Viral Incentive Marketing - How Dropbox and PayPal Used Injected Steriods Into Their Viral Marketing

We’ve now arrived at one of the most powerful performance-enhancing drugs of viral marketing - better known as viral incentive marketing.

The first three growth engines we covered were largely self-driving. Users invite others because it’s obvious the value they get from a product is amplified by recruiting others.

...But what if the dynamics of your site don’t include inherent viral marketing, viral communication marketing, or viral collaboration marketing?

The Answer to “Why the Hell Should I?”

Let’s assume you ask a user to invite others to your product. You have a solid product, and you ask them nicely in many different places on your website to take action.

You should be set, right?

Wrong.

You will likely get a few shares from friends, family, and enthusiastic early adopters.

However, for a significant percentage of your users (depending on how close you are to product/market fit), their knee-jerk reaction will almost always be something along the lines of:

• Nope.
• This is annoying. I’m outta here.
• Why the hell should I?

Not every user will feel like this, but many of them will.

These are exactly the people we’re targeting with viral incentive marketing.

The 6 Categories of People

1. Prospects – In-market people in need of your product but who have not been exposed to it enough to become a Lead.
   
   
2. Leads – Prospects exposed to your product enough to become interested in hearing more. They provide you with a means (such as contact info) to acquire more information.
   
   
3. Users – Leads who have evaluated some information about your product and who have become convinced enough to give it a shot. They are now using your product.
   
   
4. Acolytes – Users who, through the course of using your product, have reached one or more moments of value to convince them to enthusiastically continue using it.
   
   
5. Advocates – Acolytes who, through the course of using your product, have reached a moment where they see the value provided by recruiting others in their network to use it as well.
   
   
6. Immune – Either out-of-market people with no need for your product or in-market people who have not maintained a good enough experience with your product to remain a lead, user, acolyte, or advocate. They are now fully out of your reach.

Your viral incentive campaign should be the carrot you use to push acolytes to become advocates.

The vast majority of your advocates will be acolytes first. If this is NOT the case, it means you have powerful incentives that compensate for a lack of product value – and that’s when you get people gaming the system.

Turn Acolytes Into Advocates

A few things to consider:

• If acolytes aren’t becoming advocates at all, evaluate the value you’re providing them. Do your research on what they want, what problems they’re having, and what they truly find remarkable enough to talk about. Talk to them as much as you can. Then make improvements accordingly.
  
  
• If acolytes leave instead of becoming advocates, you’re likely being spammy or annoying. Your negative methods to acquire a share or referral are outweighing the perception of the value you’re providing. Go back to focusing on adding value, and ONLY ask for a share or referral when a user feels good about their experience (typically when they first see the benefits you offer).
  
  
• If acolytes are on the fence about becoming advocates, you’re likely offering solid value, and you’re not being overly invasive. However, you’re just not quite where you need to be to push them over the edge.

Dealing with this last group is where incentivized viral marketing can shine. It can help convert those users on the fence from squeamish naysayers to loyal acolytes, yelling your brand’s name from the rooftops.

However, the DEGREE to which this happens will depend largely on:

1. How valuable your product or service already is
2. How valuable your additional incentives are
3. How relevant your incentives are in relation to perceived core value and viral value

(NOTE: If you’re starting to see the word “value” appear everywhere on the pages of Viral Hero, you’re not crazy. Perceived value is the underlying foundation of viral marketing.)

With – and Without – Viral Incentive Marketing

You’re engaging in an implied conversation with users at all times. Depending on the scenario, the conversation can look quite different.

SCENARIO 1: You Have NOT Reached Product/Market Fit

YOU: Do you like our product?

USER: No.

YOU: Well . . . shit.

Work on creating more value until you reach product/market fit. (In other words, until users answer “hell yes” to this question.)

SCENARIO 2: You HAVE Reached Product/Market Fit

YOU: Do you like our product?

USER: Yes.

YOU: Will you invite others?

USER: Why the hell should I?

YOU: Because it’s pretty and I’m nice to you.

USER: Umm . . . [Slowly backs out of the room.]

If you can’t provide a satisfactory answer to “Why the hell should I?” in anything other than a very creepy way, you’re failing.

SCENARIO 3:

You’ve Reached Product/Market Fit, AND You’re Using Viral Incentive Marketing

YOU: Do you like our product?

USER: Yes.

YOU: Will you invite others?

USER: Why the hell should I?

YOU: If you do, you’ll get *INCENTIVE*.

USER: Seriously? Rock on! Okay, I definitely will.

[YOU and USER high-five.]

See the difference? This is a much more complete conversation that leaves both parties feeling satisfied.

Viral Incentive Marketing Done Right

The most effective viral incentives to offer users are rewards that offer an augmentation of the core value that brought users to the product in the first place.

Think of any of the referral programs out there you’ve been exposed to. Many involve cash, which is typically why they fail because it doesn’t blend with the product’s core value and doesn’t augment the experience you came for.

Others provide an extrinsic benefit such as a discount, deal, or file download in exchange for inviting others to join a service or use a product. This works a bit better.

But the real veteran move is providing a significant augmentation of your core value.

Take Dropbox, for example. The popular file storage and sharing application experienced a meteoric rise to prominence in the late 2000s.

• Dropbox lets users store files and access them across all devices (which is their core value promise)
• You share the service because you want friends to easily have access and update those files
• Dropbox then added an incentive – for every user you invite who signs up, you get 250MB of free space for no extra charge.

Dropbox’s viral incentive marketing campaign rewards users with an augmentation of the reason why they originally wanted Dropbox. The company expertly blended its core value with its viral value, which makes the program so effective.

How effective? Try over 300 million users.

When C4R Actually Works

A Cash for Referrals (C4R) program seems solid in theory. After all, you can pay people to do just about anything.

However, while you might get referrals, the actual business value (i.e. customer lifetime value) of the users you gain will most likely NOT be significant.

While you may get new signups from a good C4R system, many people will also be gaming the system for a quick buck. As a result, your ROI will plummet.

But what if the transfer of money is the core value prop of your site?

Take PayPal, for example. PayPal has actually seen success with a C4R viral incentive marketing campaign because the value they add to users is a means to transfer money to others.

By dropping $10 into a user’s account for inviting friends to use PayPal, they’re providing that user a risk-free method of trying out the service without depositing any funds.

The value of money is something everyone is very aware of, so this tactic massively increased their conversion rate from “on the fence” to loyal repeat users.

But that’s not all.

Early on, PayPal used a “$10 for you, $10 for your friend” viral incentive marketing campaign to augment user referral rates even further. Certain users have the instinct to NOT invite others if the reward is one-sided. That is to say, they feel guilty profiting from exploiting their friends.

By providing an added incentive for the INVITEE as well, PayPal made it far more likely for referrals to occur.

(NOTE: PayPal DID still see many “users” trying to game their C4R system. This ended up being the Russian Mob, and it came very close to tanking their company early on.)

Using a Product Incentive / C4R Hybrid

DraftKings is a hybrid example of when a company can run a successful C4R viral incentive marketing campaign.

Earning cash is part of their core value prop, but DraftKings (a fantasy sports contest provider) found a way to “monetarily” reward inviting others without the risk of bleeding the company dry when funds are withdrawn.

Instead of adding free money to user accounts, DraftKings used what they call “DK Dollars”. They play the same as real money, but you must USE them on the site. You can’t withdraw them to your bank account.

Does DraftKings factor this into their cost of user acquisition? Of course – those users can pay DK Dollars to play in real games, and they (or their opponents) win real money in return.

However, the company knows these DK Dollars have been spent giving new users value and that these users have now seen tangible value for inviting others.

Stay True to Your Core

Although C4R is attractive in theory, I stand by the assertion that the most cost-effective and powerful form of viral incentive marketing is a campaign that blends your site’s core value prop with the value prop of your reward.

If cash isn’t part of your core value prop, don’t settle for an uncreative option like C4R.

There’s a better solution out there if you put a little brainpower into it.

Try additional access, a discount, a free addition to an order, or a resource they couldn’t otherwise get.

If you must create a reward specifically for your viral incentive marketing campaign, DO IT. It’s absolutely worth it.

Remember also that viral incentive marketing is much more effective when the reward is two-sided (i.e. a reward for the inviter AND the invitee).

This ensures inviters don’t get negative feelings about taking advantage of friends. Instead, they feel as though they’re adding REAL value to those who would truly be interested in a product or service.

How You Can (and Should) Benefit From Incentive Marketing

In summary, viral incentive marketing is the act of offering a specific incentive or reward for spreading the word, sharing, or inviting others to your site, app, or service.

Determine how to best put it to work for you and inject a welcomed dose of performance enhancement into your viral marketing by asking the following:

• Why did users come to you in the first place?
• What problem are you solving for them?
• What’s the core value of inviting others?
• Is there a way you can add even more value to your solution through a reward?

In my experience, viral incentive marketing is most often under-utilized in e-commerce, where EVERYONE has a product they’re selling, and ALMOST everyone has the ability to offer a discount code.

What’s Next?

In the next chapter, I will show how services like Youtube and Slideshare crushed it by utilizing something I call embeddable viral marketing.

How Did Youtube Grow Faster Than Any Company Ever?

Thanks to one very special technique, Youtube was able to go from a failed dating service to a viral video superstar almost overnight. Find out how in the next chapter.

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