eternity. You can always try and exchange blog posts as well with bloggers in your niche. This Is a good strategy to employ to grow your audience faster.

The advantages of Guest Blogging are:

  • Builds natural links
  • Increases your online authority
  • Builds Relationship
  • Opens up your product/ service to a large audience quickly

I’m a big fan of Kissmetrics, Buffer & Moz and each of them have taken the blogging strategy to an all new level to drive traffic on to their service/ product.

Kissmetrics, is an analytics platform. It has its own blog and the contents on the blog are super awesome and cover a wide variety of posts related to SEO/ Analytics/ Digital Marketing etc. They have steadily built up an extremely impressive reader base and invariably converts a lot of them as well. They also encourage guest bloggers on their blog page.

Buffer on the other hand grew phenomenally in its early days using the Guest blogging strategy. Leo Wildrich, co-founder of Buffer admits that using the guest blogging strategy alone, they were able to acquire 100,000 users in the first nine months. That’s like quite incredible. Two sites that you should definitely consider for getting guest blog opportunities are MyBlogGuest and Bloggerlinkup.

Moz similarly used blogging as a tool to build an ever growing subscriber base and with it a healthy base for it’s products.

2) Infographics:

Infographics is a great way to engage your audience and create something that is extremely viral in nature. Creating one is not that expensive either. You can do it yourself or hire someone on fiverr who could create an awesome Infographic for as much as $5. They are visual, useful, entertaining and sharable. This awesome infographic lays out the creative process pictorially of making an Infographic.

8 Steps to Create an Infographic

by mainstreethost on visual.ly

And this is a great Infographic created on infographics by Zabisco.

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Check out these great free tools for creating awesome Infographics : http://www.infographicsarchive.com/create-infographics-and-data-visualization/

3) Social Media:

Social Media is one of the best channels for getting visibility for your product/ service. It’s also very often the most cost effective and viral of channels. Infographics are content and Social media provides the best possible channel to make your content viral and with it bring a truck load of traffic.

  • Understand that your activity on Social Media is for the long run.
  • Build great engagement and brand awareness and slowly you will start seeing results.
  • Content is King – Create great sharable content that would in turn enable you to reach more people.
  • Always be responsive to questions or comments from your followers. Build a healthy community.
  • Depending on your content decide on which of Facebook, twitter, Pinterest, Stumble Upon, Instagram, Google+, Reddit, Youtube, Linkedin or any other platform would work for you. Try and stay active on the ones that give you better engagement and reach based on your content and niche.

Cracking visibility and engagement on each of these channels is an art in itself. I will cover in detail the things one should avoid and the things one should follow to build a community on any of these platforms. ( Check my earlier post on Stumble Upon. Will be covering each of Pinterest, facebook, Twitter and Instagram).

4) Influencer Marketing:

Influencers are gold! Most of us are quite aware of what Influencer marketing is. Let me explain if you aren’t aware. Influencer marketing is marketing to influencers in your niche be it bloggers, journalists, consultants or Industry analysts. And If you spend time and effort there is nothing better to build credibility and visibility.

The first step is to identify influencers in your niche. There are a number of ways by which you could create a list of Influencers.

  • Relevant keyword search on Twitter or Linkedin would give you a great list to start with.
  • PR Tools like Vocus and Cision are also great for finding list of Influencers.
  • Google Blog Search and Technorati can be great tools for finding bloggers in your niche.
  • Set Google Alerts on keywords that you want to track. It will enable you to keep track of all new posts related to those keywords and with it identify the person posting the same.
  • Try and scan Forums/ Communities in your niche to find influencers and be active on those forums so that people start noticing you.
  • I for once find Mom Bloggers almost always a great way to influence women and it’s almost unavoidable in niches like Fashion, Interiors, Gardening, Cooking etc. Try Blogher.

Remember that influencers are almost always busy people and it’s difficult to get their attention. You would have to spend time and effort in building relationship with them.

  • Follow them on twitter and connect with them on Linkedin if possible. Share their content and try and start a relevant conversation on any of their posts. This would slowly make them take a note of you which you could leverage when needed.
  • Or else try and email them either asking a question or appreciating them for their latest content/ post and start a conversation. It might be difficult to get email IDs of influencers as very often they tend to not put it out in public. Use a tool like Rapportive to try a few combinations until you get the right one connected to any of their Social Profiles or read this article to find the best way to find someone’s email ID.
  • Sending gifts to influencers is another great way to build relationship with them. Brands in fashion, food categories more often than not send their products to Influencers who tries them and almost always writes about their experience. It’s a great way to improve credibility and reach a large user base.
  • Creating a list of top influencers in your niche by actually ranking them and sharing it with the masses is a slightly expensive and time consuming exercise but is a great way yet again to reach out to the Influencers. If possible generate a widget as well so that the bloggers could use it in their blogs and very often they would do that as well giving you credible back-links.

5) E-Books & White papers:

Like I mentioned before a lot of the inexpensive strategy would involve your time and effort. Content is the King in all sense. You can decide if Blogging or E-Books and White papers are a better option for you. The latter would involve significant amount of time and effort in producing something of greater value while the former would involve producing a number of shorter posts to keep improving your visibility and reputation.

E-books and White papers are pretty comprehensive in their content and if it’s a niche you are interested in then it’s almost always catches your eye and makes you go through it. Check this awesome collection of blogs on the Kissmetric platform : http://blog.kissmetrics.com/marketing-guides/

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6) Powerpoint Presentations:

Are you using Slideshare? If you are not, then you are missing out on one of the best lead generation channels especially for businesses. Slideshare is the world’s largest content sharing community for professionals.

“With 60 million monthly visitors and 130 million pageviews, Slideshare is amongst the most visited 200 websites in the world.”

This is not the only reason for you to be on Slideshare. Slideshare presentations tend to rank really well in Google for certain keywords.  Look at the Google search results for startup metrics:

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It would do you all so well if you could create your own decks on slideshare. It is inherently viral in nature. Things to Remember while creating content on Slideshare:

  • Create a compelling presentation:  keep in mind the quality of the content and attractiveness of your graphics.
  • Understand that your animations won’t be re-produced on Slideshare and that you are not going to present the deck. So your content should speak for itself.
  • Use nicely designed templates for creating the deck. You may use services like SlideRocket or PhotoSnack slide creation.
  • Ensure that the privacy setting is set to [Public] Everyone.
  • You can include Youtube videos in your presentations or “slidecast”, meaning you can sync an MP3 soundtrack.
  • Just like other Social Media channels, you can follow people, like their presentations, download and interact with them. Do that and slowly build a following.
  • Ensure that you keep your links in the presentation. It’s helpful not only in terms of driving traffic to your site but also gives you good SEO benefits.
  • Always have a call to action on the last slide and provide contact info. If people have made the effort to browse through all of your slides, then they definitely are prospects. Try and convert them.

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7) SEO:

In the earlier methods we have tried various content creation and distribution strategies and all of those add to your SEO efforts. Let’s break up the SEO strategy in to on-page and off-page SEO.  Remember Content is the King, always be creating content that’s valuable.

Refer this representation of the various factors influencing your SEO strategy:

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Highlighting the various steps one could take to improve the on-page SEO:

  • Valuable content and be hyper-relevant to a specific topic
    • Include subject in title tag
    • Include subject in URL
    • Include subject in image alt text
    • Specify subject several times throughout text content
    • Provide Meta description and meta keywords.
    • Crawler/ Bot accessible
      • Make sure there is no duplicate content.
      • Don’t block bots.
      • URLs should follow best practices around length, being static vs dynamic, and being included in any appropriate RSS feeds or XML Sitemap files.
      • Phenomenal UX
      • Make it easy for your users to share the content.  Shares on Social media sites act as strong signals for search engines.
      • Multi-devices ready.

And for your off-page SEO:

  • Share your content with your friends circle on all major Social networks.
  • Keep Blogging and if possible do guest blog on major blogs in your niche.
  • Engage on forums in your niche. Ensure that you add value to the forum and just not another spam backlink generator. Contrbuting to discussions in the group will establish you as an authority in your niche.
  • Submit your websites to the topmost quality directories like DMOZ, Yahoo Directory, ZoomInfo, One Mission, Pegasus, etc.
  • Social Bookmarking is yet another technique. Search engines love these sites and often track them. Ensure that you submit your contents to sites like Digg, Stumble Upon, Delicious etc. Also ensure to tag the contents properly.
  • You can try exchanging links with similar blogs.
  • Video promotions. Submit your videos on all major video upload websites like Youtube, Dailymotion etc. They are quality sources of traffic and helps you with your off-page SEO.
  • Contact Review sites to review your product or offerings.
  • Use Press Release service providers like PRMac or PRWeb to issue press releases. Gives you backlinks and in cases where the press release excites people, you might get a lot of additional coverage as well.
  • Get active on sites like Yahoo Answers, Cha-Cha, Answer bag etc.

These are in brief the few on-page and off-page SEO techniques you could employ in making your website more search engine friendly and with it gain significant amounts of traffic. Remember, always be creating content that’s valuable and extremely viral in nature.

8) Go Mobile:

Well, I wouldn’t necessarily say that you should go mobile just for the sake of getting more traffic to your website. With the smart phone explosion it’s suicidal if one is not on mobile. It’s so very important in terms of not losing your existing users, making their experience better, improving user retention, in being connected with the users 24*7 and all of this adds to your growth. It’s a call you need to make if you need to be on mobile as a native app or as a mobile web app based on the product/ service you provide. There is some amount of resource you would need to spend on building a native app and you would need to understand the returns it would give you to take a call on.  At Zoomdeck, this was a call we took and we did not even think twice. For a social network like us being on the app marketplace was a no-brainer both in terms of increasing our user base and also in terms of increasing the engagement our users would have with our app. The ability that an app provides to be in constant touch with your users is phenomenal. One wouldn’t want to spam the users, but an efficient use of the push notifications will go a long way in improving user retention.

A market place like the app store, google play or the amazon store opens up an entirely new channel for users to discover your product or service and engage. People spend crazy amounts of time on their phones and any product wouldn’t want to miss out on this. I have covered in detail the tips and tricks you need to employ to gain maximum from your appstore debut.

Few other articles on app store strategies:

9) Contests and Give Aways:

If executed properly Contests and Give Aways are a great way to engage your audience and build base. It’s very important to understand the exact reason you are running a contest. If you aren’t sure on that you would probably drift from the core thing you want to achieve and more often than not it would not give you a good ROI. You could run a contest:

  • To increase your social authority : Get Facebook likes or twitter/ pinterest followers and so on.
  • To drive more sales and with it revenue.
  • To build awareness and buzz around your product.
  • To collect email info and other customer information.
  • To generate new leads.
  • To engage you existing audience base.

Before you start a contest clearly define your end result and measure. Now based on the end result you want to achieve, create a very creative contest plan. Few examples of cleverly crafted contests are:

(i) Vera Bradley is fantastic at visual social media marketing and they created this awesome contest on Instagram. The contest asked people to post as many Instagram photos as they liked showing them wearing or carrying a favorite Vera Bradley bag. Submitting was as easy as including the #VBStyleShare hashtag when posting images to Instagram.

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The Vera Bradley Instagram contest was short – just about 4-5 days. At the end, 10 winners received a free wristlet.

(ii) Contiki  Vacation’s “Get on the Bus” Promotion : Contiki, a travel firm that caters to the 18-35 year-old demo, dropped a promotion in mid-February that let winter-weary web surfers imagine their perfect vacation. The winner got one of eight vacations worth around $25,000.

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The “Get on the Bus” promo challenged fans to get a crew with four friends together, choose a trip and then try to get as many votes as possible in order to win. the effort, which ran from February 23 through March 31, garnered 8,000 Likes for Contiki and generated more than 10 million ad impressions through Facebook shares, Likes, tweets and blog coverage. One reason for the success was a feature that let users and their friends create a bus, which incorporated music, movies, Likes and interests that users had in common via their Facebook profiles.

Summing up a few pointers to remember while running a contest:

  • Plan your contest based on the end-result you want to achieve.
  • Give meaningful prizes to your audience.
  • Always include more than one prize if possible. You could have one major prize and a few consolation prizes.
  • Always use multiple channels to promote your competitions so that more people see it and participate in it.
  • Try and keep the entry simple so that you get maximum participation. Have different levels in the competition that would increase the chances of people winning the competition.
  • Decide on the duration of your contest: I would say for a simple straight forward contest – 3 weeks would be ideal as it’s not too long or too short for you get good engagement. It would also depend on the type of contest you are running.
  • Do blog, tweet, make a facebook post, share across different platforms on announcing the winner. Experiences are the best form of give aways and always capture the winners moment. Creates an instant connect.

Check a few of the incredibly successful & awesomely creative campaigns but of course they all had a bit of budget as well. Never know, they might encourage you to try something really creative and innovative but not expensive though

(i) Heineken’s departure roulette was brilliant. It was expensive but made an instant connect with the audience. They set up a board at JFK’s Terminal 8 and dared travellers to play “Departure Roulette”—changing their destination to a more exotic location with the press of a button. They had to agree to drop their existing travel plans—without knowing the new destination first—and immediately board a flight to the new place.

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(ii) Or this brilliant campaign from TNT, this was incredibly viral :

(iii) “The Old Spice Guy” campaign was just phenomenal; its viral success is something that hasn’t been matched In the short history of Internet. Isaiah Mustafa, the Old Spice Guy, was able to pump out hundreds of hilarious videos at alarming pace in response to Old Spice Video commentators. They even had a Reddit thread to respond to others.

This one has more than 46 million views. Incredible.

(iv) Hugh Macleod is a professional cartoonist and his idea of releasing a succession of Daily Biz Cards was just brilliant.b

In his campaign he creates cartoon in which he targets a particular individual, a random person, a celebrity but always someone. His market is pretty huge and he would of course need a lot of visibility to build his business. He relied on the ego and the influence of several large names on the internet who would circulate or share the cartoon with their tribe giving him greater visibility. Brilliant stuff.image

(v) Red Bull’s Stratos Space Jump vowed the world and is one of the most brilliant campaigns executed ever. Dubbed “the mission to the edge of space,” it featured Felix Baumgartner making a freefall jump from 24 miles above the earth last October. The jump broke five records, according to officials at Guinness World Records, and Mr. Baumgartner became the first human to break the sound barrier without engine power. Mr. Baumgartner’s feat captured consumers’ attention the world over. TV stations, news reports and journalists all referred to the event as “Red Bull Stratos” rather than shortening it to simply “Stratos,” as is so often done with branded events.

The event was carried on nearly 80 TV stations in 50 countries. The live webcast was distributed through 280 digital partners and racked up 52 million views, making it the most-watched live stream in history.

There are plenty more of such brilliant and creative campaigns that’s been incredibly successful and pulled in a lot of visibility and conversions for the brands. The essence of the success of anything you do to leverage “Pull ” is to create quality content and to tap in to all channels to reach the audience who would get excited by it. Be smart, be creative and put in a bit of hard-work! Focus not just on getting traffic, but also focus on retaining your existing users and delighting them always! J