Over the last 12 months, I’ve launched 30+ referral programs, mostly for Y Combinator-backed startups. What I learned is that 9/10 founders are launching their referral programs for the first time and unfortunately don’t have a great framework to work with.
The internet is littered with articles like ’10 things to launch a successful referral program” — and none of it is actionable advice. It’s mostly generic statements that are very obviously true but aren’t actionable or specific enough to be helpful, stuff like “use Tracking to optimize it” or “have clear marketing goals in mind”.
So, I wanted to give you a clear cut & dry playbook for what you should do to get your referral program to work. In this 2 part series, I’m sharing my project management approach to getting your referral program to work.
- Part 0: Variables you should measure=> things you should fix
a discussion of which variables you should track and measure, and what actions you should take to improve each of those parts
- Part 1: Promoting your referral program
what you should do if your referral program awareness or participation are low. this part of the referral program is so important that I feel like it deserves a separate article
- Part 2: Increasing participation of your referral program
what you should do if customers know of your referral program but aren’t using it
- Part 3: Deliverability of your channels
if you’re using email as a referral channel, you need to measure open rate => referral program emails tend to end up in spam
- Part 4: Conversion rates of your referral offers
Part 0: What you should be measuring and what you should be fixing
I like to divide up the referral program into 4 distinct measurable conversion points so that we can better optimize each step separately. Referral programs are complex — there are multiple different levers we can pull to optimize — let’s focus on each one methodically.
- Measure % of your active users that have seen your referral program. If this number is low, work on visibility and promoting it (Part 1)
- Measure number of invites sent per each of your users that has seen your referral program. If this number is low, you should work on adding clarity and creating urgency (Part 2)
- If you’re using email, you need to measure open rates. If this number is close to 0, you’re likely ending up in spam (Part 3)
- Measure % of referral links clicked/emails or messages opened. If this number is low, you can improve messaging + add multiple follow up points (Part 4)
Fortunately, with referral programs, we have a lot of opportunities to track — we can track views, invites generated, emails open and links clicked, and sign-ups.
I’ll assume you have a referral program set up and that you’re tracking these. With that said, we will diagnose what you should measure and how to make that number go up.
Part 1: Promoting your referral program
Low View Count← Improve Visibility
Top of the funnel we have visibility of your referral programs, i.e. out of all of your active users, how many have seen your referral program. This is measured by the percentage of your users that generates unique views of your referral program page.
This differs widely amongst startups — the more frequently your users engage with your platform’s website/app, the higher this should be. If your users are engaged with your platform on at least a weekly basis, you should aim for 100% of your active users.
Here is where you should place your referral program to improve this number:
- Admin dashboard/personal cabinet
- Credit replenishment/billing section
- Checkout order confirmation
- Right after sign up, offer them a premium feature
It also works if you place your referral program in multiple places. Avoid — placing it on a separate page, with just a “refer a friend” item on your navigation menu bar and hoping people will see and click it.
If you don’t want to place the whole referral screen on your main admin dashboard, you can at least place a big bold banner that leads traffic to it.
Other ways to promote:
- newsletter outreach
- support chat/onboarding process — closing out your intercom with “btw are you aware we have a referral program? would you be down to check it out?” especially if the ticket had successful outcome
- organize events around it: time-bound your referral campaign to one month while launching, offer an outsized reward for the top referral spot. Afterwards say “hey, we received so much interest from the community that we decided to open up our referral program permanently”.
Part 2: Increasing participation of your referral program
if you’re getting lots of visibility on your program, but not a lot of participation, here is what you can do:
- Adding urgency to share (tricky to accomplish, amazing results)
- Improve your messaging (easy to do, decent results)
- Make it easier to generate a share (easy to do, decent results)
Adding urgency to share
Fix — master the art of aligning customer’s urgency with yours. First, identify typical flows your users take that are urgent to them.
best example: they’re out of credits they need it to complete an action. usually it goes like…oh no, I’m out of credits …*clicks on buy points*….*sees an opportunity to get few points for free for just inviting a few friends*….goes for it.
Another great example: they just tried doing something that’s normally reserved for users of a higher subscription tier…for example, they’re using tinder, they want to use the “boost” feature, they hit on that button, but they can’t -> they’re not tinder gold member… here, you can offer them a limited use of this premium feature in exchange for a few successful referrals.
These work really well because you’re building on top of the customer’s urgency that is already there, and channelling that towards your referral program.
Your messaging is not super clear/confusing
Fix: being explicit about how/when they’ll get the reward is what you should aim for. A/B testing different messaging works BUT don’t overdo it — from what I’ve seen, this is very low efficiency per time spent on it, you’re much better off changing something fundamental like in the previous section. providing a table like the one below helps, it sort of shows your users…look I’m on top of my referral program, we are counting all of the referrals generated, don’t worry…and we are tracking when your friends convert.
Make it easier to generate a share
If you don’t have these yet, you must add 2-click share channels: email, sms, WhatsApp etc etc.
Don’t just leave them with copy to clipboard, but instead offer them a few more items on the line.
Bonus: a table like this helps your customer get immediate feedback — “oh great my referral was counted!”. showing them their referral is actively tracked increases the probability of multiple shares + bonus if you check for deliverability & ask the to retype the email address
Part 3: Deliverability of your channels.
Emails opens are low ← fix SPAM
If you’re doing well in (1) and (2), but you have a super low number of email opens (hint: you should DEFINITELY be measuring email opens and link clicks), there is a really good chance you’re going into SPAM. This is why you should measure email opens — if you see that number close to 0%, you know it’s got to be in SPAM.
How to solve this issue:
- run email address verification before sending those emails. there is always a percentage of users who will mistype their friend’s emails. Gmail will punish you for undeliverable emails as it thinks it’s happening because you’re buying old emails lists from someone. there are API’s that will handle this for you on the fly. if the result returns “undeliverable” to you, ask your user to retype that email
- unsubscribe link is a MUST
- useless images and Html, more plain text, and keep it simple
If your open rates are OKAY but not great, one more thing:
- subject line — include the sender’s name there
Part 4: Conversion rates of your referral offers
If you’re doing well in (1) (2) and (3), but no one is clicking your link/visiting your website using the referral links => work on your messaging and your offer.
First, always mention who invited them and why. Experiment with a colourful promotional email vs. a personalized text-only note. Bonus if you attach the referrer’s profile picture.
Second, be more explicit about the offer that’s being extended. If your service is relatively unknown, stating value in dollars is a great idea. But if you’re in e-commerce and the expected order is below $100, then aim for a percent discount.
Third, don’t forget to follow up! This is unfortunately only possible via email. On your referral page, include a little note saying we’ll follow up with your friend in 3 days. Then, send them a follow up reminder.
Fourth, experiment with the landing url/deep-link that your customers send to their friends. But this conversion step here is not that different for referred users compared to regular leads, thus I don’t feel like it’s within the scope of the referral program to optimize your lead to customer conversion rate.
That is it — if you track these 4 conversion rates, then you should know exactly what you need to work on to debug your referral program. If you’re looking for feedback specific to your referral program, or just want help launching your referral program shoot me an email elezhan@use-avalanche.com
