Growth hackers! We need your advice on setting up a top referral program

We are setting up a referral program for We will incentivize customers to share our site with others. Our jewelry will sell for $100 - $1,000, mostly ~ $250. We've been thinking about giving $1 for every signup customers bring but are scared of possible fraud and overall unsure whether this is an appealing proposition. We've settled on $50 for every friend who comes and purchases. I am super aware that we won't know the answer until we test, but still, what's your take on that? Is $50 too much? Do you have other suggestions or can you point us to a very successful referral program in a relevant industry?


Question ...

If the lower end of the retail price range for your jewelry is $100, why would you be giving away $50 in cash?

Presumably, the margin on a $100 piece of jewelry is such that its wholesale cost is roughly comparable to that $50 in cash.

So if the choice is between giving away $50 in cash versus giving away $50 indirectly in the form of products worth more than $50, why would you pass over the opportunity to place your products with your customers?

There are dozens of ways to spend $50 on marketing. But the best way -- surely -- is to put your branded jewelry around the necks or on the hands and wrists of people who will go out in public wearing / promoting you!

I'm sure you could structure this in various ways to make it just as cost effective as giving away cash. At worst, the cash probably ought to be in-store credit.

Yet you might also want to consider incentivizing a person to refer 2 people or 3 people or 5 people as a minimum in order to redeem free merchandise of various price points. Anyone who sees that they are 1 more referral away from a $500 piece of jewelry will be much more eager to bring in another friend than someone who has already been paid $50 apiece for each referral thus far.

Answered 7 years ago

At the end of the day it comes down to what metric matters most in your business. I don't have enough info about your business model and products to give definitive advice but you should only pay a referral commission for referrals that move your business forward. You are on the right track by only paying comissions for people who are referred, sign up AND make a purchase, rather than just sign up.

Facebook is an example we can all relate to. Zuckerberg has always only reported ACTIVE users, not registered users because ACTIVE users are what make Facebook valuable.

Whatever it is that will make your company more valuable whether it's users, usage, revenue, profit, volume of sales, frequency of sales, etc. is what you should incentivize.

Hope this helps, let me know if you need any clarification. Here to help!


Answered 7 years ago

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