Referral Marketing: An Actionable Guide

Learn how to build, run, and improve your referral marketing campaigns.

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What you’ll read in the next chapters is an amalgamation of a 4-year experience in referral marketing.

We figured out that it would be perfect to put in a single guide, all the insight we managed to gather from all the campaigns we hosted, and offer it for free to all the people who dig the idea of growing their business with referral marketing.

This is more a set of actionable tactics, than it is another “ultimate guide”.

Enjoy!

referral marketing viral loops

What is Referral Marketing?

Referral marketing is a technique (for some, a marketing channel) that enables loyal clients and advocates to refer their network to your company in exchange of rewards.
 
Referral marketing has the same effect as word-of-mouth, but is initiated and managed by a company.
 
The rewards offered to customers referring other people, can come in many forms:
  • Discounts.
  • Money.
  • Free products.
  • Early access.
During the past few years, some of the biggest companies in the world have deployed referral marketing, as a powerful asset that helped them to either kick start or expand their user base.
 
If you’re wondering if referral marketing is really important, let’s take a look at some data.
Consumer data
  • 84% of individuals in 60 nations say they trust friends and family suggestions.
  • 86% of B2B buying choices are based on peer word of mouth.
Referral Marketing Facts
  • 1 Offline mouth impression drives at back five times more sales than an impression of paid advertising.
  • 52.2% SMEs in the US say referrals are the most effective promotional instrument for them.
  • Referrals are the second best source of income for tiny companies in the United States.
  • It has been proven that the referred clients generate greater profit margins than other clients.
Rewards
  • 84% of Americans say they would purchase from a particular brand through an exclusive offer.
  • For boosting the efficiency of a referral campaign, non-cash referral incentives are 24 percent more efficient.
  • An exclusive offer would be shared by 91% of Americans with their friends / family.
Never used Viral Loops?

Well, you’re going to be surprised!
Our template-based viral & referral marketing solution is all you need to run a successful referral marketing campaign.
Sign up, set up a campaign of your choice, and you’re ready to go. Book a Demo and see how easy it is.

Famous Case Studies

Airbnb

When Airbnb launched their service model, they were met with concerns—travels and hosts alike worried if they could trust a stranger.
 
Jumping that obstacle started with this basic insight: a whopping 92 percent say they find peer-related suggestions more compelling than advertising.
 
By constructing a refer-a-friend-like program that gave the mic to experienced customers -Airbnb could decrease (if not eliminate) the concerns, making tourists and their hosts more ready for travel. Current clients have become trusted brand proponents who want and need to hear from fresh clients.
 
The home-sharing business encouraged prospective travelers providing travel credits — $25 when a referred friend leased from Airbnb and $75 when a referred friend listed their property for rent on the site. However, for Airbnb, because of the magnitude of incentives, the strategy was a little dangerous.
 
Airbnb identified six specific metrics to track, including:
  • Number of monthly active users sending invites
  • Number of invites per inviter
  • Conversion rate to new user
  • Conversion rate to new guest
  • Conversion rate to new host
  • Revenue impact potential

See how Airbnb’s Referral Program Built a Billion $ Growth Formula.

Dropbox

Dropbox’s referral program had 2-side rewards and was an overall success because:
  • Offered an extended version of the same product.
  • It was part of the onboarding process.
  • People had a clear view of the benefits.
  • It made it ridiculously easy for people to invite their friends.
  • People knew their referral status at any given time.
  • They managed to build a Viral Loop.
Let’s have a quick dive into Dropbox’s metric history:
  • September 2008: 100K registered users
  • December 2009: 4M registered users
  • September 2017: 33.9M registered users, 10B evaluation + 1B revenue.
The philosophy of Dropbox’s referral program was very understandable.  Because the product provided cloud storage room, they decided to reward individuals with more free space not only by referring to their colleagues, but also by accepting an invitation.
 
In order words, we’re talking about a 2-side referral program for a compelling product, which rewarded both parties to complete the required assignment ; Dropbox registration.
 
Part of onboarding process: Dropbox realized this and not only created a six-step piece of cake onboarding, but Dropbox incorporated its referral program into it as a final step.
 
Inspired by Paypal refer-a-friend program
Paypal rewarded referrals with cash (because their company was about this), so Dropbox had to use the main value of their product in their rewarding scheme. People wanted cloud storage in the case of Dropbox ; the more, the better.
 
Very easy to invite people: They could do so through sharing social media or just sending their unique referral link in whatever manner they want (messenger applications, email, SMS, handwritten cards, etc.). 
 
Email is strong, but sending your invites to your contacts one by one is not the case, Dropbox provided the choice to sync your contacts from Gmail, AOL, Yahoo!etc.
 
People knew their referral status: Dropbox included a user-accessible panel at any time, so they could see how the invitations were performing.
 

Mastic Spa

Mastic Spa is a cosmetics brand with natural beauty products with Mastic; a resin produced only in the Southern part of Chios, a beautiful Greek island. It has multiple applications in cosmetology and pharmaceutical.
 
Objectives:
  • Awareness in order to acquire new leads.
  • Data gathering for correct segmentation and ad targeting.
  • Sales– well, because a business needs money.
Creating a viral giveaway with a Manychat seemed like a one-way road.
This sort of campaign enabled us to capture leads, segment users based on their preferences (explain how further down the article) and demographics, and directly drive revenues from within Facebook Messenger, since the app has more than 1.3 billion monthly active users.
 
Rewards 3 bundles: Body, Hair, Face.
 
The giveaway (disigned to create incentives in every step, thus increasing purchase desire) run for 5 days straight, and every day we would pick a different winner. After participating they were asked to invite their friends. 
 
Users were also told to follow Instagram’s Mastic Spa to get 10 more submissions that would increase their likelihood of winning. 
 
We held a runner for people who didn’t win and offered them a discount for the products of Mastic Spa.
 
Pre-launch: Facebook “coming soon” with Manychats Growth Tool Results managed to gather 2,405 leads, ready to participate in our viral Messenger giveaway.
 
Overall, this Manychat giveaway campaign resulted in:
  • 4K+ Messenger subscribers.
  • 48% of the total participants sending at least one invitation.
  • 650 people participating from an invitation.
  • ~1,080 Instagram followers.
  • A few thousand in sales.

See how Mastic Spa gathered 4K+ leads in 5 days with a Manychat giveaway.

Infinity

In March 2018, Infinity, was in the final phases of creating an MVP of their ‘ infinitely ‘ versatile and user-friendly project management and collaboration tool. 
 
They have come up with a fairly simple solution after days of thorough studies, and several hours spent defining the approach to gain as many early participants as possible. A referral campaign was launched by the Infinity team.
 
Landing Page
It’s not simple to make a viral landing page. To prepare excellent content, a visually attractive design, and even an explanatory video, you have to spend a lot of time. And that’s what Infinity did precisely.
 
Incentives
Infinity organized a bunch of waitlist rewards:
  • an invite to the Infinity launch weekend for the winner
  • a lifetime premium plan for the top 10
  • and a priority invite & 6 months of the premium plan for the top 100
 
How it worked
  • Visitor: Infinity Landing Page
  • Visitor clicks on CTA button (in this case ‘Subscribe for Infinity Early Beta’): Visitor becomes a Member 
  • Member receives a referral link which automatically puts him on the waitlist: Member is repositioned on the waitlist and put into consideration for winning an incentive based on the number of successful referrals (the number of people they’ve invited who also subscribed for Infinity’s Early Beta).
 
Results
  • K-Factor = 0.75 (3 out 4 people who received a referral link actually accepted the invite and became members)
  • Visitor to Participant = 22%
  • Participants share rate = 18%
  • Invitation CTR = 88%
  •  Invitation Conversion = 75%
 

Robinhood

Gaining one million potential users during prelaunch is perhaps a lofty target for a small startup. But you can certainly expand your prelaunch reach—and your waiting list—by imitating some of Robinhood’s techniques.

Just like Robinhood stole from the rich and gave to the poor, we’re stealing/ borrowing from Robinhood’s referral program tactics and giving to you.

Instead of inviting potential Robinhood users to join a mailing list, the company appealed to its interested fans’ desire to be the first to benefit from what Robinhood had to offer.

So how did Robinhood‘s referral draw in the first eager-to-gain-early-access few?

Robinhood kept the sign-up process short, sweet, and simple.

When a person arrived on the early-access landing page, only one task stood between them and the chance to be the first to use the Robinhood app: entering their email address.

The brainpower behind building Robinhood’s waiting list knew this fact and designed a sign-up page so straightforward that it could be completed before any person (or fish, for that matter) could lose interest.

The page was simple to use. Not full of jargon or length copy, just one powerful hook—”Robinhood $0 commission stock trading. Stop paying up to $10 per trade.”

Giving users only one option; To opt-in.

 

Get People to Share and Re-engage

Gaining access was simple.

With Robinhood’s referral and like many other pre-launches, the first few sign-ups were acquired from family, friends, and as a result of press mentions.

Gamification.

People. Love. Playing. Games.

Especially when those games are tied to rewards they actually want.

Robinhood created a referral-based viral loop that looked something like this:

  • When users signed up for Robinhood’s Referral, they were put on the waiting list. The higher on a person’s position on the list, the earlier the Robinhood fan got access to the beta.
  • After entering an email address, the “thank you page” allowed individuals to see is their position on the waiting list.

See how Robinhood’s referral program brought 1 million users before launch.

Never used Viral Loops?

Well, you’re going to be surprised!
Our template-based viral & referral marketing solution is all you need to run a successful referral marketing campaign.
Sign up, set up a campaign of your choice, and you’re ready to go. Book a Demo and see how easy it is.

How to choose prizes

The dos and don’ts
Do not choose to reward individuals with something that has nothing to do with the identity of your brand – directly or indirectly. Aka App store a scooter business gift card.
 
Yes, you’re sure to get more referrals by offering an iPhone, than free shoelaces for a lifetime, but the reason you’re building a referral program is your need for quality leads in the first place.
 
DO – Great benefits completely align with the meaning of your business or brand. What you are offering should increase your user / customer connection with you ; it should place users in a situation where they can do nothing but speak about you.
 
Types Of Rewards / Get Inspired
Free Products: Self explanatory and probably all of us have participated in such competition.
 
Internal Currency: Good for SaaS and services that charge their clients for expanding the user experience (e.g. Dropbox), the prize is a giving to your users a little extra of your product in exchange for referring you to their friends.
 
Discounts: Another classic– especially for eCommerce and marketplaces, a tip to nail it would be to offer best practice to follow is to offer 2-sided rewards- that way both the referrer and the referred have something to gain.
 
Company Merch: People love to feel like they are part of a movement. One of the easiest ways to reward them is to make them feel like they’re part of your crew.
 
Exclusive content: Usefull if you’re in a tight budget and cannot offer pricy rewards, exclusive access to eBooks, videos, webinars and PDF guides to intrigue people to share the event with their friends. Such rewards, while free for you to produce, offer valueable info for your ambassadors.
 
Early Access: Popular among pre-launch campaigns, this way you incentivize people by giving them an experience so exclusive to them, that makes them fell part of the team and actual ambassadors since they have an good insight of what is coming.
 
Team spirit + Exclusive content = Access to private communities : Exclusive Facebook or Slack groups are more than valuable since like minded people get together to discuss problems and frustraions.
 
Company stock: Might sound extreme but using bits of your company as rewards can drive incredible results, who wouldn’t like free money in the first place?
 
Importance of copywriting
Believe it or not the way you’ll present the rewards plays a crucial role, using clever copywriting can do that for you, that, we’ll discuss further down the post.
 
If you’re already that good at using words, then you can probably make people spread the word for you without even offering them a reward.
 
For how long should you run your campaign?
Major part of your planning process, make it too long and you reduce the value and urgency of your campaign, make it too short and you make it so scarce that people won’t even have the time to join.
 

How to determine the duration:

Referral 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.
 
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 them to ambassadors
A giveaway should run between 2-4 weeks depending on the scale of the campaign. Ideally, a brand should run giveaways and contests once every two months — that is around 6 a year.
 
Pre-Launches: 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.
 

How to introduce your campaign

Create a landing page
While the goals of your referral campaign is to increase exposure, gather leads etc. but the primary goal of a landing page for it should be to show/reveal the value upfront and create a connection between your company and your to-be ambsassador. 
 
Ask for their email first so you filter out only those who actually care> redirect them to a thank you page> ask them to share with their friends > remind them of the prizes.
 
Good ol’ email
  • Send only to your active users so you don’t become the spammy/salesy company to the rest.
  • Keep in mind that you have to offer a reward tempting enough, and easily attainable. 
 
Messenger
With 88% open rates and 56% click-through rates, Messenger is one of the most powerful marketing channels.
 
  • Keep it short and simple. People need to understand the real value for them, and requires minimum effort.
  • All you have to ask is to click the “Forward” button to invite your clients to share the message with the users they want.
Go omnichannels for ultimate impact
You could implement a referral program to your ecommerce customers for full engagement by using the 3 tactics we described.
 

Promote your campaign

For existing customers
 
Buying from you is first of all a sign that what you are selling has motivated them to stick.
 
Set up automated emails: This allows you to build automated flows that include dynamic content, according to your customer’s purchase history.
 
A good approach would be to add a product the client has visited in the past but never purchased in the email as an incentive to sign up for your referral program.
 
Retargeting: Apart from you existing customers, you can use retargeting as a method to capture the email addresses of people that visited your store and left without making a purchase.
 
Paid Ads
If you treat your message and targeting with care, chances are that the right people will land on your landing page
 
Google Adwords: Try to keep your message as consistent as possible with the content of the landing page that you’ll send visitors to. That way you increase your chances for greater conversion rates, as people will get what they expected when they clicked the ad.
 
Facebook Ads: We’ll get into details about how to nail them later, but some quick tips would be to:
 
  •  Insert in Facebook the email addresses of your existing customers and create a lookalike audience. That way you ensure that your ad will be served to people that share the same interests with your customers, resonating that way to their buying habits.
  • Create a mind-blowing creative (something that can catch the user’s eye while the scroll their feed endlessly). 
  • Keep your message clear as possible and use some cool emojis (grab more eyeballs). 
  • A video ad is also cool, but since most people will probably watch it on “mute”, add some subtitles!

Other channels:

  • Newsletter as mentioned above
  • Social Media
    • Don’t be spammy
    • Get people to engage by brainstorming what kind of posts would be more engaging, also consider the data you already have.
    • Tip: You can run a Facebook giveaway campaign, asking people to like and comment and then lead them into a landing page for the giveaway.
  • Content Marketing
    • If you are new to this: instead of trying to promote your referral through your content, would be to approach other content creators that resemble your audience and ask them to promote your referral program (yes, “ask” means you’ll have to pay them to do so).
    • If you already use it: you can make use of widgets set to work when people get in from your content, along with a special message.
  • Offline is an option
    • Use flyers, Banner, QR codes you name it, nothing beats real person interaction
  • In-site notifications
    • It’s a really a shame not having a menu item or a dedicated section on your website. This can spark the curiosity of the visitor increasing your chances of turning them into ambassadors.
    • On top of the above, you can also put a top bar on the site containing information about your program and change the copy every two weeks in order to A/B test what works better.
 
Create your message
You must make it easy for people to understand what they have to gain from entering your referral program. You have to use terms they understand.
 
When it comes to copywriting that converts, there are two things you must keep in mind:
  • Clear Message
  • Emotional Triggers

See the 7 Ways To Promote Your Referral Program.

Never used Viral Loops?

Well, you’re going to be surprised!
Our template-based viral & referral marketing solution is all you need to run a successful referral marketing campaign.
Sign up, set up a campaign of your choice, and you’re ready to go. Book a Demo and see how easy it is.

How to nail your Ads

Paid Advertising or PPC, as you probably already know can significantly boost the reach of your referral campaign if your budget allows for it

Preferably when you run such a campaign you’d prefer instant boost in traffic rather than something for sustainable, for this reason we suggest you opt for Facebook and Instagram ads instead of something like Google Adwords.

Concerning the benefits of running a PPC campaign, except from the massive reach you’re going to achieve, you’ll also build an active audience that can be used even after the the end of your campaign AND you’ll increase your brand loyalty as you are going to be engaging more with people interested in your business.

To do all that, our own PPC expert conducted a step-by-step guide on how to optimise your Facebook ads which is too detailed to be included in this page, so, when it’s time to make the most out of your dollars go here.

See how to nail your Facebook & Instagram ads for giveaways.

How to get even more participants

  • Give extra incentives to existing participants. 
    • A surprise discount for being part of the campaign.
    • Remind them how close they are to the prize.
  • Improve the invitation process.
  • This can be done after a while when you’ll have gathered some data such as CTR, Conversion Rate or even page behavior with a tool like Hotjar, revise the flow and find point of improvement
  • Tip: Email is a to-go choice and you should also add 1 or 2 choices for social media; mostly the ones where your game is stronger. That way you ensure that people will share your campaign in places where you can support your level of awesomeness. You can even offer the option to to sync contact from their email provider so you remove the hassle of actually typing email adresses
  • Offer 2-sided rewards; that way both the referrer and the referred have something to gain.
  • Leverage all available marketing channels. Yes you did it in the initial promotion but that’s not enough, continue being active on social, send an email to new newsletter list subscribers and so on.
  • Remember to follow up. The only way to make people refer to their friends and colleagues is to communicate to them a sense of urgency to them. No one wants inactive users.
  • Just email them to show them how close they are to achieve a goal, or consult them on how to get closer if they need to.
  • Improve your retargeting, now you maybe already have data from your ad campaigns, optimize more.

See the 6 Ways To Grab More Participants For Your Referral Campaign.

Tips to up your copywriting game for better campaign performance

Make it easy to understand
 
Customers should see you as a company that respects their patronage when introducing a referral program, and that plans to become partners. 
 
Looking down on their clients while floating in a money pool isn’t a tactic that takes you too far.
 
The simplest way to prevent this perception, is to make your copywriting simple, direct, and colloquial.
 
Develop a brand voice
Major brands out there enhance their identity this way, it should state your beliefes and what you stand for.
 
Don’t know what your brand should sound like? Start by listening. 
 
Listen to what’s going on in your office and to your customers. Then decide how to use what you picked up to differentiate your brand from your competitors. 
 
Pick single words or even more complex phrases to adopt as branded lingo and use them in your copy. Now you sound like your brand!  
 
Avoid passive voice
Self explanatory, but just thing you are not submitting an academic essay, you are dealing with people limited patience.
 

What metrics to watch

K-Factor or Viral Coefficient 
The k-factor is the total number of registrations per unique inviting user.
 
Participant Share Rate
This is the average number of unique shares per campaign participant. The bigger this rate is, the bigger is your campaign’s organic reach, which means a lower CPA for acquiring leads.
 
Invitation CTR
Invitation Click Through Rate is the percentage of people who click your participant’s invitation and go to your campaign’s page.
 
Most of the times, this number is high, as that most people will see an invitation from a person that they already know and
 
Invitation Conversion Rate
The invitation Conversion Rate is the percentage of the people coming from invitations, that actually become participants of your campaign.
 

What mistakes to avoid

Don’t select boring incentives
You need to lure clients with rewards that are enticing enough to make them take the time to sign in to their social media accounts and refer their network.
 
Don’t make it complicated
The longer your explanation, the less likely your cleints will learn and participate in your campaign. Developing a complicated process can also make it look like you’ve got something to hide.
 
Don’t set it on autopilot
Failure to review a campaign, is one of the biggest mistakes we see. It may mean that you chuck money out of the window and continue to fund a referral program that does not do much to take your way to consumers.
 
You don’t want that. Make sure to review your campaign’s performance in order to improve it. 
 
Don’t give up too soon
No matter what kind of marketing strategy you’re implementing. 
 
Whether you’re trying email marketing or starting a simple campaign to increase click-through rates, marketing programs need time.  Be consistent, tweak your program, and don’t give up.
 
Never used Viral Loops?

Well, you’re going to be surprised!
Our template-based viral & referral marketing solution is all you need to run a successful referral marketing campaign.
Sign up, set up a campaign of your choice, and you’re ready to go. Book a Demo and see how easy it is.

Go advanced

What will motive people to become early adopters?
Although there is no straight answer to that, there are some options:
  • Discounts.
  • Extended product features.
  • Early access.
I think that providing discounts is pretty straight-forward, so I’ll move right to proving extended product features.
 
The same principles to choosing a prize for a referral campaign apply here as well. 
 
Pro tip: Since you’re running a pre-launch you want to create FOMO of what is coming and what they’ll miss if they don’t join.
 
Get inspired: Do it with milestones
Your participants join the Milestone Referral campaign and reach milestones as they refer more and more friends to join the campaign.
 
For example, the first milestone can be at five referrals, then at 10, 25, and so on.
 
To do a pre-launch campaign with this concept, you may have the milestones to be specific dates that campaign participants are going to get access to your product, starting with the date that is furthest away.
 
Have a voice
Do you have a clear idea of why you do what you do? Do you communicate it to the world effectively?
 
Chances are you’re not the only one doing what you are doing. So ask yourself – as a customer, when faced with the option to choose between similar products, what affects your decision?
 
Know your market
Don’t just assume you know what’s best for your customers, or that you know how to solve their problems better than they do
 
It could be that no one needs something you’ve built in, or there’s a particular essential (and perhaps pretty simple) feature missing.
 

Create Hype for digital products

Make it Personal
When introducing your product, showcase the problem your ideal customer faces. Then paint a vivid picture of how this problem affects their business or themselves.
 
Treat you early birds with love
They were one of the first to sign up, so offer them something additional, make them feel exclusive, this way not only you empower your relationship with them, but also you motivate them, even more, to share with their friends.
 
Crowdfunding
People take pride in being part of creating something, so they are bound to tell their friends about their contribution.
 
Behind the Scenes and Teasers.
Letting people witness the process leading up to the launch will make them feel part of the family.
 
Create hype for physical products 
Freebies 
People love free stuff. Hosting a contest or giveaway will get you attention for a dirt low price. Making sure the call to action is something fun or unusual 
 
Have a Landing Page. Seriously.
Having a landing page lets people offer you their email for updates and insider news on the product. That way, you can nurture them until the launch through email marketing.
 
Influencers.
Reaching out to the proper influencers will put your product in front of a significant number of highly qualified leads
 

Create an Explainer Video

Blogging/Guest blogging
you can draw attention to your website and product, but also provide backlinks to your blog from an SEO perspective.
 
Be Visual.
Infographics are visually engaging and easily consumed, and in effect, very shareable. Here’s a good example.
 
Don’t forget the real world
Show up at events and do some networking and so on…
 

Referral marketing with Messenger

Most of the time, referral marketing campaigns fail to get the traction they deserve because their message gets lost in the endless noise we call the Internet.

With extraordinary Open & Click-through rates, Messenger is a less intrusive and inexpensive way to get your message right in the face of your potential customers.

 

Run a Viral Giveaway

For software/service like we did.
When our product was (almost) ready to launch, we had to start spreading the word about it.
 
Trying to gather email addresses for a product that would work entirely via Messenger seemed like a stupid idea.
 
That’s why we’ve built a pre-launch campaign that followed the giveaway model by using our product. We wanted the people to see a demo of how the Messenger flows of the referral campaign could look like, and give to 20 people early access to the product itself.
 
Users got more entries for getting more of their friends to sign up for our pre-launch, and the more entries one had, the more their chances to get early access.
 
Beardclubs’ Free product rampage.
Beardclub is one of the biggest (if not THE biggest) retailers for men grooming products. When they decided to give a year’s worth of beard oils, Messenger was the obvious choice.
 
They asked people to join their referral campaign, and then incentivized them to invite their friends by giving more entries for every successful referral!
 
They asked people to join their referral campaign, and then incentivized them to invite their friends by giving more entries for every successful referral!
 

Reference: Manychat

Do it with a milestone campaign

A Milestone campaign via Facebook Messenger.

This approach is the same as the one used by companies like Harry’s Razors, The Hustle, or Joeywears; only now you have the option to run it via Facebook Messenger.
 
The way it works is effortless; there are multiple rewards with each reward corresponding to a certain amount of referrals.
 
For example:
  • To get free shipping, invite one friend.
  • To get a 20% discount, invite three friends.
  • To get a free product, invite ten friends.
  • To get a free life subscription, invite 50 friends.
Never used Viral Loops?

Well, you’re going to be surprised!
Our template-based viral & referral marketing solution is all you need to run a successful referral marketing campaign.
Sign up, set up a campaign of your choice, and you’re ready to go. Book a Demo and see how easy it is.