Referrals are one of the most effective ways to generate new subscribers for your site at a very low cost, but not nearly as many subscription businesses use this tactic as they should.

What is a Referral Program?

When we talk about a referral program, we’re speaking of a specific program which could leverage software, an app or a marketing campaign to get your existing members to recommend your site, service, box subscription or publication to their friends, their peers, their family members.

Recommending tools, services and content is something people do all the time. But for your business to be effective at getting your visitors, members or subscribers to recommend you, you need to make it very, very easy for them to recommend your product or your service. The reason is, studies have shown that people really do tend to listen to their peers or their family members when it comes to purchasing decisions.

The customers that you get through referrals also tend to be much higher quality. We have found that referred subscribers can have up to a sixty percent higher lifetime value than subscribers you get through other paid media channels. That’s a significant improvement. You might not see sixty percent in your specific business, but study after study have shown that they do generate higher quality subscribers.

Referrals are also a very, very cost-effective channel.  Referred subscribers cost one-fifth to one-tenth what you might pay for a subscriber generated through paid media on a cost per acquisition basis.  When setting your goal for your referral program, try to generate up to fifteen percent of your monthly new members, a good small but steady contribution month after month at a very low cost per acquisition. This allows you to use your budget more effectively for some of your other subscriber or member acquisition channels, like paid search, email marketing, or advertising.

Types of referral programs

Here is our list of how you can generate referrals with five specific types of programs. We chose these because they’re applicable to both B2B and B2C, though some work a little better for one or the other, which we’ll explain as we go into them.

Referral Program #1: New Subscriber Referrals

The first program is something we like to call “referral at birth”. That’s where you present a new subscriber with an option to refer this service to their friends right at the moment of sign up. Essentially, when somebody joins your subscription or membership, you build in this type of “tell-a-friend” or “recommend us to a peer” pitch right into the sign-up process.

When designing referral at birth programs, focus on your new member onboarding process to include the promotion.

You should also think of other key points in your subscriber lifestyle where you might be able to insert a referral program. This could be if somebody comes back and makes an additional purchase from you in addition to their subscription during the checkout process, you might insert some kind of referral program. Also, think about renewal. If a subscriber is renewing, they’re probably happy with the service, they might want to recommend it to a friend or a peer in the B2B space.

It’s very important if you’re considering referral at birth, test this against other offers you might make during that process. We’ve seen a lot of marketers like to use their thank you pages after a new registration to offer some co-registration deals or maybe some upsell offers. If you’re using something else on your thank you page, definitely test which is going to be more beneficial for your site in the long run, whether to generate referrals or to generate co-registration revenue or a direct sale.

Referral Program #2: Direct Referrals

Another program is a direct referral request. These are special promotions that are designed specifically to get your member base to recommend your service to their friends, their family members, their peers.

The idea is that you want to make it something that your subscriber would want to share. Why would they want to share this? It makes them look like they’re offering a special deal to their friends. They get to feel like they’re a part of something. It’s also important to create a deadline to create a sense of urgency. That way you can also measure the effectiveness better rather than having an ongoing program month after month after month.

We recommend you try and send your referral request in multiple channels because some people respond to email, some people respond to direct mail and others, social media. Also, you might consider building something into your customer service scripts where you can have if somebody’s on the phone with a customer service agent where they present an offer with some kind of benefit for their family members, business colleagues or their friends if they were to make a referral.

Referral Program #3: Reward Program

You could consider implementing a very specific reward program.

We sometimes get questions about what the difference is between a direct referral program and a reward program.  It’s an astute question!  The difference between a direct referral and a reward program is that a direct referral program benefits the referred subscriber, the reward program benefits the referrer.

You want to give your existing members a bonus every time they refer someone. These should be an ongoing program, not a special promotion. This is something that lives on your site, it’s always there, members know about it, and then any time they refer someone, they’re going to get their benefit.

Your program could be a cash benefit, credits to their account, an extension of their subscription or membership term, or additional services that you might offer.

If you’re going to use cash or credit for your reward program, it’s important to figure out how much can you offer. You’ve got to look at the lifetime value of a subscriber, look at the other cost-per-acquisition and figure out how much can I really afford to spend on these referrals in order to make it profitable.

Don’t just think that cash is the only kind of reward to offer. In fact, non-cash rewards can be really effective when executed in the right way.

You don’t even have to send anything. You don’t have to send a product, you don’t have to send cash, you don’t have to give them credits, you can also just simply recognize your subscribers. This can work really well because sometimes that’s all people really want is to feel engaged with your site, and feel appreciated. If you make it very easy for your customers to refer your site to other people, then also make it very easy for you to recognize them publicly in some way.

Referral Program #4: eCards

Another program you can consider are eCards, and I’m sure everyone listening to this has received or seen an eCard. These are essentially just online greeting cards. Sometimes there’s an animation, sometimes some sound, but basically, it’s things that people can customize and send to their friends or their peers.

In addition to making it personalized from the existing subscriber and letting them personalize it to their recipients, you also want to try and tie in some way that when the person receives it, they’re brought back to your site. You could also include a special offer for new subscribers with these eCards so that the people who get it see that it came from their friend who’s a subscriber at your site, but now they’re offering you a special offer, or you could include a direct signup form. Make it engaging, and then also make it so that it can take another action and become a member of your site.

You can make these as simple or as complex as you want. The key here is that the more personalized you make it, the more your customer is likely to share it.

Referral Platforms Directory

There are many tools available to support different types referral programs, here are some that we found to get you started with your research.

What referral programs or technology are you using? I would love to hear what you are doing in this area!