Video: What reward should I offer for a referral?
Discounts, Credits, Swag what should we give out? In this section we go over the different rewards you can give out as well as the pros and cons that are attached to each one.
Hi, welcome to another session on customer referral programs. Today we’re going to talk about what should I give for my customer referral program. Determining the right reward or prize can actually be quite important in determining the effectiveness of your customer referral program. Before we get into the meat of what prize you should actually pick, we just have to clarify that it depends what type of business you are.
Know your business
If you’re a business to business company, you’re probably going to be looking at different prizes than a business to consumer company. Now, why is that? Well, if you think about it, a consumer is far more likely to pay their own bills, therefore things that influence them are going to be different than a business to business(b2b) customer, who is potentially employee #4078 and really doesn’t care about the bill. We start this basic, business to business, business to consumer, it’s going to split us out.
Let’s look at Prizes
Let’s actually look at what the prizes are. There’s three different types of prizes you’re going to find in most customer referral programs, you’re either going to have a percentage off their bill, a credit on their account, or swag (T-shirts, branded gear, potentially bottles of wine, whatever you’d like to give). We’ll start with discounts, if you’re going to do a discount for your customer referral program, you want to make sure that at least one of your users is actually paying the bill. It’s true that this can actually be a business to business customer, but you want to make sure this is a small or medium business customer where that individual is concerned about paying the bill. If you have a consumer app, this can be a very nice solution. We’re looking at giving them a percentage off their monthly bill, so if you charge $10 a month, what can we give them off that? 10%-20%, and actually, the percentage we give off really quite matters. It has been found that under 10%, it’s very hard to get anyone interested, it all turns into sort of “nickels and dimes”, and that doesn’t really drive too much interest. Interestingly enough, we’ve actually found that if you go over 20% discount, your returns start to diminish quite drastically. This doesn’t mean you will not get good results if you go ahead give away more and more, it just goes to say that beyond 20% you’re not going to get that many more people for the amount you’re going to give away.
Offering Credit as a Prize
Now, credit is a great option if you don’t go ahead and charge a monthly subscription fee, but you have more of a metered billing solution. An example of this is you’re an email sending service and you actually charge per email sent. If it’s $0.1 per email, it might be a $1,000 bill for one customer, but a $10,000 for another. You may not want to give away a percentage discount because that could expose you to potentially quite a bit of loss. For those types of applications, we would recommend a credit. You want that credit to average around 10-20% of a users’ first month with you, and that’s going to give them enough incentive to try it, to get going, and that’s not going to break the bank, unlike giving away 10% to a million dollar customer. Once again, these can work in small/medium business, but it’s typical in a consumer application, the credit is going to mean a bit more to the bill.
Offering Swag as a Prize
If you’re not looking at discounts and you’re not looking at credit, swag is a great option. Swag works for people who aren’t paying the bill, because we’ve now got something that they can get out of making the referral. If I’m employee #9000 at a company, if I refer your product, and out of that I receive an amazing swag bag, that is worth my time versus if I save my boss 10% off or $1000 off, that doesn’t really interest me much, so we really recommend swag as an option, especially in the b2b space where you have those users who aren’t actually paying the bill, or if you’re lucky, aren’t actually price conscious.
Swag works really well for b2b companies who aren’t actually paying the bill, whereas discount and credit works better for small business and consumer apps where the person who is paying the bill is also a user of the app. That wraps up our session on what you should give as a reward for your customer referral program.