Tuesday, December 16, 2008

Engagement loops: beyond viral

There's a great and growing corpus of writing about viral loops, the step-by-step optimizations you can use to encourage maximum growth of online products by having customers invite each other to join. Today, I was comparing notes with Ed Baker (one of the gurus of viral growth). We were trying to broaden the conversation beyond just viral customer acquisition. Many viral products have flamed out over the years, able to capture large numbers of users, but proving transient in their value because they failed to engage customers for the long-term. Our goal is to understand the metrics, mechanics, and levers of engagement.

Levers of engagement
Let's start with the levers of engagement. What can you do to your product and marketing message to increase engagement?
  1. Synthetic notifications. The most blunt instrument is to simply reach out and contact your customers on a regular basis. This is such an obvious tactic that a surprising number of companies overlook it. For example, IMVU runs frequent promotional campaigns that offer discounts, special events, and other goodies to its customers. From a strictly "promotional marketing" point of view, they probably run those campaigns more than is optimal (there's always fatigue that diminishes the ROI on promotions the more you use them). But there is a secondary benefit from these activities: to remind customers that IMVU exists, and encourage them to come back to the site. The true ROI of a synthetic notification has to balance ROI, customer fatigue, and the engagement effects of the campaign itself.

    When you live with your own product every day, it's easy to lose sight of just how busy your customers are, and just how many things they are juggling in their own lives. A lot of engagement problems are caused by the customer completely forgetting about the provider of the service. Direct notifications can help ameliorate that problem.

  2. Organic notifications. Facebook, LinkedIn, and other successful social networks have elevated this technique to a high art. They do everything in their power to encourage customers to take actions that have a side-effect of causing other customers to re-engage. For example, from an engagement standpoint, it's a pretty good thing to automatically notify a person's friends whenever they upload pictures. But it's exponentially more engaging to have each person tag their friends in each picture, because the notification is so much more interesting: "you've been tagged in a photo, click to find out which one!" Similarly, the mechanics of sending users notifications when new friends of theirs join the site is a great organic re-engagement tactic. From the point of view of the existing customer, it goes beyond reminding them that the site exists; it also provides social validation of their choice to become a member in the first place.

    As with synthetic notifications, organic notifications are subject to fatigue, if they are not used judiciously. On Facebook, "poking" seems to have fairly high fatigue, whereas "photos" has low (close to zero?) fatigue. Ed adds this account: "When I first joined Facebook, I used to poke my friends and get poked back for the first few weeks, but now I rarely, if ever, poke people. Photos, on the other hand, is probably the primary reason I go to Facebook every day. Because they are constantly new and changing, I doubt I will ever get tired of looking at my friends photos, and I will probably always get especially excited to see a new photo that I have been tagged in."

  3. Positioning (the battle for your mind). The ultimate form of engagement is when the company doesn't have to do anything explicit to make it happen. For example, World of Warcraft never needs to send you an email reminding you to log in. And they don't need to prompt you to tell your guild-mates about the new epic loot you just won. The underlying dynamics of the product, your guild, and the fun you anticipate takes care of those impulses. This is true, to a greater or lesser extent, for every product. After you've acquired a customer, why would they bother to come back to your service? What do they get out of it? What is going on in their head when that happens?

    I wrote about this challenge for iPhone developers, in an essay on retention competition: the battle over what icon the user will click when they go to the home screen. At that point, there's no opportunity for marketing or sales; the battle is already won or lost in the person's mind. It's analogous to walking down the aisle in a supermarket. Just because you're already a Tide customer, doesn't necessarily mean you'll always buy Tide again. However, if you've come to believe that Tide is simply the only detergent in the world that can solve your cleaning problems, you're pretty unlikely to even notice the other competitors sitting on the shelf. Great iPhone apps work the same way.

    Marketing has a discipline about how to create those effects in the minds of customers; it's called positioning. The best introduction to the topic is Positioning (I highly recommend it, it's a very entertaining classic). But you don't have to be a marketing expert to use this tactic; you just need to think clearly about the key use cases for your product. Who is using it? What were they doing right before? And what causes them to choose one product over another? For example, a common use case for teenagers is: "I just got home from school, I'm bored, and I want to kill some time." If your product and its messaging is all about passing time while having fun, you might be able to get to the point where that is an automatic association, and they stop seriously considering other alternatives. That's exactly what the world's best video games do.

Seeing the engagement loop
We're just starting to weave these techniques into a broad-based theory of engagement, that would complement the work that has been done to date on viral marketing and viral loops. Notice that all of these techniques are attempting to affect one of a handful of specific behaviors that have to happen for a product to have high engagement. Do these sound at all familiar?
  1. A customer decides to return to your product, as a result of either natural interest, or a notification (organic or synthetic).
  2. They decide to take some action, perhaps influenced by the way in which they came back.
  3. This action may have side effects, such as sending out notifications or changing content on a website.
  4. These side effects affect other customers, and some side effects are more effective than others.
  5. Some of those affected customers decide to return to your product...
This is essentially a version of the viral loop. Let's look at a specific example, and start to think through what the metrics might look like if we attempted to measure it:
  1. Customer gets a synthetic message saying: "upload some photos!" Some percentage of customers click through.
  2. Some percentage of those actually upload.
  3. Those customers get prompted to tag their friends in their photos. Some percentage of them do (A), and these result in a certain number of emails sent (B).
  4. Each friend that's tagged gets an email that lets them know they've been tagged. Some percentage of them click through. (C)
  5. Of those, some percentage are themselves convinced to upload and photos. (D)
Calculating the "engagement ratio"
If we combine the quantities A-D using the same kinds of formulas we use for viral loop optimization, and the result is greater than one, we should see ever-increasing engagement notifications being sent. This will lead to some reactivation of dormant customers as well as some fatigue, as existing customers get many notification. Our theory is that the key to long-term retention is creating an engagement loop where the reactivation rate exceeds the rate of fatigue. This will yield a true "engagement ratio" that is akin to the viral ratio.

This makes intuitive sense, since the key to minimizing fatigue is to keep things new, exciting, and relevant. For example, user-generated content that includes of friends, especially if it includes you ("Joe tagged you in a photo. Click here to find out which one!") is usually going to be newer, more exciting, and more relevant than synthetic notifications ("Did you know you can know upload multiple photos at a time with our new photo uploader?"), or even than more generic organic notifications ("You've been poked by Joe."). High "engagement growth" with low fatigue is how you get the stickiness of a product to near 100%. You can try to churn out, but your friends keep pulling you back in. That's an engagement loop at work.

Seeing the whole
Engagement loops are a powerful concept all by themselves, and they can help you to make improvements to your product or service in order to optimize the drivers of growth for your business. But I think the value in this framework is that it can help make overall business decisions that require thinking about the whole rather than just one of the parts.

For example, let's say you have a viral ratio of 1.4. Your site is growing like wildfire, but your engagement isn't too good. You decide to do some research into why customers don't stay involved. When asked to describe your product, customers say something like "Product X is a place to connect with my friends online." Turns out, when optimizing your viral loop, this was the winning overall marketing message. It's stamped on your emails, landing pages, UI elements - everywhere. Removing a single instance of that message would make your viral ratio go down, and you know that for a fact, because you've split-tested every single possible variation.

As you talk to customers, you notice the following dilemma. Customers have a lot of options of places to connect with their friends online. And, compared to market leaders like Facebook and Myspace, you discover that your product isn't really that much better. Consequently, you are losing the positioning battle for your customers when they get home from school and ask themselves, "how can I connect with my friends right now?" Worse, your product isn't really about connecting with friends; that's just the messaging that worked best for the viral loop, where customers aren't that familiar your product anyway.

To win the positioning battle, you could try and make your product better than the competition, or find a different positioning that allows you to be the best at something else. Let's assume for the sake of argument that your competitors offerings are "good enough" and that you cant' figure out how to beat them at their own game. So you decide to try to reposition around a different value proposition, one that more closely matches what your product is best at. You could try and drive home that positioning with an expensive PR campaign, superbowl ads, and whatnot. But you don't have to - you have a perfectly good viral loop that is slowly but surely exposing the entire world to your positioning messages.

Here's what this long example is all about. When you go to change your messaging, imagine that your viral ration drops from 1.4 to 1.2. Disaster, right? Not necessarily. Since your viral ratio is still above one, it's still getting your message out, albeit a little slower. But if your new positioning message improves your engagement loop by more than the cost to your viral loop, you have a net win on your hands. Without measuring your engagement loop, can your business actually make tradeoff decisions like this one?

Connecting engagement and viral loops
The two loops are intimately connected, in a figure-eight pattern. Customers exit the viral loop and become part of the engagement loop. As your engagement improves, it becomes easier and easier to get customers to reenter the viral loop process and bring even more friends in. And as in all dynamic systems, there's no way to optimize a sub-part without sub-optimizing the whole. If you're focused on viral loops without measuring the effect of your changes on other parts of your business (of which engagement is just one), you're at risk of missing the truly big opportunities.

Hopefully, this theory will prompt some interesting responses. We'd love to hear your feedback and hear your stories. Have you struggled with engagement and retention? What's worked (and not worked) for you? Share your stories, and we'll incorporate them as we continue to flesh out this theory. Thanks for being part of the conversation.


  1. This comment has been removed by a blog administrator.

  2. Good stuff.

    You definitely brought clarity around the engagement loop re: A-B-C-D makes perfect sense and can be mapped against any flow that has the possibility to go viral.

    It be neat to see http://www.productplanner.com/ add engagement loops as part of their user flows.

    Thx for post.

  3. Eric,
    what an excellent article. This is so valuable for people who are trying to understand the whole meachanism... and it is explained so clearly!

    Would you be willing to have me republish this in full, with due credit and link back on MasterNewMedia.org? My readers, would really love it.

    If not, it would be my pleasure to invite you for a future guest post on the topic. People who understand something and can explain it well are rare, and this is exactly what I try do at MasterNewMedia.

    My sincere compliments.

  4. Eric,

    What a great post. May I add that if you are looking to build these loops and need an effective way to deliver your notification emails you should have a look at MxM (http://www.m--x--m.net)?

  5. Brilliant article!

    Thanks a lot for writing this :)

  6. Eric, if this was your last post and you never posted again . . . you have already established yourself as a respected thoughtleader and your insights will stand the test of time.

    If someone were to develop a solution that would make your life easier, what do you wish existed right now to help you capitalize on the opportunities you have created ?

  7. I take it that users can unsubscribe from Synthetic Notifications? It sounds a bit like spam... Sorry if that's a stupid question, but I'd really appreciate some clarification. (Sometimes you have to state the obvious, I guess :)

  8. Hi Eric, great post! I was wondering if you could clarify something which is probably very obvious. With the "Synthetic Notifications", how closely do you flirt with spam? I realise this is quite a controversial word, and I certainly don't like it, but I'd love to hear your exact thoughts on the subject. Thanks!