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DECREASE COSTLY USER ACQUISITION COSTS THE UBER WAY A Referral Marketing Primer for Online Retailers
It’s easy to forget how they started winning:
This strategy is not exclusive to their business model!
IN FACT Referral Marketing works just as well for online retailers. eCommerce brands have the same opportunity to take advantage of referral marketing and its benefits.
It’s true that… Some brands aren’t winning with referral marketing for a few reasons…
A few reasons why referral marketing wouldn’t work… 1. The product might not be a good fit (though most are) 2. Poor attention to referral user experience design 3. Using sub-optimal technology to power program 4. Suffering from a lack of viral acquisition knowledge
MOST BRANDS SEE PROMISING RESULTS… …even from In-House efforts
BECAUSE… REFER A FRIEND = LOWER CAC
Basically, Refer-A-Friend is a CMO’s Secret Superpower
Everybody Knows The truth is that everybody is aware of what referral marketing can do, but few fully grasp the impact referral marketing can have on a company.
Example: Beyond The Rack BTR initially built and launched an inhouse referral program to enable it to compete from a customer acquisition point of view. Though it gained early traction, BTR’s program quickly plateaued and its initial overall impact stayed minimal. After more tightly integrating their referral program into the user experience, overall Marketing ROI shot up to 12X and registrations increased by 8%. FULL CASE STUDY >>
After all… What is the point of a referral program if cannot scale across your marketing mix?
Lesson #1: More than a nice-to-have. Did they think Referral Marketing was a “nice-to-have?”
Referral Marketing is one of the largest and most eﬀective channels 7% 8% Most companies in B2C verticals with successful referral programs see as much as 15% to 40% of their new user acquisition coming from refer-a-friend programs. 35% 10% 11% 29% $100 Referred customers’ lifetimes values$75 are many times greater than that $50 acquired via traditional paid media. $25 Paid LTV SEM LTV Social LTV Referral LTV
How is that even possible?
Lesson #2: Referral Marketing is Continuous Referral Marketing ≠ One-off Campaign
Leverage Referral to Amplify the rest of your marketing mix on a continuous basis. A referral program will: • Allow customers acquired via SEO/SEM campaigns to invite friends, decreasing SEM-related CAC • Help users acquired via social campaigns to drive greater social sharing, boosting your social traffic • Incentivize your brand’s promoters to be vocal about your brand in greater frequency and volume
Example #1: Dropbox
Dropbox’s referral program was born out of necessity, not interest. • PPC Ads were getting more expensive, threatening business model • Had to find a way to reduce Cost of Customer Acquisition (CAC)
Dropbox launched a double-sided reward program. It incentivized both the referrer (parent) and the referred (child) to take immediate action.
$233-$388 CPA ➡ $151-$220 CPA
$233-$388 CPA ➡ $151-$220 CPA
Example #2: Airbnb
Airbnb is worth over $25Billion today — that’s DOUBLE last year’s valuation. Their offer was compelling but was very smart because Airbnb only paid for referrals after new users had made a purchase (this still works today).
Most importantly, Airbnb’s marketing mix is continuously ampliﬁed by its referral program Anyone who lands on Airbnb regardless of the traﬃc source - is a viable source of referrals.
Recap • Referral marketing is far more than a nice-to-have and is one of the largest and most effective marketing channels available to marketing executives • It can be applied in any context, and E-Commerce is an excellent candidate • Dropbox’s CAC savings raised the tide for all of its other marketing activities • To be successful, E-Commerce brands must weave social sharing mechanisms deep into the core shopping experience
Thinking of Implementing a Referral Program? Download the Best Practices for Successful E-Commerce Referral Marketing eBook. Learn the essential principles marketing executives should utilize for online retail referral success. GET THIS FREE EBOOK >>
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