Latest / The Newsletter Podcast with Fexingo: Substack, Beehiiv, and Email Newsletter Business / How Newsletters Use Growth Loops to Acquire Subscribers
Transcript
- Lucas: So there's this concept in growth engineering called the growth loop. It's not just a funnel where you put money in at the top and get subscribers out the bottom. It's a loop — each subscriber, ideally, helps bring in the next subscriber. Luna: Like a referral program, but more systematic, right? Lucas: Exactly. A referral program is one tactic. A growth loop is the whole flywheel. The most famous newsletter example is Morning Brew. In their early days, they offered a free sticker — just a cheap die-cut sticker — if you referred three friends. The sticker cost them maybe fifty cents, but each referred subscriber had an average lifetime value of several dollars. The loop worked because the sticker was a physical object that people wanted to show off, which created more awareness. Luna: So the sticker itself became a billboard. That's clever. But for a newsletter that's not targeting college students — say a B2B finance newsletter — what's the equivalent? Lucas: That's the million-dollar question. The key metric is the viral coefficient — the average number of new subscribers each existing subscriber brings in. If your viral coefficient is above one, you get exponential growth. Most newsletters are below 0.1. Morning Brew reportedly got theirs above 0.5 at peak. For a B2B newsletter, the loop might be a valuable report or a template that subscribers get when they refer a colleague. Luna: So the incentive has to align with the audience's professional needs, not just a trinket. That makes sense. But does the loop work if the incentive is digital? A PDF doesn't have the same visibility as a sticker on a laptop. Lucas: That's the challenge. The best growth loops have a 'viral hook' — something that forces the subscriber to share. For example, if you offer a 'group discount' where the subscriber's friends get a premium issue for free, the subscriber has to invite them. Or you can gamify it: show a progress bar like '5 referrals to unlock the next guide'. The Hustle used a similar approach early on with their 'swag pack' — a T-shirt and stickers — but they also had a leaderboard. That social status element drove a lot of sharing. Luna: I remember that. They'd email you your rank and how many referrals you needed to move up. It was competitive. But isn't there a risk that you attract low-quality subscribers who are just after the freebie and then never open? Lucas: Huge risk. If your incentive is too disconnected from the content, you get a spike in subscribers who don't engage. That can hurt your deliverability because email providers see low open rates and start sending your mail to spam. So the best loops tie the incentive to the newsletter's value. Morning Brew's sticker worked because their audience loved the brand identity — they were proud to be a 'Brew reader'. The referral was a signal of tribe membership. Luna: So the loop has to reinforce the community, not just the transaction. How do platforms like Substack and Beehiiv support this? Lucas: Both have built-in referral programs now. Substack lets you set a custom reward — like a free month or a special edition — when a subscriber refers someone who converts to paid. Beehiiv has a full 'referral system' where you can set up milestones and track the viral coefficient in their analytics. They even have a 'referral leaderboard' widget you can embed. The advantage is that you don't need to build the infrastructure yourself. The downside is that everyone's using the same mechanic, so the differentiation has to come from the reward. Luna: Right. If every newsletter offers 'refer a friend, get a free month', the novelty wears off. I've seen some newsletters get creative: one gives a personalized video message from the writer for top referrers. That's hard to replicate. Lucas: That's a great example. The more human and unique the reward, the better. But let's talk about the math for a second. Let's say you have ten thousand subscribers. If your viral coefficient is 0.2, that means each subscriber brings in 0.2 new subscribers — so from ten thousand, you get two thousand new ones. Those two thousand bring in four hundred, and so on. After ten cycles, you've added about twenty-five thousand subscribers. But if your coefficient is 0.5, after ten cycles you've added over three hundred thousand. The difference is exponential. Luna: So small improvements in the coefficient have huge downstream effects. What's a realistic target for a new newsletter? Lucas: I'd say start by measuring your current organic referral rate — how many new subscribers come from 'how did you hear about us' surveys. If it's below 0.05, focus on making the content more shareable first. Write one 'forward to a friend' worthy issue per week. Then introduce a simple referral incentive — a PDF or a discount — and aim for 0.1 to 0.2. Above 0.3 is where you start seeing real compounding. Above 0.5 is unicorn territory. Luna: And you need to track it over time, not just as a one-time boost. A lot of newsletters launch a referral campaign, see a spike, and then it fades. The loop has to be built into the onboarding — every new subscriber should be told, 'Here's how to get more out of this newsletter by sharing it.' Lucas: Exactly. The best loops are part of the product experience. Morning Brew had a 'referral page' in every email. The Hustle had a 'share the love' section. You have to make it frictionless. One click to get a unique referral link, and the reward is delivered automatically. If you make people jump through hoops, they won't do it. Luna: Speaking of making things easy — if these marketing conversations have sparked something you've actually used in your own newsletter, a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many of these episodes. Lucas: Yeah, it's a small group that keeps the whole thing ad-free. And we're grateful. It lets us dive into specifics like this without worrying about sponsors. Luna: Exactly. So back to the math — one thing I want to understand: does the viral coefficient change as you scale? Like, does it degrade? Lucas: Almost always. Early adopters are usually more passionate and more willing to share. As you grow, you bring in less engaged subscribers who have a lower referral rate. So your coefficient tends to decline. That's why you need to constantly optimize the loop — test different incentives, different placements, different messaging. Some newsletters find that a 'referral challenge' with a time limit re-energizes the loop. Luna: Like a one-week push where the top referrer gets a signed book or a consulting call. That creates urgency. Lucas: Right. And you can pair it with a launch. Say you're releasing a premium tier — offer early access to subscribers who refer three people. That aligns the loop with a product event. The key is to keep the loop fresh. The same incentive gets stale after a few months. Luna: I've also seen newsletters use a 'two-sided' incentive — the referrer gets something, and the referred person gets something too. That can double the conversion rate because the new subscriber feels welcomed. Lucas: Absolutely. A 'free issue for you and a friend' is a classic. But you have to make sure the value proposition is clear. If the free issue is just a regular issue, it's not compelling. It has to be a 'best of' or a special report that's normally behind a paywall. That taps into the scarcity principle. Luna: Let's talk about the downside. What about the risk of your list growing too fast? Could that hurt engagement? Lucas: It can. If you get a sudden influx of subscribers who are there for the incentive, not the content, your open rates might drop. You could even get flagged as spam if the growth is too rapid and the engagement is low. So you need to manage the pace. Some newsletters throttle their referral campaigns — they cap the number of referrals per day or use a 'drip' system where new subscribers are onboarded slowly. Luna: That's counterintuitive. Most people think faster growth is always better. But if it breaks your email reputation, it's worse than no growth. Lucas: Exactly. It's about sustainable growth. I'd rather have a viral coefficient of 0.2 with 80 percent open rates than 0.5 with 20 percent open rates. The latter means your list is full of people who don't care, and future emails will get caught in spam filters. Luna: So measurement is everything. What's the one metric you'd track above all others? Lucas: The viral coefficient, but not in isolation — paired with the new subscriber retention rate after 30 days. If people who came through referrals stick around at the same rate as organic subscribers, the loop is healthy. If they churn faster, you need to adjust the incentive or the targeting. Luna: That makes sense. And I think for most newsletter writers, the biggest takeaway is to start small. Don't build a complex growth loop system on day one. Just add a simple 'share this email' link and see what happens. Lucas: Right. And then iterate. Test a different CTA, test a different reward, test the timing. The newsletters that nail growth loops are the ones that treat it as an ongoing experiment, not a one-time setup. Luna: It's like a subscription itself — you have to keep renewing the value proposition. Alright, I think we've given listeners a solid framework to build on. Next time, maybe we'll talk about how to measure the lifetime value of a referred subscriber. Lucas: That's a great follow-up. Because if you don't know the LTV, you can't know how much to invest in the loop. For now, I'd say: pick one incentive, set up tracking, and run it for 30 days. See what your coefficient is. You might be surprised.