Building Distribution Into Digital Products for Virality (Quick Thoughts)

Last week I spoke to a couple of people (who both own a digital platform) about how I would build distribution into their companies to turbocharge growth and to increase their likelihood of going viral. That prompted me to write my thoughts on this topic as a new blogpost. I hope this post can serve others who have built, or aspire to build, a digital product.

So what is a digital product anyway?

A digital product is a product or service that is intangible- that is, it is not contained in a physical format. Popular examples include e-books, downloadable music, software, electronic games, and online courses.

Distribution is the process of making a product or service available for the end user. Distribution can take place within the physical realm (think of grocery stores) or within the digital realm (think of marketplaces like Amazon.com).

A digital product will inevitably have to be distributed through a digital distribution channel. Digital distribution channels include:

· standalone online stores such as Apple’s website,

· online marketplaces where buyers and sellers transact such as eBay, and

· social media (e.g. Instagram).

These products and channels are marketed through digital marketing distribution channels that then direct them to the place of transaction.

Digital marketing channels like Google, social media, e-mail and SMS text messaging are ways of making a digital product or channel known.

Digital products sold via digital distribution channels and marketed via digital marketing channels.

This is the digital ecosystem, and it is extremely powerful.

Products (even physical products) being distributed through digital channels can more easily experience rapid growth in adoption due to its attractive economics, namely:

· its lower cost profile

· it enables wider reach (you have access to billions of eyeballs).

These benefits are even more powerful when selling digital products – products that experience near zero marginal cost, whereby the cost of making one additional sale is nearly nil. A newsletter can have 30 or 30,000 subscribers, but it would only have to be written once, so dividing the cost of writing it by a growing denominator (the subscriber base, in this case) will result in an ever shrinking unit cost.

These benefits alone, however, are not enough to promote virality.

Virality refers to the tendency of something spreading at exponential rates. In popular culture, this tendency often refers to the sharing of content or adoption of a digital product.

Virality is dependent on how many referrals an initial customer makes, and how well prospects convert into customers. New customers also have to make a certain number of referrals, a portion of whom convert into customers. And the cycle continues.

This type of phenomenon creates exponential growth within the user base, which may not seem so significant in the initial period but will disproportionately build up with time.

You can easily see this type of function play out in the real world with social media platforms, as well as other forms of technology like enterprise software solutions (the most popular being the Microsoft Office Suite). Of course, trees don’t grow to the skies and the growth rates will eventually plateau.

If you have a digital product or service, understanding the concept of virality and distribution will increase your return on advertising spend (ROAS) dramatically and make your life much easier.

Obviously, as a pre-requisite, your product has to be great. This means it has to be:

1) well designed and,

2) useful.

Once that is achieved (and that is no easy feat), then you have to build distribution into the product itself. That means you have to build the product in such a way distributing it can be frictionless.

So how exactly can you build distribution into digital products?

Firstly, you have to get the basics down. This involves putting your business out there, directing the right traffic to your funnel and optimally converting your traffic into customers. You also have to provide a delightful user experience and minimize retention if you offer subscription services. You can’t go viral or experience any significant growth if your product is inaccessible or not user-friendly.

Again, this is no easy task.

Once the basics are in place, then you can add features that promote exponential growth. It all boils down to embedding features in the product that encourages shareability while making shareability easy.

I’ve come across several themes, which I will lay out below. I’ve taken the liberty of naming these themes in the hope it makes them easy to remember:

1. Value Exchange

This is essentially the company incentivizing the customer to do X to get Y for free. This type of incentive works very well if you can offer something that is valuable (it must have a monetary value) but costs close to nothing to provide, such as giving out zero marginal cost products in the form of giveaways or free upgrades.

A popular example is what Drop Box did in their early years – if you linked your Drop Box account with your social media account and shared your use of it on your social media feed, you would get more storage for free.

HubSpot, a marketing software company, allowed users to use a limited version of their services for free. Once that user hit their limit they could pay to upgrade or invite others to join in exchange for the unlimited premium version of the product.

2. Financial Incentive

PayPal used a referral program to help its user base grow. It would give credit ($20 at first) to those bringing in other users through its referral program. At one point the company’s user base was growing at 7%-10% daily!

3. Signature & CTA (Call to Action)

This is essentially a badge, stamp or logo at the bottom of your product (or mode of distribution) with the option, or suggestion, to share information on that product.

Hotmail is a good example of this.

During its early years, Hotmail added a signature at the bottom of every email sent that said “P.S, I love you. Get your free email at Hotmail.com.” This obviously works much better with products that act as a means of communication (such as email).

ClickFunnels, a webpage and funnel builder, also added a signature at the bottom of their users’ webpages. However, the CTA in this case involved including an affiliate link in the signature, which takes you their affiliate program page.

The affiliate program onboards those who are interested in becoming successful affiliate marketers for ClickFunnels – and offers generous commissions for new signups. This strategy proved to be extremely successful with the company achieving revenues of over $100 million.

4. Mass Collaboration Element

This involves incentivizing the user to share the outcomes of their work when jointly using a product with others. The sharing can happen on the product itself or on social media and through other communication channels.

The Google G Suite (which offers products such as Google Docs) was able to grow rapidly and significantly in a world dominated by the Microsoft Office Suite. Despite the technological superiority of Microsoft’s product offering, the collaboration element behind Google’s alternative solution allowed for wide adoption.

Other examples include sharing and communicating the consumption of an application through your social media feed.

Spotify was able to grow as rapidly as it did because of its integration into the Facebook feed. In 2021, Facebook announced an expansion of its partnership with Spotify, allowing for the integration of a Spotify miniplayer into the Facebook feed.

When Coinbase users bought a Bitcoin, they were promoted to Tweet “I just bought 1 Bitcoin on Coinbase. https://coinbase.com.” As of writing, Coinbase’s website cites it has 108+ million verified users.

5. Credibility factor

This theme capitalizes on social proof, a powerful psychological phenomenon and should not be understated. Social proof is shorthand for decision making communicates to a prospect that the product is sound, desired and serves its purpose. Sometimes, someone may not even have the intent of using the product but may gain interest because of social proof (think, FOMO).

Embedding the message of credibility through social proof encourages shareability and adoption.

McDonald’s used to establish its credibility by announcing the number of burgers sold, either under its golden arches or in other visible places. By 1958, those arches stated “Over 100 million burgers sold.” These announcements used social proof to bring in more customers.

This message did not convey other factors about the burger, such as the quality, cleanliness, or nutrient profile; but it was enough to build a larger customer base. By 1993 McDonald’s had stopped using these announcements as a marketing technique: it sold its 95th billion burger that year.

The credibility factor can now be seen in many of today’s businesses. Companies with digital products often display the number of users on their website or communications. Companies better at marketing will communicate how many people benefited from the product’s value proposition.

6. Piggy-backing

This involves using another platform to generate more users.

In its early years, Airbnb benefited by piggybacking on Craigslist (another platform) that engaged in similar transactions to Airbnb but had a much larger user base. Airbnb cross posted all Airbnb listings on Craigslist, and if Craigslist users clicked on the posting, they would be redirected back to the Airbnb website.

7. Dopamine Stimuli

This theme triggers instant gratification to the user of a product.

This is often works best with games or quizzes, and has a collaboration element to it as the dopamine response is maximized when results are shared with others.

The well-known video game Call of Duty is a great example of this. This game simulates modern warfare which triggers the reward (dopamine) system in the brain by providing challenges within a moderately intensive setting. It is not enough that the product is addictive in nature, the results of the user has to be shared and ranked with others playing the game. Users then continue to try to beat their opponents, friends, and their own personal best scores.

Mixing and Matching: The Candy Crush Story

Some digital products combine multiple themes for maximum virality. Candy Crush, the famous mobile game, is a good example of this. They took advantage of the Dopamine Stimuli associated with games and coupled it with the collaboration element, and then Piggy-backed on Facebook and their large user base.

Candy Crush embedded Facebook integration into its product which it used to rank Facebook friends’ results. This means if you beat a friend, details of your victory would be published and shared with your Facebook community. Candy Crush was also built for usage for various types of devices, making accessibility seamless. Their strategy was successful; Candy Crush became the first freemium usage app that achieved over $1 billion in revenue.

I sincerely hope this blogpost helps some of you with your product development and marketing. Please share this blogpost with whoever you think could find it useful 😉