There’s always an assumption that the clear path to getting more users will start and end with getting more and more people to go through the process of signing up and becoming users. But early on when spending all that time and effort building virality into your product, few take the time to truly understand “carrying capacity.”
In other words, it seems completely logical and reasonable to assume that if you could just get more people to BECOME users, the more users you’ll HAVE . . . right?
Carrying Capacity: A Growth Engineer’s Worst Enemy
Let’s say your non-viral user acquisition efforts (through for example PPC) result in 400 new visitors per day. Out of those 400 visitors, you convert 50 into users.
This is a 12.5% conversion rate, and is pretty strong in most cases.
With this conversion rate, let’s assume you have a 1% daily churn rate – which means each day, you’ll lose 1% of your total user base. (For more on churn check out our last chapter.) They may leave, they may cancel, their payment information may stop working, they may never update, they may discover a superior competitor, they may die – the list goes on. There are any number of reasons a user may churn.
Regardless, if this data holds true, when you reach 5,000 total users, your growth will level off. You simply won’t be able to acquire any more users as you’ll be churning exactly as many as you’re acquiring on average.
This is your carrying capacity.
Uh oh . . . we’re going to need a bigger bowl.
You’re Not Locked Into Zero Growth Forever
Carrying capacity is the point at which your average number of acquired users equals your average daily number of churned users.
To put it simply, carrying capacity is the point at which growth stops.
Don’t panic. When you reach your carrying capacity, you just need to make a change.
Let’s say you increase your ad spend by 50%, and drive 600 new visitors each day as a result. If you maintain your existing conversion rate, you’ll be converting 75 of those visitors into users. With your same 1% daily churn rate, your growth will level off again at 7,500 users.
You may be seeing a trend here. Your carrying capacity is dictated largely by the total number of users you already have, the new users you’re getting on top of those users, and your churn rate.
Let’s assign our carrying capacity to the variable CC.
CC = avg. daily users acquired / avg. daily churn rate
CC = 75 / .01
CC = 7,500
Carrying capacity becomes a much more difficult nut to crack without viral growth. With zero viral growth, your only options to increase growth are your traditional fixed non-viral acquisition channels.
Couple that with the fact that you have a fixed average churn rate, and your user growth will predictably stop (and sometimes even decline) until something changes.
The Key to Reducing Churn and Overcoming Carrying Capacity
At the end of the day, success always starts and ends with the perceived value you provide.
Reducing churn comes from doing things like:
- Listening to your users and making the improvements they call for
- Fixing critical bugs that ruin key parts of your experience
- Creating reactivation flows to bring users back when they’re at risk of churning
- Improving the first user experience to deliver value to users faster
- Making a more useful or entertaining product as a whole
- Focusing marketing on more well-targeted users who need your product more
The list goes on.
To sum things up, churn is the foundation of all growth. If your churn sucks, you can’t grow – no matter how awesome your viral and non-viral acquisition channels are.
Address the quality of your product and the methods by which you’re delivering clear and obvious value.
Successfully do that, and all this time and effort you’re putting into learning how to grow virally will pay off in spades.
Let’s keep this roadshow churning, shall we. (See what I did there?)
Since the majority of marketers out there probably don’t have the slightest clue about carrying capacity, consider yourself ahead of the game. But knowing and doing are two entirely different things.
So while I gave an indication above of how one might put into motion a strategy to overcome carrying capacity, that was only a teaser. In our next chapter I’ll provide a blueprint for how you can stave off stagnation by injecting your business with a welcomed dose of virality. Along with the math to prove it.
Can You Predict What Happens When Virality and Carrying Capacity Collide?
There is a potential “shortcut” to decreasing churn. I’m sure by now you can guess what it is, but you might not know exactly how or why virality can be so effective in igniting growth in the longterm. So it’s high time we amplify our efforts.
- Cycle Time: What the Primary Defense Mechanism of Rabbits Can Teach You About Growth - March 15, 2016
- Viral Infection: How the CDC Can Make You a Viral Marketing Savant - March 4, 2016
- Viral Communication Marketing – How Apple, MailChimp and Hootsuite Used Hotmail to Inspire Explosive Growth - June 25, 2015