The Viral Coefficient (so-called k-factor) estimates the number of new users that the average user refers to a given product and/or service. Together with the NPS, it delivers a quantitative measure of how many users are actually recommending your product, i.e. how effective is your current user base as a marketing channel.
The Viral Coefficient is usually considered by venture capital investors as one of the leading indicators of one product's scalability.
The typical components of a Viral Coefficient (k-factor) calculator for any digital product are:
Total number of users
Total number of invites
Total signups from invite
To calculate the Viral Coefficient you need to compute the following intermediate KPIs:
Invite rate = Total number of invites / Total number of users
Invite conversion rate = Total signups from invite / Total number of invites
Viral Coefficient = Invite rate / Invite conversion rate
As a rule of thumb, the viral coefficient must exceed 1 for a company to achieve viral growth.