How to build a refer-a-friend program for your web app in 2013

Refer-a-friend programs work. The problem is that while some of them lead to exponential viral growth, a lot of them are poorly built and leave the people that built them feeling like they wasted their valuable time. So, we’ve decided to come to the rescue and give you some pointers on how to build a refer-a-friend program for your web app.

Here at SaaSquatch we research web app growth, talk to people that have run successful (and unsuccessful) refer-a-friend programs, and spend a lot of our day thinking about referrals. We’ve accumulated a nice little pile of knowledge about what works in the modern internet age of 2013, and we’ve decided to suppress our primal SaaSquatch instincts that would have us hoarding our treasure and hiding in our pacific northwest forest, and instead we’re going to share this knowledge with you (but please, no pictures!).

Step 1 - Build on your web-app's foundation of authenticity

The foundation of absolutely every successful refer-a-friend program is based upon real, honest, authentic reviews from one close friend to another. In order for your refer-a-friend program to be a success, you need to establish your own foundation of authenticity. It’s odd to say this, but the first step to building a refer-a-friend program is to not build it at all: The first step is to make sure you have that foundation laid out. Check your customers reaction, look at your numbers, and do a gut check to see if you believe a refer-a-friend program would work for you.

First, check your out what people are writing about in your correspondence with customers, on review sites, and in your twitter feed. If people are already saying nice things about you, then that’s a good start. The second place to check is your numbers. At what rate are people converting from just visiting the site to using your web app, and at what rate are people activated and retained (to see what I mean by activated and retained, check out pirate metrics). Those numbers should speak to the value that your product is providing to your customers, and if they're doing well, that's another sign that you've got a solid foundation. The last place to check is your gut. Do a mental gut check. Put yourselves in your customers shoes and ask “Would I tell my friends or colleagues about this?”. If the answer to that question is simply “no”, then you probably don’t quite have product-market fit, yet.

Step 2 - Make it friendly (good UX is king)

In the modern web age User Experience (UX) isn’t just nice to have; fantastic user experience is king, and bad UX is a death sentence. LinkedIn, Dropbox and Paypal all have made small tweaks to their UX and gotten huge results. What does this teach us? It’s not a matter of just having a button, it’s a matter of having the right button in the right place.

For your refer-a-friend program, you need to make sure you have the right buttons in the right places. We’ve seen far too many refer-a-friend programs hidden deep inside account settings next to the scary features like downgrade my plan and cancel my account. I can understand why some people might think that refer-a-friend is a non-core feature, and shouldn't be in the forefront, but remember that if people don’t know about your referral program then they just won’t be able to participate. So make your refer-a-friend buttons plentiful, visible and useful.

For people that don’t want to show their refer-a-friend program on the front page of their web app, a happy medium is to prompt people during what we call happy moments. What is a happy moment? It’s when someone collects pays for the first month in your SaaS app, or uploads their first file to their dropbox, or finishes their first call in your video conferencing app. Studies have shown that people are much more likely to refer a friend if they just had a positive experience. So, try to catch people when they do something that makes them happy or makes them understand the value of your product. During these happy moments people should be in the right mindset to give your web app a positive review, and they even have something to talk about. “I just got paid for my first invoice, with Ballpark and it was so easy! You should try it.”

Good user experience doesn’t end with finding the program, it also has to be easy to use. Does your refer-a-friend program require people to give you their usernames and passwords for their email account, authorize a facebook app, follow you on twitter and click through five pages before they can even start inviting friends? That’s not a good thing. You need to focus on optimizing for honest and personal referrals because those will be way better for your business than a million unread spam invitations.

People can spend hours debating over what the best design is, but ultimately the answer is what performs best. So instead of debating just try something, measure it to see how it works and then optimize it from there.

Step 3 - Know and measure your metrics

When you design a refer-a-friend program for your web app, you need to understand what you’re going to get out of it and once it’s launched, you need to see if that happened. We’ll probably have to post another article entitled “What to expect from your refer-a-friend program” or “How to know how well your refer-a-friend program is doing”, but in the meantime, this little bit of advice will have to suffice.

The key metric to your refer-a-friend program is your viral coefficient (also know as your “K Factor”). It measures how many new users one of your users will invite. If your k=2, then one of your user will on average invite two others and your app will grow exponentially or virally. If your web apps is a business app or SaaS it’s very unlikely that you will go viral, but that’s still awesome.

Just like the funnel that you set up to measure your pirate metrics, you’ll want to set up and measure a funnel of the steps in your refer-a-friend program. How many of your customers know about the referral program? Of those people that know that you have a referral program, how many have tried to participate? Are the referred friends signing up, completing their trial and paying? Measure these metrics, find out if you have any drop off points where people are disappearing, and try to fix those drop-off points. Remember that like your pirate metrics funnel, you’re going to have less than 100% conversion at any step, and that’s okay.

Step 4 - Plan for 2014 and beyond

Referral programs shouldn’t be static. You can’t just spend a couple weeks building your referral program, then turn your attention back to building your product and forget about it. This guide gives some advice for what works RIGHT NOW, but it’s not going to be true forever. Social networks are popping and dropping all the time, the web and the technologies that power it are evolving, mobile is becoming a force to be reckoned with, and the way that people expect to interact with each other are changing.

For example, some web apps have made their sharing work via a Facebook app, so they can auto-post to people’s walls. This seems like a great idea at first because you get a nicely integrated experience, but the downside is that now you a new way for your referral program could break. Make sure to subscribe to the Facebook developers blog and watch out for the deprecated features that go out every month. This means putting some of your other features on hold just to have your developers maintain the status quo. And what about Timeline? Open graph? These are great things to take advantage of, so make sure you find time for them.

If you’re building a referral program from scratch, try to take advantage of as many tools as you can to simplify the design, creation, testing, maintenance and optimization. Otherwise, you’ll be spending a huge amount of money on paying developers to simply maintain the status quo, time you should rather be spending on growing your foundation of authenticity.

Summary - A great refer-a-friend program does all these things

A successful refer-a-friend program is built on a foundation of authenticity. If someone would refer your web app, then you have that foundation, and you’re ready to launch a referral program. Before you launch, though, make sure that you understand what you’re going to get out of it. Measure how well it’s performing, and have a plan to maintain and evolve your referral program over time. Finally, make sure that your design makes your refer-a-program easy to find and a pleasure to use.