The K-Factor: The Secret Factor Behind Your Company’s Growth
Written By : RICHARD FONG
Published on March 17, 2014
Viral marketers like to throw around buzzwords, often with little thought to their real value. While some – like engagement and social buzz – are difficult to pin with any type of consistent definition, others are backed in real mathematical analysis and marketing science.
One of these buzzwords is the K-factor. Like viral marketing, its name (and most of its concept) is borrowed from epidemiology – the study of how viruses and disease spread from one person to another. Instead of measuring the communicability of a disease, the K-factor measures the viral potential of content or a business.
Working out the K-factor is simple. If “I” is the number of invitations (or messages, in the case of viral content) sent out by each customer or user, and “C” the percent conversion rate of each invitation, then “K” is the multiple of the two.
K = I multiplied by C. Nice and simple.
This factor can be used to measure the growth rate of an online application, a piece of content, or even a business that depends on viral growth. A K-factor below one is indicative of exponential decay, while a K-factor of greater than one indicates that a business or app is growing exponentially.
Using the K-Factor to calculate your company’s growth rate
Let’s say you operate a company that’s purely dependent on referrals for any new customers. Your business starts operating with 10 customers, each of whom has a network of 10 prospects that it can invite to work with your business.
This gives you a network of 10 customers to market to, with each customer adding an additional 10 people to your business’s network. Depending on the conversion rate of your network’s marketing efforts, your business could achieve a K-factor of greater than one (growth) or lower than one (decline.)
David Skok, of For Entrepreneurs, examines the mathematics behind the K-factor in this blog post. He also adds a new variable to the formula behind the K-factor – the amount of time required for the viral cycle to repeat itself. Using the spreadsheets on Skok’s page, you can calculate the K-factor for different apps and companies.
What does the K-Factor mean for your business?
To businesses that depend purely on direct marketing – strategies like cold calls, direct mail, and online advertising – the K-factor is an irrelevant calculation that is of little value. However, businesses that depend on organic growth – whether it’s viral marketing or simple customer referrals – can learn a lot from the K-factor.
By calculating your business’s K-factor using a sample of users, you can work out whether viral growth is possible or not. Working out your business’s K-factor will allow you to calculate your business’s viral growth potential and chart out average user acquisition trends over months and years.
Whether you develop online apps, offer a helpful service, or sell a product that you think could go viral, understanding the K-factor will make it easier for you to give your business the powerful viral growth it needs for success.
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