‘Exponential growth’ is a trending topic of the entrepreneur world and a feature – every startup strives for!
But what exactly is exponential growth and how do you achieve the phenomenon?
Exponential growth refers to the rate of change measured over a given number of equal time intervals. For example, when a business grows by 100% or more over multiple time intervals, each increase of 100% is added to the initial value – resulting in compounding and creating an environment of exponential growth.
In simple words, if your business grows 100% every year over multiple years – your business would begin to experience the required growth.
Exponential Growth Formula
The formula for exponential growth relies on the starting value of the metric you are using – such as the revenue or the number of users. This number is evaluated by the percent it increases over a specific time frame. The final number in the formula for exponential growth is the exponent itself.
- Xt = X0(1+r)t
- X0 = the starting value
- r = rate of increase (or decrease if measuring exponential decay)
- t = time in equal intervals expressed as an integer
Factors that boost exponential growth
The most important facilitator of exponential growth in marketing is the idea of viral coefficients. This protocol takes advantage of word-of-mouth marketing and aids in reaching exponential growth. This is followed by the network effect.
As the name implies, the network effect is the increase in number of users after friends, families, and other acquaintances start endorsing the same product or service.
Examples of exponential growth in business
Without even realizing, you are also responsible for the exponential growth of many products and services. Take for example, social media networks like Facebook, Instagram, and Snapchat. And what about ridesharing services like Uber. After the initial use of these services, it is likely that you have shared your experiences with others – hence, the growth.
Facebook is one of the best examples of a business experiencing exponential growth. Launched in 2004, the social media network saw 1 million monthly active users in its first year. However, the number grew to 2.32 billion by the end of 2018 – signifying a 231,900% increase over the 14-year period. That’s a 13,753,150% increase over 14-years.
Another popular example of exponential growth is seen in DiDi. A ride-hailing service based in China, the company was launched in 2012. However, today, it boasts 550 million users, employs 21 million drivers, and completes 30 million rides per day.
Strategies to achieve growth exponentially
Ultimately, you may be wondering how to reach exponential growth. Sadly, the pathway towards the growth is challenging and requires a very good idea that could lure the users away from the existing ones. However, some tips to help you get started include:
One feature that plays a pivotal role in the success of a product is the ‘user-friendliness.’ Products that are complicated or confusing usually fail to attract the users and thus – fail to reach exponential growth as well.
The onboarding experience is another aspect that fuels the user’s expectations. This simply means educating the users on how to use the product – effectively.
Offering incentives for referrals and social sharing
Adding a ‘refer-a-friend’ program is helpful to incentivize a word-of-mouth recommendation within the user’ network. And even though it may seem like bribery – the tactic encourages participation and engagement.
Too often, marketers use excessive push notifications, SMS marketing, email newsletter, and other digital mediums to advertise their latest products and offers. However, this usually annoys the users who may resort to boycotting the same product.
Instead, transform the marketing strategy and provide users with valuable information, breaking news, and timely updates.
Is your business scalable along with the demand?
Some business ideas are great. However, they are unable to accommodate according to the growth of the business – and hence, are forced to close down or keep their services limited.
The negative effect of exponential growth is decay.
Just like us human beings, some companies also have limited life and have to face extinction at some point.
A business owner must understand that as the business matures or grows, the further they would have to fall. And history has shown us numerous examples of businesses who grew rapidly and saw their failure in an equal manner as well.
To minimize similar failures, we advise businesses to keep an eye on the changing trends of the industry. It is also important to look at benchmark reports and other marketing resources to keep a firm grasp on exponential growth.
In the Infographic below, let’s take a quick look at the basics of exponential growth.
Infographic by: clevertap.com
Infographic by: clevertap.com