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Any marketer knows that there are so many customer acquisition strategies out there that selecting the right one isn’t always a piece of cake.
Referral marketing, however, has proven to be one of the most effective ones that marketers love; a successful referral program can work wonders for any type of SaaS business.
So if you’re looking to get started with it for your own SaaS, then this guide on how to build a great referral program might be exactly what you’re looking for.
To be more specific, here’s what we’re going to cover:
Plus, we’ve gathered some of the best examples of companies that have successfully taken advantage of this strategy for you to get inspired.
Let’s get going as we’ve got lots to cover.
A SaaS referral program is a way for software companies to expand their customer base by rewarding their existing customers every time they share the service with others.
By doing this, they manage to increase the influx of new customers without having to spend large amounts on marketing campaigns.
Sounds good, right?
In simpler terms, the existing users – or referrers – are usually given a referral link or code which they can share with their friends, family, and even with their online audience through blog posts and social media.
That way, every time a new user signs up for the product using that same link or code, the referrer is given a reward.
Actually, in many cases, both the referrer and the new user are rewarded; also known as a two-sided referral.
The reward can vary depending on the nature of the software.
It can be a gift card, free content, free products, and even free money.
We’ll cover a few great examples further on in this guide, but possibly the most popular referral marketing story is the case study of Dropbox, a file storage service founded in 2008.
The software actually managed to increase its user base by 3,900% in just 15 months by applying a great referral system.
If the number sounds mind-blowing, that’s because it is; how did they do it though?
This was achieved by utilizing the two-sided referral tactic, where both the referrer and the referred customer get rewarded with extra storage space.
Naturally, this was a great incentive that was both appealing and aligned with the product’s capabilities.
Of course, there are many benefits that can derive from a successful customer referral program.
Let’s dive a little deeper into them.
We hope that by now you’ve got a good understanding of what a referral program is and are excited to learn more about it.
What we still need to talk more about, however, are the awesome benefits you can get from referral marketing besides just expanding your user base, which is the ultimate purpose of it.
Let’s get into it.
One of the most important advantages of using a referral program for your SaaS is the very low customer acquisition costs, also known as CAC.
Whether we’re talking about a CRM, an ecommerce, or an SEO software.
This is because we’re dealing with a pay-for-performance marketing strategy; meaning that you only have to reward referrers once a new user has signed up for the product.
What’s more, according to eMarketer, referrals drive the highest B2B conversion rates, at 3.63%.
This makes referral marketing one of the most efficient and cost-effective ways of acquiring new users.
Author’s Note: You can further lower your CAC by offering a reward that’s no cost for you, such as free content or free trials.
Let’s move on to the second benefit.
Increased customer loyalty is of vital importance for any marketer or startup founder.
Especially for SaaS products where the business model is often based on recurring revenue, such as monthly or annual subscriptions, the main goal is to increase customer lifetime value (CLV) and decrease customer churn rate as much as possible.
CLV is basically how valuable a customer is in monetary value across his whole relationship with a business.
The longer a user is signed up for a product or service, the higher the CLV will be; making customer loyalty a very important aspect when it comes to SaaS companies.
According to a study, referred customers have a 16% higher lifetime value than when acquired through other marketing channels.
Thus making it clear that referral marketing programs are key when it comes to acquiring loyal customers.
Let’s move on.
Brand awareness is one of those metrics that isn’t always easy to measure, yet is craved by all types of businesses and the reason is clear.
The greater the extent to which consumers are familiar with your brand, the more trustworthy you’ll be in their eyes and, therefore, the more likely they are to become your customers.
While brand awareness can be spread in many ways, referral campaigns are without a shadow of a doubt one of the best ones out there.
That’s because – by nature – they encourage word-of-mouth marketing; a great tactic to spread the word about your brand through your customers themselves.
Based on a study by Nielsen, 92% of consumers say they trust recommendations from friends and family, above all other forms of advertising.
Pretty impressive, right?
This is exactly why referral programs work; even when it comes to influencer and affiliate marketing, people show a clear tendency to trust individuals they follow more than the companies themselves.
What’s more, the referred person can go ahead and refer even more people and each one of them can do the same as well, thus creating exponential growth for your brand.
Now that you know what a referral program is and what the great advantages of one are, it’s time to see how you can create one yourself.
Let’s get into it.
Creating a great SaaS referral program isn’t difficult, but there are a few things you should take into consideration in order for it to be a successful one.
That’s why we’ve gathered a few of the most important steps for you to take throughout the whole process.
Any successful referral program idea relies on attractive rewards.
Those rewards are the incentive an existing customer will get in order to refer a potential customer to sign up for the product.
For example, what Airbnb, which, by the way, has built one of the most popular and successful referral programs of all time, did here was offer their users $25 travel credit when they invited a friend to sign up for the service.
Plus, they also gave those signing up for Airbnb through referrals $25 to travel.
However, before you go ahead and choose the referral incentives you must decide if you’ll go for a one-sided or two-sided referral.
This means whether only the referrer will be rewarded or the referred person will as well.
After that, you must choose a reward that’s both attractive and aligned with your product’s capabilities, as well as budget.
Will it be a free product? Free internal currency? Exclusive access to certain features or communities?
Whatever you decide, remember to work with what you’ve got at your disposal that’s bound to push awareness around your brand!
Here at Viral Loops, we’ve worked with companies offering a wide variety of incentives as part of their referral marketing strategy, so we know first-hand that choosing the right one is a deal-breaker.
Let’s move on to the second step.
Assuming that you’ve decided on your ideal referral system, the last thing you want is for your users to not be able to utilize it easily.
That’s exactly why you must make the incentives simple and clearly point them out in a place that’s visible and accessible; whether that’s on your landing pages or as a part of the user onboarding process.
Here’s a perfect example that comes from TikTok in Indonesia:
As you can see, the referred person gets an invitation to join TikTok and gets IDR120,000, which equals around $8.
The reason we’re sharing this example is that it has it all.
The referral reward is clearly covered on the page and the steps are clearly showcased.
All the potential user needs to do is to click on the Download and join TikTok button.
Making the process easy and straightforward is an integral aspect of building a referral program for your web or mobile app.
What’s more, you must try and show appreciation for your user’s time.
After all, people online nowadays are very impatient and want things done in a very straightforward way.
The easier it is for them to share your referral link, the more times they’re going to reach out to other people and share it with them.
We suggest keeping the sharing process under 30 seconds long and offering a wide variety of sharing options.
Moving on to the next step.
The last step is to actually implement the referral process, whether you do that in-house or use a tool like Viral Loops.
If you choose the latter – an excellent choice by the way – you’ll have many options at your disposal that’ll help you throughout the process.
For instance, if you don’t have a developer, you can use Viral Loop Pages to create a landing page for your referral marketing campaign in a matter of minutes.
What’s more, among our plethora of templates, you can find a refer a friend template with which you can help your users easily refer people to your product with responsive widgets and receive their reward.
It’s really as simple as that!
All in all, it’s important to incentivize your existing users in a way that’s aligned with what your brand stands for, make sure that your referral campaign is clear and concise, and, last but not least, find a reliable way to apply it.
Now let’s have a look at a few examples of successful referral programs for you to get inspired.
One of the best things about referral marketing is that you get to be creative when incentivizing your existing customers.
The case studies we can feature are endless; from Airbnb and Uber to PayPal and Amazon.
Let’s have a look, however, at just a few of the companies who have utilized their referral programs in great ways, in order to expand their user base in a cost-effective way.
The first example we’ll cover is that of Airtable, one of the most renowned collaborative softwares out there.
Airtable has taken great advantage of the one-sided referral system, by rewarding the referrers with credits that can be used within the app.
Image Source: Airtable
As you can see from the screenshot above, referrers can earn a $10 Airtable credit for each person they send a referral link to, as long as they sign up for the software.
They can also see an overview of their total credits, which people they’ve sent an invite to, as well as share the referral link they’re provided with.
This is a very useful page to have since referrers can easily keep track of their progress and share a new referral link at any time.
Let’s move on to the second example.
Livechat is a well-known B2B SaaS providing customer support services to companies and has also set up a successful referral program to attract new users.
Image Source: Livechat
As you can see from the screenshot, all a paid member has to do is enter their email address, generate a unique link, and earn $39 to spend on the app for each referred customer, assuming that all steps have been completed.
The steps include for the referred person needing to complete their first payment within the app, which will even result in a 50% discount for them.
Image Source: Livechat
We can clearly see that this is a two-sided referral program, where both sides can earn a reward in the form of a discount.
Moving on to the next case we have for you.
Trello is a collaboration software for remote teams to communicate and manage their projects.
Besides being a great tool, Trello has also built a great referral system that makes it almost irresistible for its existing members to not use.
The concept is simple; for every friend someone refers that signs up for free, they receive a free month of Trello Gold, which is an add-on pack for individual Trello accounts.
They can actually refer up to 12 friends, which means they can enjoy a free whole year of Trello Gold!
Image Source: Trello
This makes it a great incentive for existing users to take advantage of this referral program and help the business expand its user base.
Referring can either be done by sharing a unique link or inviting someone new to a Trello board, making the process clear and easy.
That’s something very important to a successful referral program, as we noted earlier.
Image Source: Trello
Despite it being a one-sided referral system, Trello is a great example of how referral marketing can leverage a company with virtually no cost.
Let’s continue with our next example.
Clubhouse is a well-known project management tool for software teams to collaborate easily on tasks.
What’s noticeable about it, however, is the referral system the team behind it set up to attract new users.
As you can see in the screenshot below, we’re not talking about a simple two-sided referral system; three parties are being rewarded for every referred person.
Image Source: Clubhouse
More specifically…
… can all receive great rewards when participating in the referral program.
For instance, the referred person’s organization can get 2 months free on any of the tool’s paid plans, the referrer’s organization can receive $500 in account credits or alternatively a free team dinner, while the referrer themselves can win a wide range of gifts!
Sounds good, right?
This is a great example of a referral system with very attractive incentives, that’ll prompt the tool’s existing users to spread the word to as many people as possible.
Put simply, referral programs can work wonders for SaaS products in ways that not many other marketing and sales techniques can, whether they’re implemented in-house or by using a referral software like Viral Loops.
Let’s see how you can get started with one.
We’ve pretty much covered everything you should know about a successful referral marketing program and had a look at some great examples, too.
However, even though we’ve made our tool very simple here at Viral Loops, by offering step-by-step guidance and useful templates to build your campaign, as well as a plethora of integrations with third-party apps, we understand that things might seem a little overwhelming at first.
That’s why we strongly recommend you dive into our $67B Worth in Referral Programs ebook which you can download for free.
The book showcases various referral marketing campaigns of world-famous companies – such as Dropbox and Robinhood – and what you can do to get inspired for your own campaigns.
Get your free copy below.
There you have it!
You’re now fully aware of what a referral program is, what the benefits are, as well as how to successfully implement one.
We also went through a few examples of SaaS companies that have managed to leverage their business through referral marketing for you to get some extra inspiration.
If you feel ready to create your own referral program for your software, don’t hesitate to book a demo with us to guide you step-by-step through the process.
Thanks for reading!
Written by:
Nikitas is responsible for growth at Viral Loops and also helps customers on 1-on-1 basis to reach success with their referral campaigns. Let's connect on LinkedIn
