Building the Network Effect Into the Product
For SaaS, ask if the product works better when users tell others — if not, your marketing is doomed.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 3
- Confidence
- 85%
One of Godin's key things product builders miss: for software, and especially SaaS, if you don't build the network effect into the product itself, you're almost certain to fail. You can't hope a platform like Apple picks you and magically makes you successful. The test is simple: will this work better for my users if they tell other people about it? A 'yes' largely solves your marketing problem; a 'no' means there's no reason for anyone to spread it.
Origin
Seth Godin, listing what product builders most often miss (his third of several such lessons).
Core principles
- 01For SaaS, a built-in network effect is a survival requirement, not a nice-to-have
- 02You cannot rely on a platform (Apple) to promote you into success
- 03The test: does the product work better for a user when they tell others?
- 04If sharing helps the user, they'll share, and marketing largely solves itself
- 05If sharing doesn't help the user, no one spreads it and no one hears about you
How to run it
- 1
Ask the network-effect question
For your product, ask directly: will this work better for my users if they tell other people about it?
Pro tip Run this test at design time, not after launch.
Watch out Hoping a big platform will pick and promote you is not a strategy.
- 2
If no, redesign so sharing helps the user
If sharing doesn't make the product better for the user, rework the product until inviting others creates value for the inviter.
Pro tip Interoperability and shared value (like a common file format) give users a self-interested reason to recruit others.
Watch out If the answer stays 'no,' users have no reason to tell anyone and growth stalls.
- 3
If yes, let it drive your marketing
When the product works better as more people use it, referrals become the growth engine and the marketing problem is largely solved.
In the wild
Word became dominant because it was the format co-workers needed to interoperate on. Once a user migrated, it was in their interest to insist others use Word too, so the product spread itself.
→ The network effect built into the format made word-of-mouth self-reinforcing.
Common mistakes
Betting on platform promotion
Hoping Apple or another gatekeeper will pick and promote you is not something you can build a business on.
Shipping SaaS with no shareable value
If the product doesn't get better when users tell others, there's no organic distribution and the launch is likely to fail.
Is it for you?
Best for
SaaS and software founders designing a product's growth loop before or during build.
Not ideal for
Single-user tools or offline products where no plausible network effect exists.
From the transcript
“for software particularly software as a service if you don't build the network effect into what you are making you are almost certainly going to…”
“the question is will this work better for my users if they tell other people about it and if the answer is no then why…”
“if the answer is yes then your marketing problem is pretty much solved”
From the episode
Seth Godin's best tactics for building remarkable products, strategies, brands and more