As I write this article, global equity markets are in a free-fall, some indices down as much as 9 per cent in wake of the ‘Brexit’ decision. To my left, push notifications are blowing up my phone and I just can’t help reaching over to take a look. Call it OCD, FOMO, or whatever else:
the financial network has got a hold of me. It’s seriously addictive and a great example of how much power a large network can yield!
The network effect (also referred to as network externalities or demand-side economies of scale) occurs when a product or service becomes more valuable as more people use it. To really simplify what’s happening here, imagine purchasing the first ever telephone in existence. You’re sitting at home ready to make your first call, before realising there’s a problem – who you gonna call? It’s at this point you realise the product is essentially worthless, until the user base grows of course.
Some products are defined by their ability to create a network effect but plenty are not. The cream I shaved with this morning for instance will yield the same user experience regardless of whether my neighbour or anyone else uses or doesn’t use it. Right? Well, not exactly.
What if there was a network for the shaving cream I use? As more people join, I might gain tips on how to shave without cutting myself, more convenient locations to buy the product, other products to use post-shaving etc. So yes, the product has the potential to get better as more people use it; through networks, my user experience can get better.
Cut back to 2016 and not only is there an endless number of networks to subscribe to, but our ability to create and own a network is unprecedented. Thanks LinkedIn!
An interesting example that caught my eye last week was the 12WBT (12-week body trim) program by Michelle Bridges. I noticed her book sitting across the table from me during a podcast, so I thought I’d check it out. At first glance my summation was an exercise and diet plan rolled into a web platform and app – which it is – but there’s something else going on that makes her product far more valuable.
She calls it a community, I call it the network effect. There’s a Facebook page with over 800k followers, a member’s support zone, a blog, meet-ups, videos and localised workouts. You only have to browse the page to know this is no joke – thousands of photos, comments, likes and evangelists! The engagement is extraordinary and every time the 12WBT network gets bigger, the product gets better.
In a previous article, Mark Ghiasy asked me about the ‘two sided marketplace problem.’ It’s a tricky issue and unfortunately applies when building networks too. But it can be overcome. Here’s a few tips I think can help.
Build value independent of the network: Take the 12WBT example. The network adds great value, but on its own you still get a lot: dietary advice, exercise plans, instructional videos and motivational material from Michelle. Unless you’re trying to build the next Facebook or Instagram, most products will provide some value without a network in place. In other words, the network should be adjunctive to your core offering.
Build network-aligned products and services: The most engaging networks are often focused on engaging topics. As much as I enjoy a good shave, I wouldn’t commit any time to the topic beyond the bathroom. Why? Because it’s not greatly enjoyable nor does it impact my life.
Financial services, health, and entertainment are examples of categories people engage with.
They want to improve in these areas because the outcome matters. Designing a product or range of products that can start a broader conversation is important. My YBR customer network often discuss their mortgage products, which can lead to a discussion about insurance, superannuation and so on. Even if you sell just one product, the conversation will eventually circle back – bringing with it more sale opportunities.
Market your network: It sounds obvious but I really must reinforce this one. So often I see people give up because their product didn’t take straight away. Some networks have a great natural adoption rate, but most don’t. They need time and resources to be brought to the forefront. If you’ve started a Facebook or Instagram page, try using sponsored posts or promoting the page. Tell your family and friends, engage your existing touch points and spend what you can to get your network out there. Most of all, make sure you stay engaged and remain patient!
I hope the above was helpful and I’d love to hear your feedback and keep the conversation going below!
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