We all know Elon Musk founded Tesla and SpaceX, but do you know that he also cofounded Paypal?
Paypal, the fintech pioneer with over $10 billion in revenue and over 190 million customers, would not have been where it is today without viral marketing.
Here’s what I learnt from Elon Musk:
1. Leverage the virality of your business model
Paypal is fortunate to have a business model in which one customer would essentially act as a sales person by bringing in other customers. For someone to send money to a friend and, he or she, needs to recruit that friend into the Paypal network. Thus, the exponential growth. It was like bacteria in a Petri dish like Paypal. Elon ran Paypal for about the first two years of its existence and by the end of year two, they had a million customers.
2. Dumping cash in marketing isn’t the most effective in creating viral marketing
To generate word of mouth marketing, the most useful and cost effective marketing method, it does not mean spending tons of money. It is about managing the marketing cost: profit ratio.
Spending $10 to acquire each customer was what Paypal did. They gave $10 to each new customer and $10 to the customer who referred them.
Having said that you should not blindly spend $10 to acquire each customer. The Customer Acquisition Cost should not exceed the Customer Lifetime Value. For example, if you earn $20 profit per product you sell, spending $10 to acquire each customer is justifiable.
3. Revisit the STEPPS checklist advocated in the book Contagious to stretch your marketing dollar
When brainstorming the marketing/ branding for your product
|Social currency||Does talking about your product or idea make people look good?Can you find the inner remarketability?Leverage game mechanics?Make people feel like insider?|
|Triggers||Consider the context. What cues make people think about your product or idea?How can you grow the habitat and make it come to mind more often?|
|Emotions||Focus on feelings. Does talking about your product or idea generate emotion?How can you kindle the fire?|
|Public||Does your product or idea advertise itself?Can people see when others are using it?If not how can you make the private public? (remember teacher reducing drinking)Can you create behavioral residue that sticks around even after people use it?|
|Practical value||Does talking about your product or idea help people help others?How can you highlight incredible value, packaging your knowledge and expertise into useful information others will want to disseminate?|
|Stories||What is your “Trojan horse” story which people would love sharing with one another?If your product or idea embedded in a broader narrative that people want to share?Is the story not only viral but also valuable?|