12 terms you need to know before you launch a customer referral program


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Customer Referral Program terminology can quickly becomes confusing, not to mention down right frustrating. This presentation was made to help clear up the 12 most important terms in customer referral programs and set a common language for us all to talk in.

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12 terms you need to know before you launch a customer referral program

  1. 1. ReferralSaaSquatch.com @getSaaSquatch 12 Terms you need to know before you launch a referral program - Referral SaaSquatch blog.referralsaasquatch.com   http://www.slideshare.net/ReferralSaaSquatch   ReferralSaaSquatch.com @getSaaSquatch
  2. 2. ReferralSaaSquatch.com @getSaaSquatch 1. Referral Program A referral program is any systematic way that your company encourages people to tell other people about your product or service.
  3. 3. ReferralSaaSquatch.com @getSaaSquatch 2. Referrer These are the people that are recommending your product or service to others. They can be users, re-sellers, affiliates, partners or any other program specific term you choose to use.
  4. 4. ReferralSaaSquatch.com @getSaaSquatch 3. Referee These are the new customers you are acquiring from your referral program. They can be paying customers, non-paying customers or even other people who signed up to your referral program.
  5. 5. ReferralSaaSquatch.com @getSaaSquatch 4. Customer Referral Programs Customer referral programs are referral programs designed to specifically motivate your existing customers to help you find new customers. Customer referral programs work because a friends recommendation is the only form of marketing that directly produces a purchasing behavior.
  6. 6. ReferralSaaSquatch.com @getSaaSquatch 5. Affiliate Programs Affiliate programs are referral programs that reward third parties, typically with cash,  when new customers signup for your product or service as a result of  their referral.
  7. 7. ReferralSaaSquatch.com @getSaaSquatch 5. Affiliate Programs cont’d These programs can be effective when you have a collection of powerful influencers who have the ability to refer your product on a large scale (blog, podcast, etc…) With a monetary  incentive these individuals have a reason to refer your product over someone else’s.
  8. 8. ReferralSaaSquatch.com @getSaaSquatch 6. Partner Programs Partner programs are referral programs that reward certified third party vendors of your product or service with incentives such as cash, recognition and advertising.
  9. 9. ReferralSaaSquatch.com @getSaaSquatch 6. Partner Programs The key difference is that they are personally vetted by the company. This helps to remove the moral concerns companies have about using third party affiliates to promote their product.
  10. 10. ReferralSaaSquatch.com @getSaaSquatch 6. Partner Programs Partner programs typically have a much more rigorous admission process than affiliate programs and come with some legal obligations.  The admission process can include paying fees, going through a certification program and/or attending training sessions. 
  11. 11. ReferralSaaSquatch.com @getSaaSquatch 7. Viral Coefficient Viral Coefficient is the measure of how viral your loop is. If your viral coefficient is higher than 1, every new user you add to your system will add at least 1 other user and so on.  Technically, when your viral coefficient is 1 or greater you have a viral application. 
  12. 12. ReferralSaaSquatch.com @getSaaSquatch 7. Viral Coefficient If you don’t have a K-Fact of greater than one don’t worry about it, it’s a pretty hard thing to do. For those of you looking for the math, the simplified version of calculating your K-Factor, or rate of virality is: I = Number of Invitations CR = Conversion Rate I x CR = K = Viral Coefficient
  13. 13. ReferralSaaSquatch.com @getSaaSquatch 8. Viral Loops A viral loop is a mechanism that has users refer others to your product or service and then ultimately turns those referees into referrers through the same mechanism.
  14. 14. ReferralSaaSquatch.com @getSaaSquatch 9. Organic Viral Loop Organic viral loops are viral loops that occur naturally through the regular use of your product or service. Inviting a co-worker to review a plan in a project management tool is an example of a organic viral loop.
  15. 15. ReferralSaaSquatch.com @getSaaSquatch 9. Organic Viral Loop Organic viral loops are considered extremely hard to build into a product or service after it already exists. This is why authors like Seth Godin encourage you to include organic viral loops into your application in the initial design phase.
  16. 16. ReferralSaaSquatch.com @getSaaSquatch 10. Artificial Viral Loop Artificial viral loops are viral loops created exclusively to encourage a viral loop and do not add to the natural use of your product or service.  The act of rewarding a customer with $20 credit for every friend that registers for your service is an example of an artificial viral loop.
  17. 17. ReferralSaaSquatch.com @getSaaSquatch 11. Rewards – Reward Me (One-Sided) vs Reward Both (Two-Sided) Rewards are what participants in a referral program earn on successful completion of an artificial viral loop. Programs typically reward either the referrer (reward me) or the referrer and the referee (reward both)
  18. 18. ReferralSaaSquatch.com @getSaaSquatch 12. Happy Moment In referral programs, a happy moment is the time when a referrer is most likely to make a referral typically due to a recent happy experience while using your product or service. The effectiveness of a referral program depends, in part, on when a user is prompted to make a referral.
  19. 19. ReferralSaaSquatch.com @getSaaSquatch 12. Happy Moment If a user is prompted right after a happy moment they are much more likely to make a referral even if they have previously had a bad experience. Finding a happy moment is not a trivial task. It can require a critical eye, trial and error and strong in-app analytics to find your  optimal happy moment.
  20. 20. ReferralSaaSquatch.com @getSaaSquatch