With the recent developments in social media, people have seen to be spending long hours on social websites such as Twitter and Facebook. This has led to many developments, one of which is an extension into the ways of marketing available to businesses.

There are several procedures to market one’s product, the most popular ways include adverts on social media websites, bill-board advertisements or advertisements through different media channels. However, these adverts have certain inefficiencies and the customers have different questions in their mind regarding the quality.

However, the strongest way of marketing a product is when the product is recommended by one of its customers to their relatives, friends or family. This is regarded as the strongest way of marketing as it automatically answers the specific concerns of individuals and as someone they know and certainly trust uses that product, they are more attracted towards the products. A company which is looking forward to such marketing must ensure good quality and fair prices to provide value for money to its customers.

The term which has been related to determine the number of new customers brought-in through such marketing practices is called as a “Viral Coefficient”.

For instance, if the viral coefficient of a company is 5, this indicated that every current customer of the company has brought in 5 new customers, if say it is 0.5 it indicates that every customer brings in 0.5 new customers or that 100 current customers bring 50 new customers. 

Is my Business Growing?

In order to determine whether a business is growing and is acquiring new customers, viral coefficient can come handy. The viral coefficient of a business must at least be 1. This means that every current customer of the business is bringing-in at least one new customer based on recommendation. This can also be used to determine whether the customers are satisfied with the products or services of the company as if so, they shall be recommending the products or services to others to a higher extent. However, the business may always use other means of advertisements in case of a low viral coefficient.

Calculating the Coefficient

In order to calculate the viral coefficient for a business, the following information is required:

  • Number of existing customers (e.g. 500).
  • The number of invites sent-out by each customer (say 10 invites per customer; 500×10).
  • Successful invites which were acquired as customers measured in percentage (say 20% i.e. 1000)
  • Finally, the number of new customers are divided by the number of existing customers to calculate the viral coefficient (1000 / 500 = 2).