Questions

Referral Systems as SaaS

SaaS Referrals are too expensive. I need to choose the best one, so I wanted to ask you some questions: What are the most important aspects of a customer referral systems? What is the biggest challenge about using referral systems? What might go wrong in a referral system?

3answers

#1: The system you use to track your referral market. It must be reliable. If you have an unrewarded referred customer you will quickly get bad WOM effects. At best has a lot of features were to place a referral request: e.g. exit-request, pop-up, email campaign templates. Handle the relationships from referrers to referred customer.

#2: Your brand value. A referral system is not an affiliate system. An affiliate system is an external paid acquisition channel, a referral system, however, leverages your trust value of a customer. Hence, she feels good to introduce a friend to your product. The incentive method is not the primary driver in referrals, it's the brand value you established in your market. Your customers "want" to promote your product, because they feel good to be "the first one" to know about it and introduce their peers and social circle. If they gain +25GB, +10 e-commerce points, +20$ is a secondary tier incentive. #1 is they want to because they feel like it gains them authority, social validation and other maslovian feedback.

#3 Might not work, because you have not the right customer relationship setup, not developed the right customer profile yet and thus market to a wrong customer cohort. You might take bad insights out of this ending in a quick assessment of the channel.

Tbh, a referral system is the cheapest and best way of semi-paid customer acquisition. But, it comes with a huge requirement: established trust and brand value.


Answered 4 years ago

In my experience the most important aspect of referral systems are:
1) The track-ability of referrals (Knowing referred who)
2) The easy deployment of referral credits (Getting the compensation to those who referred people)
3) Understand the impact of your referral system (What can go wrong if this thing actually works)

The biggest challenge isn't implementing them (although that is important and difficult), but about understand the trade-offs of any approach and managing the to fit your objectives.

What do you want to accomplish with your system? More first time users? More repeat users? More daily visits? etc.

What would go wrong if people abused your system (hint: they will try)? Where are the weaknesses? How can you protect yourself from those circumstances (update your TOS and some management system for referral delivery).

Best of luck!


Answered 4 years ago

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