How important is a referral program for your App?
Updated: Oct 14, 2022
Abhinav started coming to the office three weeks ago. Last Friday, at around 2 PM, he said that he feels hungry in the evening and wants to avoid eating junk food.
So, he Googled “Fruit bowl near me” and ignored the first 5-6 results as they were from Swiggy & Zomato. The last result on the page caught his attention.
It read — “Juzi: Fresh Fruit bowls daily at your doorstep!”
They do exactly what they say — Take a subscription for a week/month and they will deliver fruit bowls every day at your doorstep.
Abhinav subscribed for a week and selected the option to be delivered at the office address on weekdays (anytime between 4–6 pm)
He was exploring the App and came across the below screen —
Immediately, he asked me — “Venky, do you want to subscribe as well? You will get three free bowls if you use my referral code”
I downloaded the App and subscribed using his referral code. Both of us didn’t get anything.
Then we read the condition — “Minimum order of 6 bowls”. We had ordered only 5 and hence we didn’t qualify.
I asked another colleague of mine if she wanted to subscribe. She jumped in and subscribed using my referral code. This time I ensured, she ordered at least 6 bowls.
Still, I couldn’t see my reward. I put a support request and told them that their referral program isn’t working.
The support replied saying that the referral reward is added to the wallet and I could check that in the Payment section.
Then I referred 3 more people to subscribe using my referral code and all of them subscribed.
Can you see how a simple Google search resulted in 6 customers for Juzifruits?
One organic customer got them five more customers. That’s the power of a well-crafted referral program.
Let me tell you the rights and wrongs of their referral program.
What they got right in their referral program?
Do you remember how Abhinav told me about Juzifruits?
“Venky, do you want to subscribe as well? You will get three free bowls if you use my referral code”
By using two-way rewards (rewarding both Abhinav & Me), they made it easier for Abhinav to ask me to use his referral code. There was no hesitation.
It was like Abhinav giving me a gift. Without his referral code, I wouldn’t be able to get the extra three bowls.
I have written more on the importance of two-way rewards in the article on the PayPal Referral Program.
The second thing that they got right was rewarding with fruit bowls instead of cash or points.
Consider this —
Someone who has a referral code and was thinking to subscribe for just a week (5 days) will be compelled to subscribe for 2 weeks (10 days) because then she only has to pay for 7 days and will get 3 days free.
I say this from experience. Four people in the office ended up subscribing for 2 weeks instead of 1.
The reward of 3 Fruit bowls directly helped Juiz in increasing customer retention by 100%.
What they got wrong in their referral program?
Juiz got three critical things wrong in their referral program —
The first one was when I applied Abhinav’s referral code for 1 week (5 days) subscription it didn’t tell me that both of us won’t get the reward as the condition to order a minimum of 6 bowls wasn’t met.
They could have given a prompt/message somewhere so we would have either edited our order or would have been informed about it.
This leads to confusion for the user that their referral program doesn’t work.
The second one was the low visibility of their referral program. A lot of companies get this wrong. Even we got it wrong when planning the first referral program in AppBrowzer. You can read more about it here.
If you want users to participate in your referral program then it has to be visible. It’s best if you can make it a part of your user onboarding journey like Dropbox.
Last and the third thing that they got wrong was the lack of Referral tracking or notifications(push/SMS/Email) of successful referrals. This may seem like a very small thing but trust me, it has the potential to make or break a referral program.
As I have already told you that I couldn’t figure out if I got the reward for my first referral or not. I was thinking —
Will I get a discount on our future orders?
Or Referral didn’t get recorded at all.
Did I do something wrong this time as well?
That is why I had to put a support request. Now, not many would do that. I did it because I wanted to explore their referral program in general.
You can check out their wallet screen in the previous image. It doesn’t have many details about the transactions on the screen. There is no way to figure out how much reward got added and why.
Referral Program is a product in itself
You have to consider a referral program as an independent product if you truly want to harness its capabilities.
A lot of experimentation is required when it comes to deciding —
What to reward?
When to reward?
How much to reward?
What messaging/banner will work well?
How to increase the participation rate of the referral program?
Who are the influencers?
How to reward influencers more than normal users?
To make it easier for others we have created the referral module in Flyy to help with all of the above.
Conclusion
Getting the referral program right is very important if you want to build a self-sustaining growth engine.
The startups that ignore referrals as a good to have feature do not understand product-led growth at all.
Below are a few articles that I have written on the topic of growth using the referral program.
Do read them to get interesting insights.
