Why every business should have a referral program

Why every business should have a referral program

I’m going to make a bold claim here: every business should have a referral program. 

Yep — every business, and not just tech companies. 

Referrals are sales + marketing gold. A person referred to your business by a friend is 4x more likely to purchase your product than a stranger on the street. To make things better, referred customers are, on average, 16% more profitable than a non-referred customer. 

That’s huge! 

But referrals don’t just appear out of thin air. Like gold, you have to do a little digging to hit paydirt.

That’s where a referral program comes in handy.

We’ve seen the biggest tech companies of our decade use referral programs to grow – Dropbox, PayPal, Uber and more. Now we’re seeing referral programs explode into all industry verticals…

referral campaigns built using Referral Factory

Images above are actual referral campaigns built using Referral Factory – the platform we launched in 2020, that is now used by 100s of brands to run and manage their referral programs 🚀

Mining for referrals

Here’s something crazy: one “in-person impression” (meaning a friend talking up your product to another friend) is 5x more impactful than an online, paid impression. 

This means that when my mom tells me about this amazing new show she saw, I’m 5x more responsive to her than if I saw an ad for that show online. 

Think about it: that in-person impression was free. This is why referrals are sales + marketing gold. 

The problem is: referrals don’t fall into your lap from the sky. You have to encourage your customers to refer new business to you. 

A referral program encourages your customers to refer their friends by rewarding a successful referral. Now, when my mom successfully refers me to watch this awesome new show on a new streaming service, she gets a month’s subscription for free! 

That’s referral marketing. Your customer is rewarded for bringing you new business. 

Awesome examples of referral marketing

I want to show you some real-world examples of how effective referral marketing can be. 

The poster-child for awesome referral marketing is Dropbox. 

Dropbox is an online document storage platform. Their product is storage space. The more space you need, the more you’ll need to pay. 

Unless, of course, you refer your friend. 

Dropbox had a simple referral marketing program: refer a friend and you get 500 MB of storage free per friend! Plus, your friend also gets 500 MB free. This is a 2-side referral program (which is more expensive, but ultimately better for your customer base). 

Using this method, Dropbox grew its customer base 3900% in 15 months. That’s unheard of! 

How about Paypal? 

Paypal is another solid example of real-world referral marketing. 

When Paypal got started, they simply gave people cash for opening an account. And when the new customer referred a friend, they got more cash. 

How much cash? Originally it was $20 per friend. 

Obviously, this got pretty expensive, so Paypal phased it down to $5 per referral, and ultimately spent $70 million on this program. That’s not chump change! 

But, Paypal saw 10% growth per day during the heyday of this program, growing from 1 million to 5 million customers in a matter of months. 

Uber: Free rides for two

Uber’s referral program is simple, yet effective. Each existing user gets a referral code. They can give that code away to anyone. When someone creates a new account and uses their friend’s code, both users get their next ride free. 

This is another very effective 2-side referral (see a pattern?) that has helped Uber really corner the rideshare market.

But what about non-tech businesses? 

I stand by what I said: referral marketing is great for every business, not just tech! 

Bombas, the hip sock company (full disclosure, I love my Bombas socks) has a slick referral program where an existing customer shares Bombas on social media. 

When their friend clicks the link, the friend gets 25% off their Bombas order. Then, the original customer gets $20 to spend on new socks! 

Meal Kit businesses like HelloFresh and Blueapron have also used this 2-side referral strategy, offering discounts on new customer purchases and rewarding their existing customer base for successful referrals. 

So how can you get started? 

It’s a lot easier than you think to get started with a referral marketing. You don’t need a developer or a growth-hacker, you just need an existing customer base that uses and loves your brand.

If you have that, you can get your referral program off the ground in just a few minutes using Referral Factory – our software makes it incredibly easy for any business to build their own referral program. No coding required!

Even with the most basic Referral Factory subscription (€75 per month), you get all this:

  • Everything you need to plan, launch and run a powerful referral campaign.
  • 1000+ referral program templates for you to copy and use as your own.
  • Landing page builder, to make your referral campaign feel 100% on brand.
  • Referral link generator for your users, and real time tracking of your referrals.
  • Priority support from Referral Marketing experts.
  • Integrate your Referral Program with your CRM (upgrade required to use this feature)

Want to get started? Why not book a demo of our software using this link.