How to Create a Great Referral Program for Your Startup

Dianna Labrien

Referral marketing is easy to define: It's a marketing strategy that involves getting customers through word of mouth recommendations from others. Obviously, business owners have all used this strategy on some level for millennia. The difference is that today, startups are launching referral programs that take this strategy to the next level.

There is no doubt that referral programs work. AirBNB, Dropbox, LootCrate, and other brands have used them masterfully (more on this in a moment). It’s now wonder, since according to Nielsen, 92 percent of people trust referrals when they come from people they know. If you want to create an effective referral program for your startup, here are the steps you should follow.

Know Why and How Successful Ones Have Worked

“Do I get the friends and family discount?” This phrase is quite popular today. What many people don’t realize is that it refers to what was essentially a referral marketing program from telecom giant MCI in the eighties. Basically, the company provided discounts and other incentives to people who got friends and family members to use MCI’s long distance services.

Today, some of the most popular brands use referral marketing. AirBNB started by offering incentives to people who got their friends to book places to stay through them, and even more for those who rented their places through AirBNB. Then there is DropBox. Their two way referral program rewards both the person giving the referral and the new customer with extra storage space.

Then there is a LootCrate. Their referral program is beautiful in its simplicity. Refer a friend, and get five dollars off, and your friend receives the same discount. People who refer four friends get that month’s loot crate for free.

The key is to avoid unneeded complexity and to ensure that the rewards come quickly.

Consider a Charitable Slant

While rewarding customers and their friends is certainly effective, it isn’t your only option. H&R Block donates money to organizations that refer customers. People simply enroll their non profits with H&R Block in return for a code. When people sign up to use H&R Block and use that code, the company makes a donation to the non profit. Target runs a similar program with its red card to benefit the local school of each customer’s choice.

Marketing Your Referral Campaign

Of course, a big part of your referral marketing budget should go to promoting your campaign. As always, content is key. Your goal is to make it clear that your referral program is easy, that everything is above board, and that your customers have a lot to gain from it. Your content should demonstrate the ease of making and accepting the referrals. It should show people benefiting from those referrals as well. It’s also a great idea to show customer satisfaction rates, and other data that you can use to convince customers.

Referral marketing audiences tend to be a bit younger. Because of this, don’t be afraid to use content that is a bit irreverent or tongue in cheek.

Finally, you want to be sure that your marketing doesn’t leave people with any  mistaken assumptions. You don’t want anybody comparing your referral marketing plan to a multi-level marketing scheme, nor do you want them to expect long term rewards when there aren’t any. There is definitely a talent to getting customers excited about the referral benefits they can receive without causing them to have skewed expectations.

Image: WOCinTech

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