Whens the right time to build a referral system?

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On the weekend I was listening to a podcast by Arvid Kahl which really spoke to me because when it comes to the 5 AARRRs, I’ve never really heard anyone break down the *revenue* process so fluidly.

Having word of mouth is the dream, because it means you don’t need to compete to rank on page 1 of Google with people who might have bigger wallets and won’t let go of that keyword you are targeting so much.

The examples of ones I’ve definitely used are Notion, Sweatcoin, Dropbox, Bolt, TopCashback, Ritual and Circle.

Circles was a scummy growth hack 🤬 and Sweatcoin was riding the Crypto wave at the time. This is what happens when you have someone of low quality, prospective customers feel like the person that shared it with them is trying to make quick buck

Today I’m going to share some of the gems that were dropped so can think about whether its something you should invest in.

Feedback Panda | What they did

One thing I rate highly is the fact that they were regulalrly looking to understand the metrics that matter and their audience.

Feedback Panda had organic word of mouth happening through teachers so the team decided to add a referral system when they raised prices by 50%

As you can see above, the plan was to recieve higher average revenue per customer; but they understood that some customers wouldn’t pay at the new price point, perfect time for them to invest in a referral system 👏🏾since they observed people already sharing it in FB groups.

During the go to market strategy, they managed communication by also suggesting other referral systems which gave them good social capital too.

See its good to be nice 😄

So how did it work?

For every 3 customers you referred that purchase the subscription, you got a discount and the referred got a 50% lifetime discount.

When does it actually make sense?

1. When its economically sensible because the rewards are worth it (especially in highly tribal niches)
2. When there's value for theprotagonist to have a reputation for using expert tools

Our service showed teachers in a professional light. The public perception was that teachers who use Feedback Panda, care about their students…we framed it as a way to help other teachers become better teachers, whilst saving you a few dollars

When can it be risky?

1. If customers would lose their edge if they shared your service. If there’s anything to gain from using your service in secret, most people will not share it
2. If customers admit to being a beginner if they use your service
3. If customers have to admit that they need the savings
4. If establishing a referral system will upset existing users, especially if they are in a sensitive niche - you can’t please everyone boss.

How you can get started?

1. Build your own
2. Use one that’s already out there

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About Yommy Ojo

Product Maker & Cultural Storyteller
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