500 Startups Growth Handbook

Referral Marketing

What Is It?

Your best salespeople are your happiest customers. Referral marketing happens through the entire customer lifecycle. If you make your customers happy, it is more likely they will tell their friends about you. It’s simple, yet it's your job to be interesting/helpful/cool enough to get them to talk about you.

How do you do it?

Components of a referral program:

Reward for the referrer: financial, social (want to be helpful), personal identity (want to be acknowledged as cool),
Trigger:

When in the user flow or customer lifecycle is the trigger point? Pick the point where the customer will be happiest/most excited about your product. Potentially, as soon as they buy (confirmation bias), or when item is shipping (before it arrives), or when they are wow’d by a specific interaction with the app (ONLY if the customer is wow’d - not if you think a particular feature or flow in your app is cool), or they use it the second/third/4th time (high frequency use or consistent use)... do your user psychology research. Talk to customers!
What is the trigger? Push notification, email, message in thank you page...

3. Action:

Types: share on social, share your friend’s email id, forward to friend...“Is this action (cost) worth the reward?” - this is what’s going through your customer’s head. Pick reward commensurate with action.
Make it as simple, easy, and quick as possible - remove all friction associated with taking the action

Test test test Reward, Trigger, Action. Push through early adopters/evangelists.

Formula for calculating impact:

Growth = % of customers(or users) participating x invites/participant x conversion rate

Common Mistakes Founders Make

Trying to be cool or “right” with automated/advanced tools. Test your Reward, Trigger, Action in the quickest way possible - quick change in copy with an email collection box or an email to your customers they can forward to their friends. Collect qualitative and quantitative feedback on Reward, Trigger and Action first before putting in the effort to automate anything

Real World Examples

Harry’s pre-launch referral campaign to gather 100,000 emails: http://tim.blog/2014/07/21/harrys-prelaunchr-email/

Here are Nine Awesome Examples of Referral Programs

Related Keywords

Word of Mouth, Customer Success, Trust Factor, Influencer, Viral Growth