Extole recently hosted a discussion with Juanfe Rios, Senior Product Manager at Greenlight, as part of the industry-first Customer-led Growth Summit. Throughout Greenlight’s partnership with Extole, the company worked on numerous referral programs and campaigns leveraging Extole’s referral platform.
In this session, Juanfe explored the effectiveness of referral programs and looked at several examples from FinTech and other industries.
Referral Programs: Table Stakes
Referral programs are often considered “table stakes” for businesses across various sectors. However, context matters, and each marketer must find what works for their situation. Marketers should consider:
- How the competition looks
- If there are any barriers to entry for the business
- Where the business is in its lifecycle, both as a company and in terms of users getting to know the product
Examples of the Power of Referrals
FinTech: Greenlight’s Experience
At Greenlight, a subscription-based service, referral programs have been found to bring high-quality leads. When a friend who has tried the product recommends it, a potential customer is more likely to overcome the fact that they are buying into a subscription.
Ride-sharing: Uber’s Approach
When Uber was just getting started, the company used referrals as one of its main drivers to penetrate markets quickly. Uber’s goal was to get people to take a ride, and in return, they would get a ride, which worked well for fast adoption and market penetration.
Banking: American Express and Capital One
Even large, established companies like American Express and Capital One still have referral programs to encourage people to open credit cards.
Critical Considerations for Referral Programs
- Calibrate Incentives: It’s important to be careful not to create wrong behaviors for users. If too much money is spent as an incentive, it might bring the wrong type of users to the platform.
- Cost-Effective Growth: In the current economy, there is a need to focus on lower-cost acquisition. Referral programs can be a great alternative, allowing businesses to dial up or down how much they are spending.
- Evolve Programs: Referral programs are not static. Businesses will need to iterate on the right incentive, the right moment to share, and who the right users are that they want to get referring.
- Measuring Success: Businesses should start by looking at basic KPIs:
- Are customers sharing?
- Are people clicking on the shared links?
- How many of those clicking are signing up?
- Leveraging Partnerships: Using a platform like Extole can be very helpful. It allows businesses to start testing and learning quicker than if they had to build everything on their own.
Advice for Implementing Referral Programs
- Find the Right Partner: A partner like Extole can provide advice based on their experience with referral programs in general.
- Learn from Others, but Customize: Businesses should look at what other companies have been doing, but find what works for them.
- Test and Iterate: If something doesn’t work, it doesn’t mean it doesn’t work at all. Maybe there’s another angle to things.
- Cross-functional Collaboration: Businesses should talk to their data team and cross-functional team to understand what could work for their customers.
- Be Persistent: Businesses will need to try to find the angle that unlocks growth via referral programs.
Referral programs definitely work. Many businesses have successfully implemented them. It works for Greenlight; it has been seen to work for Uber, American Express, Capital One, and even Clubhouse during its growth phase. The key is to find what works for a specific business context.
