How to design a referral program
andrewchen.com
andrewchen.com
The single-most important quality of a referral program – by far – is aligning with novelty and the social currency implicit in an invitation.
Almost nothing else matters.
Without the referrer feeling “in-the-know” and valued by the referred, without the product warranting being talked about, referrals will not be a growth engine.
As such, iterations upon a referral mechanism should first take place at the level of language and context. Dollar amount, offer, terms, etc are not the most effective levers.
I advise neglecting referral programs until a product has natural “word-of-mouth” growth, then consider a referral program as lubricant upon that existing growth.
Prior to good growth, one might try a light/crude alternative sans transactional incentive -> gift 1-month free, give coupons, require invite-only access. While it lacks the reward-loop, this approach offers the same trigger as a referral program without the heavy backing logic, saving 95% setup costs. The trigger is the first part of a referral program to get right anyways, and the rest of the referral mechanisms can be built on top of what is working within this lightweight system.
Once successful, note that referral systems follow the Pareto principle (10% of referrers accounting for 90% of referrals), and the designer might accordingly shift their attention to encouraging serial referrers.
"In-the-know" is definitely valuable here, as well as a way of showing off their knowledge.
However, if you think about a referral campaign for a charity, it isn't about being "in-the-know", you'd want to tap into people's level of caring, or measure of impact.
* I've signed up for Amazon's free one-month Prime trial at least 20(!) times.
* I've referred myself for many different kinds of products over the years.
* My friends and I have referred each other for all kinds of things too. Sometimes with offline compensation, sometimes using the honour system for a future payback.
"Just sayin'..."
Seen it happen many times.
Heh.
As it happens my OH and I were sitting at the local playground this afternoon chewing the workplace cud - while vaguely watching our daughter play - and were discussing how often higher management types actually know what's going on at the coal face.
"Not often enough" was our unanimous conclusion.
They can use these abuse signups to show growth to the investors and rake in more money.
It's not a bug but feature.
I think Amazon just doesn’t care. For the last 2 years, I’ve been without Kindle Unlimited maybe 2-3 months, and that was because I was reading a series not on KU. Usually whenever I cancel, they offer me a deal. So in those 2 years, an expensive time was paying 3.33€/month, currently I’m paying 0.33€/month (for 3 months, same as the last 3 months period). Normal price is 9.99€/month. And that’s without me going out of my way to get a deal, or any referrals.
https://www.amazon.com/Cold-Start-Problem-Andrew-Chen/dp/006...
Basically you could win 2 IphoneX. One for you and one for the person you referred. If you referred one person, this person was a ticket for you.
If this ticket/person won. The referrer and the referred/ticket won an Iphone each.
The more persons you referred the more "tickets" you had.
If the referred person referred new people, then they gained more tickets (additional to the ticket they were themselves.)
worked massively. 2 IphoneX after all. And a benefit for the person you referred and yourself.
And an incentive for the referred person to refer more.
repeated runs were shot down by the legal department (Fintechs which want to become a bank care about law a lot) due to gambling laws of the EU.
CPAU (cost per active user) was way better than the later implemented real referral program which worked with moneytary incentives.
>CPAU (cost per active user) was way better than the later implemented real referral program which worked with moneytary incentives.
the secret ingredient was crime
the state laws are mutual exclusive.
later turned out that excluding Belgium and Nothern Irland (it was pre Brexit) would solve 98% of the legal issues.
But when it comes to a charity referral campaign, it's not about being "in the know." Instead, you want to tap into people's level of compassion or measure of influence.
Unofficially they are your sales AE hooking you up outside of work :)
Of course, you can offer the incentive to the individual, not the company, but then you're on thin ice. Giving someone an iPad as a thank-you? Not something I'm comfortable with. Taking someone to an expensive dinner? That happens quite a bit, both as a thank-you for referrals, and in the sales world in general. That sort of stuff makes me feel uncomfortable, although I get that it's a continuum from 'regular business meal together' to '$300 per-person meal at fancy steakhouse'.
If you design the program right you should be able to prevent unintended consequences (say one month free for every referral that signs up for a year kind of thing).
You see similar rewards here in UK for referring people to new bank accounts, Chase made a big move over here and was giving £20 to the referrer, and £20 to the referred for minimum commitment. If you got the money it's a fast way to gobble up market share.