SaaS Referral Marketing

Most SaaS companies completely miss the referral marketing step. We are going to use this section to educate about what a grave mistake these SaaS companies are doing. If you had to ask any founder or marketer in any SaaS company whether referrals are important for their SaaS, they will all nod and state that referrals are super important. But then when it comes to acting on referrals, most fail to.

Most SaaS companies focus on acquiring, converting and retaining customers and stop there. From our experience here at EarlyParrot we attribute this to:

  • Lack of education on how important referrals are
  • Not knowing how relatively easy it is to extend your funnel to get a referral campaign integrated
  • Thinking that they have to redo / completely change their way of doing acquisition, conversion and retention
  • Not knowing how valuable referrals are and how easy it is to convert them and retain them

What is referral marketing?

Referral marketing is when you engage with your existing customers by giving the right incentive for them to share your SaaS with friends / anyone in their network. Referral marketing (is also known as the word of mouth) is by far the oldest and most proven channel for acquiring new customers. Existing audience, are enticed to spread the word on social media such as Facebook, Twitter, LinkedIn, chat platforms such as Whatsapp, Facebook Messenger, Slack OR via email invites. On successfully referring new users to your SaaS, they are then rewarded accordingly.

What is a referrer?

A referrer is a SaaS customer client (or a newly acquired SaaS customer) that engages with your referral campaign by inviting their friends to join their SaaS. All referrers get a referral link that has a unique code that uniquely identifies each them. Using this referral link, referrers can get new SaaS customers to join or convert (depending what your referral campaign conversion point is).

What is a referral?

A new SaaS user signing up or converting to a campaign when referred by a referrer is called a referral.

What are the benefits of referral marketing?

Customers trust referrals more

Research shows that efforts spent in referral marketing are well worth it. With 92% of customers trusting referrals more than advertising. Future customers trust recommendations from friends seven times more than any other kind of promotion.

Referral customers spend more and churn less

Adding to the favorable conversion rate figures, studies also show that referred customers spend 16% more, churn less and tend to refer more customers when compared to those acquired via other channels!

Lower your SaaS Customer Acquisition Cost (CAC)

PPC, social ads and content marketing are becoming more expensive and difficult to manage. Potential customers are flooded with ads. A good portion of them block ads using software like AdBlocker+, making it even more difficult and expensive to reach them.

By getting existing customers to refer their friends to your SaaS you are:

  • lowering your SaaS customer acquisition cost since you are bypassing the advertising network
  • reaching out to leads that otherwise are impossible to reach through ads

Worked for others. Will work for you.

Referral marketing is the well known secret ingredient of successful SaaS. As you will be able to see later on, there are various well known SaaS which managed to stay in business thanks to a well structured referral program that helped them to significantly reduce their CAC.

Your customers amplify your message

Your SaaS customers will amplify your marketing efforts as future customers trust more their recommendations than any other kind of promotion. Not only will your customers’ referral message penetrate more but it will also convert more than any kind of outreach campaign you can ever do for your SaaS

Then why do very few SaaS get a referral program?

From our experience at EarlyParrot there are various reasons why most SaaS companies opt not to invest time and money in a referral program. The following are some of the misconceptions that most SaaS get tangled in.

Referral Marketing requires custom development

Most think that by integrating a referral marketing campaign into their existing sales funnel, will require a major rehaul of their funnel and will most definitely include custom software development. It’s a misconception as there are platforms can easily be integrated and will help you extend your sales funnel (without requiring you to change the way how you are selling) without any custom software development. Think of it like this: do you require custom development to track visitors on your website? NO. You simply integrate Google Analytics and you are done! The same can happen with referral marketing and referral marketing platforms.

It only works for huge SaaS companies

Maybe this should have been the first in the list of myths. Referral marketing can be effective even with small customer base, if properly implemented. A 50 highly targeted and engaged SaaS customers are enough to start generating referrals. Check out, last on in this book, how Hotjar grew out of referral marketing campaign. Back then Hotjar was unknown and a small company. With the right referral marketing in place as from day, they got a 60,000 email list to launch to.

Referral marketing is expensive

Not knowing what to give out as a reward and how to manage a referral marketing can lead to giving out too much in terms of $$ value per reward or not implementing the right strategy to get the most out of your campaign.

Because of the above misconceptions and other questions, most businesses/entrepreneurs shy away from referral marketing missing out on a huge opportunity that can drastically grow their business. We highly recommend you don’t just buy a platform that can help you host a referral marketing campaign. Make sure you have the right professional support & consultation included by the platform provider on how to set up, maintain and tweak the referral marketing campaign to reach your targets. Check out later on how EarlyParrot can help you integrate a referral campaign within your sales funnel.

Examples of highly successful referral campaigns

The following are some hand-picked companies who have had massive success with referral programs. Most of the companies, would have either gone out of business or else are not as successful, if they didn’t take action on referral marketing.

Dropbox

What do they do?

Hosts your personal files online in a secure and in an easily accessible way from various devices.

Referral program strategy

Dropbox is often quoted as the epitome of referral marketing. Reason being that Dropbox pushed the boundaries of what referral marketing can do for a company. So, in the beginning, Dropbox had a huge problem. They were paying an average of $300 in ads per customer for a $99/year service.

Once they implemented their referral program that changed and they saw a 60% permanent growth. This means that instead of paying a $300 per lead, they lowered their average customer acquisition cost (CAC) to an average of $123. How?

Let’s say Dropbox paid $300 per lead for 100 users. That would mean spending $30,000 for 100 users. But let’s understand how CAC dropped through Dropbox’s referral campaign.

So the first 100 users referred 60 new users.

The 60 referred users referred another 36 new users

The 36 referred users referred another 21 new users

…..  21 …………………………….  12 ………….

…..  12 …………………………….  7 ………….

…..  7 …………………………….  4 ………….

…..  4 …………………………….  2 ………….

…..  2 …………………………….  1 ………….

Sum them all up and you get a whopping 243. So Dropbox paid $30,000 for 243, which gives us our $123 per customer.

Dropbox had huge success with their referral marketing campaign as the implemented double-sided reward system, where they give out a reward to both referrer and the referral. Dropbox also stacks rewards for referrers. This means that the more referrals a referrer gets, the more storage space get credited to the referrer’s account. Such kind of reward system helped them achieve great virality and lowering their churn rate.

TypeForm

What do they do?

The company that helps you building conversational forms, surveys, quizzes and landing pages.

Referral program strategy

Typeform’s refer-a-friend program offers a 10% double-sided reward targeted at their PRO customers only. Basically, it requires 10 paying customers to get you a FREE PRO account forever!

This reward strategy is very focused. First of all, it is exclusive to only PRO account users. So only committed customers are given the exclusive opportunity to spread the word about TypeForm and get something back. Whilst we really try as much as possible to make referral campaigns look exclusive, we don’t necessarily agree with this kind of exclusivity as it drastically lowered down the chance of FREE users having the chance to spread the word about TypeForm. On the other hand there must have been a really good reason why TypeForm closed down their access to PRO accounts only.


What we really like, is that rewards are stackable and directly proportional to the effort by the referrer. So if a referrer shares a referral link and gets 5 referrals, he will get a 50% discount month on month. Such reward stacking must have helped TypeForm to not only acquire new customers but also to drastically lower their churn rate for PRO accounts.

RobinHood

What do they do?

Not exactly a SaaS but can be treated like one. An app that helps you to invest in stocks, ETFs, options, and cryptocurrencies, all commission-free,

Referral program strategy

In just one year prior to launching the RobinHood app, they managed to build a waiting list that had almost 1,000,000 emails! One of the main drivers behind the RobinHood referral marketing huge success was FOMO (fear of missing out). RobinHood had their waiting list in INVITE only mode so most visitors simply signed up in order to make sure they reserve a spot to this exclusive/upcoming trading app.

What we really like about the Robinhood style is that they kept their messaging and even their sign-up process as simple as it can be. No first name, last name, just an email address. Straight after sign-up you will get your position in the queue and different options how you can improve it. Such strategy fueled sharing so much that position Robinhood in front of such a huge audience that made them a success prior to launching.

What is EarlyParrot and how it can help your SaaS?

EarlyParrot can help you replicate the same success stories that we have just looked at. EarlyParrot is a referral marketing platform that can support various referral program configurations for your SaaS. It is easy to setup & install and integrates directly within your SaaS sales funnel. This means that you don’t have to change your sales funnel – most probably you have spent hundreds or even thousands to build a high converting sales funnel. Your campaign will be just another step in your sales funnel that will help increase the number of SaaS leads.

Through EarlyParrot’s API, you can easily customize your referral campaign, which will bear no EarlyParrot branding whatsoever. Your SaaS users will never ever realise your are being powered by a 3rd party solution.

Through the provided dashboard you will be able to track who is referring who, who are you top referrers, where your referrals are coming from such as Facebook, Twitter, Whatsapp Email invites. You can also tweak styling of pages, email content, email branding etc.

Apart from controlling the look and feel of your campaign, you will also be able to control the data flow. Through the various integrations that EarlyParrot comes equipped with you can enrich your CRM contacts and trigger email sent out.

Strategy #59: Invite your past SaaS users, especially in-active ones

Give them a reason to return. The fact that in the past they used your SaaS means that they saw value in what you are offering. The fact that they are not paying customers any more does not mean they cannot value the potential that you are offering, but it might be they need a touch base, a gentle and subtle reminder about your SaaS.

Your referral campaign can be a quick touch base to invite them back to your SaaS, telling them about new developments whilst they have been away and lure them into becoming active by referring their friends in exchange for a reward. Your past users are a good start to get your referral marketing campaign cranking.

EarlyParrot makes it very easy to invite existing SaaS customers to a referral campaign. Either through an integration or else through a custom integration, EarlyParrot generates a unique referral link that each of your SaaS customers can share with their friends. Anyone joining your SaaS through that referral link will get attribute to the referrer.

Strategy #60: Reward stacking to help in SaaS customer acquisition and retention

The main purpose of any referral marketing campaign is to acquire new users/customers. But if played well, a referral strategy can help in both acquiring and retaining existing SaaS users.

Check up here how Dropbox gave away 500mb of free storage per new referred users. These rewards were attractive enough to make Dropbox go viral. But that was not the only benefit Dropbox got out of it. Owning an upgraded Dropbox account, with plenty of bonus storage space for referring several users to Dropbox, offers plenty of reasons why one will stay using Dropbox and will not switch to a competing service.

When designing a SaaS referral marketing campaign, make sure that the rewards you give out are stackable. Stacking rewards will keep making it attractive to refer more and more friends but will also help in drastically reducing churn, building a resilient user base that will not switch to a competing service that might come along in the future.

Through EarlyParrot platform, you can have a Dropbox like referral campaign integrated within your SaaS. Dropbox went ahead and build their own referral system. EarlyParrot provides you with the right API in order to be able to create a similar campaign without having to develop your own referral system.

Strategy #61: Referrals integrated within your SaaS, Membership website

Having a logged in area offers a huge opportunity to pitch your referral program at different stages in the customer lifecycle. Think of how SaaS like Hotjar and Dropbox integrated their referral campaign within their onboarding or else as a feature into their SaaS.

By adding a prominent CTA (Click Through Action), clearly visible from most screens, will highly increase your chances of getting your SaaS users interested in your referral campaign. Alternatively, you can also pitch your referral program to your SaaS users at different stages such as:

  • Onboarding: by inviting your newly acquired SaaS user to invite their friends in exchange for a reward
  • When hitting a limit: offer refer a friend as a means of extending their trial or increasing their freemium limit.

Deeply integrating your referral marketing campaign into your SaaS will drastically increase your conversions. SaaS such as Dropbox gave so much prominence to referrals that when hitting a storage limit, they ask to either upgrade or else refer a friend.

Strategy #62: Fear Of Missing Out (FOMO) for exclusive upcoming features

Almost any successful referral marketing campaign had some kind of FOMO that helped pushing it. FOMO will push referrers to act and share your campaign.

You might want to give out exclusive or early access to those who refer your SaaS to their friends. Users will walk that extra mile to get access to a new feature that has just been baked. Don’t limit this strategy to new SaaS launches. Every new feature can have its own launch, with a referral marketing campaign associated with it. This will help in creating many mini launches for the same SaaS.