How to choose referral rewards and referral incentives

In some of our previous articles, we analyzed the importance of building a referral marketing program for your business, plus how companies like The Hustle & Harry’s did it – in a very successful way.

prelauSince we made it for you easier than ever to build your referral program with Viral Loops, I thought of preparing this article in order to help you consider the most interesting aspect of your referral marketing campaign.

The rewards.

By now we’ve seen a plethora of referral marketing programs; that’s enough for us to know that apart from copywriting and well-planned following up with referrers, the rewards you’re willing to provide is one of the things that can make you or break you.

First of all, we should cover what’s considered a great referral reward and what’s the worst choice you can make.

Types of referral incentives.

1. One-sided referral incentives.

This is exactly what it sounds like. When you choose to have a one-sided incentive for your referral campaign, it means that either the referrer or the referred will get rewarded for participating- not both.

Pros:

It will be easier to convince people to participate in your campaign if there’s something in for them

Cons:

The absence of a reward for both sides might discourage some of the people to participate.

2. Two-sided referral incentives.

When you choose to offer double-sided incentives for your referral campaign, you’ll have to reward both the referrer and the invitee for participating in your campaign.

Pros:

Offering a reward for both sides will encourage people to share more as it appeals in the altruistic nature of humans.

Cons:

It might get expensive to give two rewards for each new referral.

3. No referral incentives.

Some companies might have any money to spend on referral rewards, or they just don’t want to invest in it.

If you’re thinking to build a referral campaign with no incentives, you have to make sure that the overall experience of using your product should be stellar in order for people to feel excited enough to share it with their network.

Pros:

The bright side is that you won’t spend any money, and you’ll have the chance to track the genuine word of mouth for your product/service.

Cons:

No referral incentive means fewer referrals. It’s really difficult to get people to share about you if there’s nothing in for them.

The best referral rewards one can think of.

To set this as plain as possible, the worst choice you can make is to reward people with something that doesn’t have to do anything with your brand identity – directly or indirectly.

That being said, no iPhones for 50 successful referrals for a shoe retail business.

The point of a referral marketing program is not to bribe people to talk about something they don’t care about.  Yes, you’ll surely get more referrals by providing an iPhone than free shoelaces for a lifetime, but the reason you build a referral marketing program in the first place is your need for quality leads.

Great rewards align perfectly with what your company or brand stands for. What you offer should boost the connection between your user/customers with you; it should put people in a position where they can’t do anything but to talk about you.

I know that this kind of things might sound poetic to you, but I got your back. This piece is dedicated to helping you find the right reward.

1. Free products

This is an obvious choice. You give free stuff to people for referring their friends. There’s not much to say about it, as Harry’s has already shown how to do it right.

Harry’s followed the concept of a “Milestone Referral Campaign”, meaning that when people reached a specific number of referrals (milestone), they instantly win the corresponding prize.

There were 4 milestones in total:

Referred 5 friends = free shave cream
Referred 10 friends = free razor
Referred 25 friends = free premium razor
Referred 50 friends = free shaving for a year

Harry's milestone Referral Viral Loops

2. Internal currency

This concept of rewarding revolves around the idea of giving to your users a little extra in exchange for referring you to their friends. This is exactly the system that Dropbox used in its referral program.

Dropbox rewarded with more space on their servers, for each successful referral. The more friends you referred, the more space you got.

dropbox Referral Viral Loops

3. Discounts

This is the most popular option among eCommerce and marketplace businesses that choose to run a referral marketing program. The best practice to follow is to offer 2-sided rewards- that way both the referrer and the referred have something to gain.

This is exactly what Airbnb did by offering $25 discount for accommodation booking to both sides. This referral program became known as the ‘altruistic referral’.

airbnb Referral Viral Loops

4. Company Swag

People love stickers, cool t-shirts, and colorful socks. Oh, they also love to feel like they are part of a movement. One of the best ways to reward them for being your ambassadors is to make them feel they are part of your team; a team needs a uniform.

A few weeks ago I wrote how The Hustle used company swag to build and establish a kick-ass email list. Be like The Hustle.

Hustle milestone Referral Viral Loops

5. Exclusive content

When you’re starting off, the fact that you can’t afford to give the reward you want can get awfully irritating. But a valuable reward is not always something that has a big monetary value.

There are things that money can buy, such as your attention and affection towards your users and ambassadors. It’s things that you might have in your stash and will make people’s lives easier.

Recently, Growth Summit used exclusive access to eBooks, videos, webinars and PDF guides to intrigue people to share the event with their friends.

growth summit milestone Referral Viral Loops

6. Early access

The feeling of trying something first is a hipsterish sin that I can’t keep myself from committing, but that’s the way that most of us work. Allowing priority listing to your top referrers is a game changer.

You know why?

Because it’s a competition, and almost all the achievements of our kind are based on the fact that we are competitive beings. Robin Hood and HeyEngage used a leaderboard campaign to gather all the email addresses they needed in order to launch to a pre-warmed audience.

Robinhood Referral Viral Loops

7. Access to private communities

This is kind of a combination of making people feel part of the team along with the promise of exclusive content. Facebook groups are thriving and people are dying to part of a community.

The Hustle (once again) offers access to their private Facebook group in exchange for only 4 referrals.

Hustle milestone Referral Viral Loops

8. Company stocks

Jet gave free stock options just for becoming an early email subscriber. The used a leaderboard referral program to give to the top 10 referrers 10,000 stock options, and the top referrer received 100,000 stock options.

Eric Martin referred the most people to Jet.com.  At the time, Eric disclosed that he spent just $18,000 on online ads in order to drive Jet.com signups.

When Walmart acquired Jet.com for $3 billion, Martin’s share became worth of $20 million. Not such a bad incentive, right?

Jet Referral Viral Loops

9. Pure copywriting

There comes one time in everybody’s life that we have an epiphany about how this world works. For me, it was the moment that I realized that you can get from anyone, anything, by just using the correct combination of words.

All kinds of rewards described above might not even matter. Back in the day that GrowthRocks started, they thought that a great way to generate clients was to educate their market about what growth hacking is.

The application for the free seminar was through a landing page. GrowthRocks searched for a way to make people invite their co-workers, partners, etc. but had nothing to give in return.

That’s why they made an offer that people could resist. After submitting for the seminar, attendees got informed that growth hacking is a team sport, and if they want to get the most out of the seminar then they should invite their teammates.

The outcome: 66% of attendees referred to at least one friend.

Everything is time sensitive

Deciding what kind of rewards you’re going to offer in your referral marketing campaign depends, to a great extent, to the type of campaign you’ll eventually run.

An important question that emerges, considers the amount of time you should run your campaign. As in the case of choosing rewards, the amount of time depends on the type of campaign you decide to run.

For Referral and Ambassador Programs

Referral marketing campaigns and Ambassador Programs are long-term campaigns by design. It’s a marketing channel that can get you new customers on an ongoing basis.

Dropbox’s referral program has existed since the early days of the company and is still one of its main customer acquisition channels.

Templates you can use for this kind of campaigns:

Viral Giveaways

Companies run viral giveaways for two reasons mainly:

  • Grow their audience and specifically their email list.
  • Engage their existing and potential customers and transform to their marketers.

A giveaway should last between 2-4 weeks depending on the scale of the campaign as well as the rewards. Ideally, a brand should run giveaways and contests once every two months — that is around 6 a year.

Templates you can use for this kind of campaigns:

Prelaunch Campaigns

Startups and new companies run pre-launch campaigns to get traction and gather potential customers before they launch.

Well-established brands and eCommerce stores, take advantage of pre-launch campaigns for creating a buzz about new and upcoming products.

We recommend running your prelaunch campaigns for at least 2 months—ideally more than that. For example, the commission-free stock trading app, Robinhood, had one million users before it was even created by running a prelaunch campaign for more than 1 year.

This timeframe you will give you the advantage of gathering a lot of users and potential buyers so you can generate sales and actual users on the first day of your launch. On top of that, you can get feedback from the people who signed up and also involve them in building your product or service

Templates you can use for this kind of campaigns:

Before you go

As I wrote in the beginning, referral rewards are kind of a big deal– or a deal-breaker. The best way to decide what’s best for you, you can start by considering the options you have in hand.

Search for rewards that will push the awareness about your brand a bit further with the assistance of your happy ambassadors.

Don’t overthink. Work with what you have and don’t forget that when you can offer more, you should probably do it.

If you need help setting up a referral program and deciding on your rewards, we can help you out on a short, free call:

Written by:

Nikitas Filosofof

Nik has launched products in many industries for himself and clients. He's responsible for growth at Viral Loops, and he has worked in marketing since he was 17. Passionate about applying psychology to marketing. Favorite number: 42. Let's connect on LinkedIn