3 Referral Program Mistakes That Don’t Work and Why!
This week we are profiling referral programs from three of our favorite companies: PipeDrive, PaperTrail, and Terapeak. These guys have great products, have run referral programs for awhile and have had varying levels of success with them... but they are not without their sins. Today we'll show you a common transgression for each of these referral programs, and tell you how to make amends for those sins.
We hope this article sheds some light on what we have seen in referral programs in the wild, and will teach you how to boost your referral program performance.
Pipedrive is a web app that helps your sales team manage and track their sales leads. Created by frustrated sales managers, Pipedrive solves a bunch of pains with current CRM software.
Transgression: Hidden Campaign
Pipedrive's transgression is a common one: They built a beautiful referral program and promptly buried it on a side tab of the user profile. We're not saying that you should be prompting your customers to refer at every click, but it should be something that is easy to find and in plain sight.
Fix: Find a Happy Moment and Visibility
We suggest you find a customer's happy moment. This is kind of like the aha moment, but instead of it being the point where your customers are likely to stick around (ie: the retention "Aha moment" from Mattan's article), it is the point where they are happy and would refer a friend.
For example, in e-commerce the happy moment is right after someone has completed checkout. People are more likely to invite their friends after purchasing because their shopping endorphins are still flowing. Other great happy moments are when someone submits a positive review, gives a thumbs up for the quality of the support they received, or maybe in the case of Pipedrive, had a successful day of closing deals.
PaperTrail is a web app that solves your problems with logging. They help guys in Dev Ops that are running a lot of servers keep track of what's going on and be more effective.
Problem: Weak Incentive
We're a big fan of Papertrail and use it in our day-to-day operations. So, when we saw that they had a referral program, we were immediately stoked to have our friends and colleagues set up their Papertrail accounts... until we saw our reward.
Papertrail's transgression is that their incentive is insultingly small. The 50MB reward seems insignificant compared to the gigs and gigs that we log every month, and when you actually do the math, it cements the feeling. At $16.80 per GB, the reward for getting my friend to sign up would be a measly $0.82 off my monthly bill.
Fix: If you don't have something nice to give, don't give anything at all
You're better off to rely on organic referrals than to insult your customers with a measly incentive. This doesn't mean that you need to throw money at the problem. Some of the best incentives have non-monetary value that gives them real weight.
If you can provide a bigger reward, try making it a reward for a more lofty goal. Offer a t-shirt when a friend subscribes and don't give anything away for free or trial accounts sign-ups. This will make your economics a simple CPA calculation, and remove the risk of rewarding those free account referrals. By not giving away anything until you make money, you'll also be able to offer a much nicer incentive.
Terapeak provides analytics for the biggest sellers on Ebay. Terapeak tracks product and consumer behavior on the Ebay marketplace, including over 2.4 billion transactions per year and over $68 Billion in online consumer spending worldwide, and uses that information to help over 1.3 million online merchants sell better.
Transgression: Being a Secret Weapon
Terapeak’s product provides a competitive edge for their customers. Unfortunately, this means that Terapeak's transgression is baked right into their very DNA: People simply won't refer Terapeak to others, because those others are potential competitors. Why would someone want to invite their own competition? We call this being a "Secret Weapon" and it is the worst kind of transgression because there is no cure.
Fix: GTFO and try something else
For "Secret Weapons" a referral program quite simply will not work. Your only option is shut down that referral program and switch up your marketing tactics. Try more paid customer acquisition models such as CPM and PPC advertising campaigns, or launch a combination of a blog and newsletter to help keep and attract your customers.
We've pointed out some transgressions with these referral programs, but that doesn't mean they don't produce any results. At the end of the day, you need to measure how your referral program is performing and relentlessly try to improve it. Where is your drop off point? Do your analytics say that nobody ever visits the referral program page? If so, chances are that you've hidden your program. If they make it to your referral program, but they never end up sharing, it's very likely that your incentive just isn't enticing, and you might need to try a bigger prize, some swag or a dancing cat. Try something, measure how it works and then improve it.