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September 8, 1999 Event
The Value of Viral Marketing: When Does It Make Cents? As the final quarter of 1999 draws near, Internet companies are spending more than ever before to market their brands. While many have achieved success using dollars to reach users and build awareness, others are enjoying success through a less dollar-intensive means. The phenomenon of viral marketing has led to some of today's biggest successes, such as Hotmail and ICQ. This powerful mechanism relies upon effective products that lend themselves to word-of-mouse endorsement and strong user community adoption. However, some fundamental questions remain. How large an audience can viral marketing alone build, or sustain? Does it work well beyond free products? And, is the concept of viral marketing limited to just applications? In the recent past, viral marketing has proven that it can effectively drive user adoption for certain products in their early stages. But it remains to be seen whether or not viral marketing will have a significant impact upon mainstream marketing strategies.
Key Learnings
DEFINING VIRAL MARKETING
"Viral marketing" has emerged as a ubiquitously embraced yet seemingly amorphous concept, describing everything from spontaneous word of mouth referrals to deliberate incentive-based marketing campaigns. Though broad in concept, viral marketing can be classified into two categories: the first, driven by the network effect, relies on products that increase in value as the number of people using them increases. Such network effect driven products are typically enjoyed by communication-based products. The second relies on word of mouth recommendations of compelling products. Such viral campaigns are based on the notion that great products naturally lend themselves to widespread adoption without the aid of traditional marketing dollars.
ORIGINS IN THE OFFLINE WORLD
With the success of online viral phenomena such as ICQ and Hotmail, it is often overlooked that online viral marketing campaigns have their roots in offline viral success stories. The Levi's tag on jeans, for example, is comparable in effect to Hotmail's email footers. ICQ's success at encouraging participants to recruit friends and family seems to steal a page from the success of MCI's own Friends and Family program. The infamous pyramid or ponzi schemes equally bring forth some of the darker offline origins of viral marketing. Thus, while the Internet may be a tool that enables highly effective viral marketing, it is embracing rather than introducing the concept.
PHENOMENON VS. MARKETING TECHNIQUE
The nuances of successful online viral campaigns do not yet lend themselves to formal documentation, implying that viral marketing treatments in business schools may vary for some time. Despite the effectiveness of early viral campaigns, end results can rarely be planned and do not consistently adhere to a fixed set of formulae or guidelines. While viral marketing campaigns can be ignited, they cannot be controlled. Viral marketing may better be described as a cultural phenomenon than a business tactic.
KEYS TO SUCCESS
There is an illusion of viral campaign success when a product reaches a new user. However true viral campaign success comes not just from reaching new users but from continually engaging them. The key to viral marketing is turning customers and potential customers into your marketers. Products that users benefit from recommending to others on an ongoing basis are thus most likely to enjoy the user adoption impact that viral campaigns can afford.
RISKS OF VIRAL MARKETING
Email promotional campaigns, such as PlanetRx's three free items offer, have been highly effective in reaching new users to date. With no barrier to entry, there is little doubt that such campaigns will grow in number as merchants embrace what appears to be a successful viral strategy. However, in the same manner that positive network effects can enable effective viral marketing, negative user experiences can have the opposite of a network effect by stymieing further adoption and inviting user fallout. As the number of merchants that embrace email promotional campaigns increases, users will become habituated to email promotions, resulting in sub-optimal viral marketing results for merchants.
QUOTES OF THE NIGHT
"Evite is like Ebola because it spreads quickly and widely. ICQ is like herpes because it spreads through intimate one-to-one contact."
"Mathematically, viral is exponential and marketing is linear."