Launching a referral program is the best thing you can do for your business.
After all, customers tend to trust each other more than they trust brands. What better way to build credibility than to let your best customers vouch for you?
Besides, if done right, referral marketing can help you acquire more customers without draining your marketing budget. Better yet, referrals bring in the most loyal customers, too.
This is well and good. The problem? Running a referral program can get overwhelming. Fast.
You can’t help asking:
Am I offering the right incentives?
Am I promoting my referral program enough?
Am I promoting it too much?
How do I keep up with all these referrals?
If you’re feeling overwhelmed, it pays to see how the most successful companies did it. Looking for the best referral program examples? Here are 7 companies who have supercharged their growth through referral marketing.
Airbnb disrupted the hospitality industry by doing the unthinkable: allowing homeowners to turn their homes into rentable property. Since its 2008 launch, Airbnb has seen rapid growth. In August 2017, the community-driven hospitality platform broke 4 million listings—exceeding the number of rooms available in the top 5 major hotel brands combined.
Airbnb owes a big part of its success to its referral program.
Airbnb Referrals 1.0
The company launched their first refer-a-friend program, Referrals 1.0, in 2011 via Referrals 1.0.
How Airbnb’s referral program worked:
- Refer a friend to Airbnb, and you receive $25 when they take a trip.
- Refer a friend to Airbnb, and you receive $75 when they rent out their home.
While Referrals 1.0 was a success during its first year, it lost some steam due to lack of promotion. Why didn’t they promote it much? Gustaf Alströmer, Growth Product Manager at Airbnb, says it’s because they weren’t particularly proud of the referral program.
Airbnb Referrals 2.0
Airbnb then revamped its referral program and launched Referrals 2.0. Around this time, mobile adoption was growing at a rapid rate and the company took advantage. With Referrals 2.0, Airbnb users were able to import Gmail contacts and send customized invitations.
To top it off, Airbnb discovered that appealing to self-interest isn’t always the best way to motivate their users. As it turned out, customers are more likely to send referrals if that means their friends get the reward rather than them.
How did they find out? By A/B testing their referral emails.
Leveraging personalized invites
Here’s another thing Airbnb did right: they personalized referral invites. They even assigned personalized referral codes
When an Airbnb user sends a referral invite, this is what their friend sees:
By including the name and photo of the referral, Airbnb was able to leverage the connection between Airbnb users and their referred friends. It shored up the company’s credibility because it showed proof that someone they know enjoyed and trusted the service.
When people hear “Tesla,” what’s the first thing that comes into people’s minds? That’s right—electric cars
Tesla, however, wasn’t the first car maker to manufacture electric cars. They cornered that part of the market because they have a vision people can aspire to, and that instills loyalty and advocacy among their customers. In fact, Experian found that out of all car brands, Tesla has the highest level of customer loyalty out of all car brands.
Tesla leveraged that loyalty to great effect via their referral program. The referral program was so successful, in fact, that it 40x ROI. With zero advertising budget.
How Tesla’s referral program worked:
Tesla’s referral program has had many iterations through the years. But if there’s something they did right consistently, it’s knowing what their most loyal advocates want.
And what do Tesla’s most loyal advocates want? More Tesla products? Sure. But what they wanted more than anything else is the opportunity to wear their advocacy as a badge of honor.
So Tesla indulged them by offering meaningful, novel, and exclusive rewards.
Tesla’s referral program incentive structure:
- Refer a friend, and they get $1,000 in Tesla credit when they buy a car.
- Referrers get automatic entry to win a Ludacris P90 Model X
- Referrers also earn the following rewards based on the number of referrals.
10 referrals: invitation to Tesla’s next unveiling event
5 referrals: Tesla wheel rims that are not available for purchase
3 referrals: Tesla owners jacket that is not available for purchase
2 referrals: Tesla duffel bag that is not available for general purchase
Keeping up with Tesla’s Referral Program
If you’ve been following Tesla’s referral program, you already know that it changes all the time. This is one advantage of having multiple product lines: It gives Tesla the flexibility to switch up their reward tiers based on the changing wants and needs of the market. It also helps to keep advocates on their toes, with some of them on a perpetual hunt to grab the next exclusive rewards.
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3. 24 Hour Fitness
24 Hour Fitness is one of the biggest fitness club chains in the U.S. To date, the fitness chain has 400 clubs and 4 million members worldwide.
The fitness company’s referral program contributed a lot to that growth. In fact, the company was able to generate over 330k referrals in the first 3 months of the program’s launch.
How did they do it?
- By offering rewards to the new customer instead of the referrer.
- By leveraging social media.
Offering rewards to the new customer via a one-sided referral structure
This is another case of a brand knowing what their customers want, nay, need.
If you’re one of those people who aim to stay fit but need the constant motivation to stay accountable to their goals, you probably bring a work buddy with you when you head to the gym. After all, it helps to have a friend who will encourage you to meet your daily fitness targets.
But finding the ideal workout buddy can be a struggle. 24 Hour Fitness solved that problem by launching a referral program that allowed customers to offer their workout buddy prospects a free three-day pass to the nearest 24 Hour Fitness facility.
In referral marketing parlance, this incentive structure is called a one-sided referral structure. There are two kinds. One that rewards only the referrer, and another that rewards only the new customer. 24 Hour Fitness chose the latter. And it worked. Big time.
This incentive structure worked for 24 Hour Fitness for two reasons. First, many non-customers didn’t want to pass up on the free three-day pass reward, especially if that meant a friend will tag along. Second, customers were encouraged to send more referrals. Turns out they relished the opportunity to give their friends a freebie. Also, sending referrals felt less awkward and more sincere since both parties know the referrer won’t be getting anything in return.
Leveraging social media via the “Social Referral System”
24 Hour Fitness saw the potential of social media around the time of the referral program’s launch in 2013, and so focused on social referrals instead of using traditional methods.
By using Gigya’s social sharing tools, 24 Hour Fitness’s customer referral stories spread far and wide, giving them the social currency and the exposure they need to acquire more customers.
Relying on social referrals rather than traditional referral methods also dramatically reduced the company’s customer acquisition costs.
“Traditional brick-and-mortar referral methods can be quite expensive,” Joe Beruta, head of marketing at 24 Hour Fitness, tells ClickZ. “We saw so much communication going on via social platforms and we wanted to capitalize on the natural, word-of-mouth referrals that happen there.”
By January 2014, the fitness chain registered more than 8,400 new referrals through social shares, earning them a revenue of more than $600,000.
Rewarding high-value members
Brand advocates offer a lot of value to a business. Not only will they keep doing business with you, but they will also take every opportunity to spread the word about your brand.
24 Hour Fitness realized this. And they rewarded their best advocates in kind.
After finding their top referrers, 24 Hour Fitness awarded them with a branded bag of fitness supplies, including a water bottle, towel, etc. The rewards also came with personalized "thank you" letter."
4. Morning Brew
Morning Brew is a daily newsletter that provides business-minded millennials with the latest news surrounding the business world. Founded in 2015, the media company has recently reached 2.5 million subscribers and is set to earn $20 million this year.
How did they do it? By publishing great content.
Subscribers loved reading their content so much that they kept recommending the newsletter to their peers even before the company had a referral program.
So it’s no surprise that Morning Brew’s growth accelerated at a rapid rate when they launched their referral program in 2017. Subscribers were so into the program that it helped the media company grow their audience from 100,000 to 1.5 million in just 18 months.
Tyler Denk, Growth Engineer at Morning Brew, explains it all in his popular Medium blog post:
“While the referral program obviously doesn’t account for all 1.5 million subscribers we have today (we began pursuing paid acquisition in early 2018), it does account for over 30% of our total subscribers and is the “secret sauce” that makes our growth flywheel spin. It’s helped turn readers into evangelists and evangelists into walking advertisements. It’s the ultimate 1 + 1 = 3 scenario that makes all of our acquisition channels X times more effective.”
So, how does Morning Brew’s referral program work?
Morning Brew’s referral program offers multiple rewards using a tiered reward system where subscribers earn bigger and more valuable rewards as they continue to rack up referrals.
As you can see from the above image, Morning Brew doesn’t offer cash rewards or discounts.
Rather, they offered rewards that appealed to their target audience’s desire for:
- Exclusive experiences
- Social status
- A sense of community
It’s no surprise that Morning Brew offered “Trip to Brew HQ” as the highest reward. After all, a recent study shows that millennials put more value on experiences than rewards.
Morning Brew’s seamless UX
The key to a successful referral program, or any marketing campaign for that matter, is to deliver relevant experiences based on audience intent and scenario.
Morning Brew pulled this off by crafting user flows that align seamlessly with the customer journey as it coincides with the referral program.
For example, if a new subscriber hasn’t referred anyone for two weeks, Morning Brew sends this follow-up email to remind them about the referral program.
The email above is but a taste. If you’re a regular reader of the Brew, you’ll notice the following trends:
- Their emails are personalized as all get out.
- Their brand voice is consistent all throughout.
- They remind you about your referral progress in relevant touchpoints
- They consistently show stunning visuals that showcase their rewards.
- They make sharing easy by providing a unique referral link and social sharing buttons.
- They use gamification elements to keep you engaged in the referral experience.
5. Amazon Prime
Amazon’s rise from scrappy, underdog startup to being one of the wealthiest brands in the modern era is the stuff of legends. If your company can be put in the same sentence as Google, Apple, Microsoft, and Facebook, then you’re definitely doing something right.
A big part of what made Amazon so successful is Amazon Prime, a paid subscription program that gives customers access to additional services (free deliveries, exclusive deals, discounts, premium content, etc.).
To date, Amazon Prime has acquired 200 million members worldwide. And that’s no mean feat considering these are high-value customers. In fact, Prime members spend up to $1500 per year on average, which is more than double the amount spent by regular Amazon shoppers.
Many of Amazon’s most loyal brand advocates are Amazon Prime subscribers. So it’s not in the least surprising that Prime customers love to evangelize the subscription program to their peers via referrals.
How Amazon Prime’s referral program worked:
It’s simple. An Amazon Prime member refers a friend. If that friend joins and makes a $5 purchase, the referrer receives a $5 credit to spend on their next Amazon purchase.
This reward structure works for Amazon Prime for two reasons. First, it rewards customers with what they want: the additional means to make more Amazon purchases. After all, a Prime member will want to buy more to maximize the value of their membership.
Below is the landing page to the Amazon Prime referral program.
Amazon did a lot of things right with the landing page above.
The captivating headline. Notice how it (“One more benefit of friendship”) highlights not just the referral program’s benefits but also the value of friendship.
The accompanying hero image. It does an excellent job of communicating the referral program’s message.
The prominent CTA. Notice how the entire page design and the contrasting colors draw the eye to the CTA.
Multiple sharing options. The more sharing options you provide customers, the more likely they’ll share.
While Amazon Prime ended its referral program in 2017, no one can deny that it was one of the catalysts that helped the program take off and turn Amazon into a multi-billion dollar company.
Dropbox is a big deal in the cloud storage arena. And why not? After all, the company killed the USB stick And thanks to robust integrations, Dropbox continues to dominate the cloud storage space, making the product the ideal tool for productivity and collaboration.
Dropbox had word of mouth going for it early on. But Dropbox didn’t rest on laurels. They capitalized on the hype surrounding their product by launching a referral program.
Dropbox shows that the way to referral program success is two-sided
Dropbox’s referral program uses a two-sided reward structure, meaning that both the referrer and the referee are rewarded for every successful referral. This works especially if theories a network effects involved (your product or service increases in value when more users use it).
Here’s how Dropbox’s two-sided reward structure works:
- Refer a friend and you get 500MB of free storage.
- The friend who receives the referral also gets $500MB of free storage.
- Keep sending referrals until you reach 16GB.
How Dropbox’s referral program achieved 3900% growth in 15 months.
Dropbox’s referral program was a major hit, helping the company achieve 3900% growth in 15 months. That means Dropbox doubled its user base every 3 months for 15 months.
And they maintained that pace of growth year after year.
Here’s Dropbox’s number of registered users from 2008 to 2009, and all through 2017.
September 2008: 100K registered users
December 2009: 4M registered users
September 2017: 33.9M registered users, 10B evaluation + 1B revenue.
So how did Dropbox manage it? They pulled it off by being great at what they do. Remember, cloud storage wasn’t exactly new around the time Dropbox was founded, but the company separated itself from the competition by making file-sharing child’s play for users.
In other words, Dropbox made their solution referral-worthy. Dropbox made file syncing so easy that users couldn’t help themselves from recommending the solution to others.
If most Dropbox users are eager to recommend the product to others without a referral program, imagine what would happen if there was one?
Another thing Dropbox did right was introduce the referral program in the onboarding process, This makes sense. After all, new users will want to make the most out of their investment from the get-go. Who wouldn’t want the idea of an additional 500MB on top of the 2GB you already have?
7. World of Warcraft
World of Warcraft is arguably the most successful massive multiplayer online role playing game (MMORPG) of all time. Since its 2011 release, the video game franchise has already amassed 140 million global players.
With the number of devoted players the game has, surely World of Warcraft has a referral program that can help them leverage their loyal fan base, right?
WoW’s ‘Recruit-a-Friend’ program
WoW’s referral program is called ‘Recruit-a-friend.’ Here’s how it works:
- Access the ‘Recruit-a-Friend’ system via the in-game store menu.
- Send a recruitment link via email.
- Once the referral signs up using your link, both of you will get rewards
- You can recruit up to 10 friends using the RAF system.
What made it work
The best part about the referral process is that you do everything without ever leaving the game.
The best part perhaps is that the entire referral process can be completed in-game. This makes sense. After all, when you’re fighting off a hoarder of demons, the last thing you want to do is exit the game and send off a couple of emails.
The main draw of the referral program is the rewards themselves. When you send referrals, you get a variety of in-game benefits and items. One obvious rule you need to follow when setting up referral programs is to offer rewards that will prove valuable to your customers. And what WoW players want, more than anything, are in-game goodies that can help them advance in the game.
WoW also added a “network effect” to the referral program by giving a 50% experience boost to recruited players and recruiters who party together following a successful referral (or recruitment).
And not only that. WoW’s Recruit-a-Friend program also offered exclusive rewards in the form of mounts. Mounts are modes of transportation that can help players travel faster. But mostly, players want to earn these mounts because they love collecting them.
As the above examples show, a referral program is a powerful way to grow your business at a low cost. While there are many ways to design a referral program, I hope that the success stories discussed in this blog post have sparked some ideas on how you can supercharge your growth with a referral program of your own.
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