Customer Ripple Effect
Differentiate your customer acquisition approach.
Purpose
- The Customer Ripple Effect (CRE) is a tool to help you unlock second and third order impacts. CRE provides an opportunity to identify viral adoption loops to accelerate growth, reducing customer acquisition costs as your customer base grows.
- A thoroughly mapped CRE provides a roadmap for feature prioritization and market strategy, and it helps anticipate headwinds such as regulatory pressures or PR problems.
Method
- Background
Every product creates effects across at least three distinct layers of stakeholders: primary customers who directly use and pay for the product; secondary customers who interact with primary customers and experience downstream effects from the product; and tertiary customers who are affected by the product at scale, even without direct connection to users. - Define primary customers
First, define your primary customers. These are the user segments identified via customer discovery. They are the people who will directly transact with your product or company. Primary customers are the traditional focus of product development and marketing, but they don’t exist in isolation. They are embedded in complex social systems. - Define secondary customers
Use this understanding of primary customers to define secondary customers – people who never directly use your product but interact with your primary customers. In the CRE model, secondary customers’ experience of the world has changed somehow because your primary customer uses your product.
Example: Consider a mental health or meditation app: primary customers are those who use the app on a regular basis; secondary customers are the friends, family members and co-workers who get to interact with happier, calmer individuals because of your product being in the world.
Secondary customers benefit from your product, even though they never actually use it themselves. While these people aren’t paying for the product, if you understand who these beneficiaries are, you can develop a product roadmap that includes features that might turn them into paying customers in the future OR leverage their benefit from the product into a word of mouth customer acquisition channel. - Define tertiary customers
Once secondary customers are understood, define tertiary customers. Tertiary customers are people affected by your product at scale, and they never interact with your product or company. They don’t even interact with anyone who uses your product. They are, however, potential sources of business risk as well as potential champions.
Example: A tertiary user of a mental health or meditation app might be an HR head who decides what benefits should be offered to employees, including mental health treatment benefits which could include professional counseling as well as apps. That individual is not a user of the app, and they may never know anyone who uses the app itself. But they are part of a larger ecosystem that changes because this product exists. - Revisit GTM
After primary, secondary, and tertiary users have been defined, consider how to adjust GTM strategy to leverage this ripple effect.
Consider additional product features that would allow primary users to be part of your marketing engine (see Zoom in Cases, below). Is there a feature that invites primary users to share how your product has benefited them? Ideally, you want to find a way for primary customers to become an additional channel to drive product awareness. A not great example of this is social apps that harvest your phone or email contacts without asking permission. A better approach is a product that allows users to export content that has brought them value and share it with people who aren’t customers, such as shareable articles or multi-player games with free trials for a user connected to a paying customer.- Use secondary customers to understand adjacent beneficiaries and leverage them as potential product champions. A product designed to anticipate the needs and desires of a secondary customer can leverage the energy of a viral adoption loop – even if the product doesn’t fall into a traditional viral model.
- Use secondary customers to understand adjacent beneficiaries and leverage them as potential product champions. A product designed to anticipate the needs and desires of a secondary customer can leverage the energy of a viral adoption loop – even if the product doesn’t fall into a traditional viral model.
- Use tertiary customers to identify potential headwinds to avoid as well as tailwinds that can supercharge your business model.
- Anticipate tertiary effects
Understanding tertiary impacts helps companies anticipate regulatory challenges, identify strategic partnerships, and build more sustainable business models. Poorly understood tertiary effects can lead to significant friction and costs as a product scales. Generally, defining tertiary considerations is trickiest. The Airbnb case study below is a great example of this. Some places where tertiary impacts matter for company growth:
- Are there environmental issues that impact global expansion? Consider server energy.
- Are there usage, remote work enablement, paper reduction and other factors that matter in certain global markets?
- What are the potential effects on user populations or social issues? Are there accesssibility features you can highlight, work-life balance impacts that will help attract employees, or brand halo effects to leverage in marketing?
- Are there governance issues related to changing market expectations? How will you address data privacy controls, audit trails, or compliance features?
- Consider strategic tradeoffs
Developing a CRE takes time. Why make the investment? The ripple effect framework offers more than just strategic advantages—it provides a structured approach to product strategy with a mindset focused on long term growth. By systematically mapping impacts across primary, secondary, and tertiary stakeholders, companies can:- Anticipate unintended consequences before they become problems
- Build features that create positive impacts across multiple stakeholder groups, giving you a GTM advantage and the potential to build a halo effect and burnish brand
- Develop measurement systems that track broader social outcomes to take advantage of regulatory changes that would be headwinds for anyone else, as well as give you a head start in global expansion where drivers of business growth may be different
- Create more sustainable and defensible business models
- Add useful rigor to decisions
Finally, the goal of the CRE is to give you better information from which to make decisions. It isn’t to avoid change. The world changes and that’s both inevitable and positive. The CRE is a tool that can help you assess which potential changes can amplify your business, which have the potential to impede your growth or damage your brand, and which might provide new insights for product features or long term strategy. - Sidebar: The History of CRE
Read our latest article on The Ripple Effect.
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Trap Doors
- Don’t overlook…
Your early customer research might not have gone deep enough to effectively inform a CRE. As you map your customer ecosystem to discover new insights on how to create growth patterns and better understand potential tailwinds, don’t overlook the potential need for additional customer research. - Make sure…
Make sure CRE insights percolate through company strategy. When you update product roadmap, for example, prioritize features that solve problems for both primary and secondary customers, and create metrics that measure outcomes across all three customer layers. - Keep in mind…
Keep in mind that every company has tertiary customers. Just because they’re hard to identify doesn’t mean they don’t exist. - Don’t ignore…
Don’t ignore secondary customers after launch. Remember they may not be the population you expect. - Doing avoid...
Don’t just avoid bad things. Build platform capabilities that allow for positive ecosystem development – this can help build a distinct brand and differentiate your product.
Especially for B2B sales, healthtech and edtech,
the difference between the buyer, the end consumer, and any intermediate decision makers matters (ex. a parent buying toys for a child).
Founders must have a clear awareness of the stakeholders involved in making a purchase decision.
Cases
Zoom: Primary, Secondary, and Tertiary Customers
Primary customers are those who have purchased an account and host video calls.
Secondary customers would be anyone who is interacting at some point with people who are using Zoom meetings, including family members interacting with partners working from home or friends who hear about hybrid work habits.
Tertiary customers include commercial real estate firms dealing with changing office demand, local lunch spots near office buildings, and transportation providers seeing altered commute patterns
Airbnb: Primary, Secondary, and Tertiary Customers
Primary users are both the people who book stays and those who list properties for rent.
Secondary customers are friends, family and coworkers who hear about vacation stays at Airbnb properties or revenue streams brought in by those who rent out rooms or homes.
Tertiary customers include housing markets affected by short-term rentals; this is a good example of how tertiary customers can be a source of headwinds. Dealing with local housing policies has cost Airbnb both time and money dealing with individual municipalities passing legislation that impede its business model.
Who to Enlist
Whoever does customer engagement and/or user research can dig deep into the ripple effect. Whoever works on product can map features for different customer layers.
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The board can weigh in on long term risks; compare those to your understanding of tertiary customers.
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Whoever does marketing can make sure the exposure secondary customers get to your product helps convert them to primary users as much as possible.