Think referral programs are just for Ecommerce? Think again. Some of the most successful referral programs in history were actually designed by SaaS businesses.
- Take Evernote, which grew to 1 million users in 14 months thanks in part to referrals.
- Or look at Dropbox, which used referrals to increase its conversion rates by a whopping 3900% – in just 15 months.
Their success proves that referral programs can work excellently for any SaaS (software-as-a-service) business, including yours. And the best part? You can steal their secrets.
Evernote, Dropbox, and other SaaS referral program powerhouses have followed a proven formula that any software company can easily run – and potentially use to achieve viral growth.
If you’re looking to generate more qualified leads and grow your user base, our guide on how to start a successful SaaS referral program is what you need.
Today, we’ll cover:
- What a SaaS referral program is
- SaaS referral program benefits
- How to create the most effective referral program for your SaaS business
- Some of the best SaaS referral program examples, to inspire your own program design.
Let’s dive in!
What is a SaaS referral program?
A SaaS referral program is a marketing strategy that encourages your existing users to recommend your software to their network of friends, family, and colleagues. In return, you reward your customers when their referrals result in new sales.
When you choose the right referral software, it’s easy to set up a SaaS referral program and instantly track – and reward – successful referrals.
Why should SaaS companies start a referral program?
There are many reasons to launch a referral program for your SaaS business. Here are the most significant benefits of incorporating a referral marketing strategy:
- Increases brand awareness: SaaS referral programs encourage word-of-mouth marketing by incentivizing existing customers to expand your brand reach. This is an easy way to position your SaaS in front of new eyes.
- Promotes conversions: Existing customers are likely to know friends or colleagues who may also benefit from your service, which increases your chances of making more conversions.
- Consistently encourages faster purchases through the power of trust: Social proof is a key purchase driver for many consumers. Recommendations from people you know and trust are 50% more likely to prompt a purchase than promotions coming directly from companies.
- Empowers customers to be repeat advocates for your software: While satisfied customers can easily become your best brand advocates, they’ll still need a reminder to refer. If you reward them for sharing your software, they’ll be motivated to keep sharing.
- Encourages customer retention and improves customer lifetime value: Loyal customers are essential for your SaaS, since you’re so dependent on subscriptions or recurring purchases. Referred customers are more likely to stick with your software – research has found that referred customers have a 16% higher lifetime value than their non-referred counterparts.
- Lowers customer acquisition costs: When existing customers spread the word about your business, their promotion is nearly free. You’ll only need to pay once for referral software, and then incentivize your existing users to refer you to their network (similar to affiliate marketing). This is much less expensive than ads and most other forms of marketing.
- Creates a reliable ROI: Unlike traditional ad channels, a referral program creates a reliable stream of revenue. After all, you only reward customers after a successful referral (after new users make a purchase), making your spending more predictable.
Before starting a referral program for your SaaS business
To run a successful referral program, ensure you have the following elements in place beforehand:
A well-designed SaaS that meets users’ needs
For a referral program to work, you need to give customers a reason to share your software with their network. Does your product solve your customers’ problems or fulfill their needs?
- Check your reviews and feedback to see if you’re faring well with this.
- You might also conduct customer surveys or comb through your social media comments.
A healthy network of users who would willingly recommend you
Are customers staying loyal to your SaaS – and have they already shown clear willingness to share you with others?
- For instance, if you’re a subscription-based SaaS, you should have many repeat subscribers.
- Alternatively, use a net promoter score (NPS) or other customer satisfaction surveys to assess whether customers are willing to share.
- And if you’re already getting positive reviews or social comments, then you’re a step ahead.
A track record of stellar customer service
How do your users rate your customer support? Customers will be more willing to promote you if they have a top-notch experience with your SaaS.
A support team that can handle the influx of new users
Remember, the potential to increase your customer base with a referral program is huge. You need a large enough customer support team ready to handle an influx of potential customers and their needs. And this is the key – it must be able to deliver the same level of stellar support that led your existing customers to recommend you.
Knowledge of your ideal customer
You need to create an ideal customer profile or have defined your buyer persona. Knowing who fits your target audience enables you to optimize your SaaS referral program accordingly – both for the existing customers you want to mobilize, and the new customers you want to attract.
Familiarity with how existing customers communicate with friends
Whether through email, text, or social media, you need to know the channels your customers usually use to communicate with their peers. This way, you’ll be able to integrate these channels into your referral program.
Understanding of what would motivate existing customers to share
Find out what would encourage your users to widely refer you. From cash and gift cards to benefits such as exclusive discounts and upgrades, knowing what would motivate them is paramount. Don’t be afraid to ask your customers directly!
8 best practices for starting a SaaS referral program
Now that you’re up to speed with what you need before you can start a SaaS referral program, here are some tips for creating an effective program.
1. Set measurable goals for your program
The first step to creating a successful referral program as a SaaS company is setting measurable goals and tracking key metrics, such as:
- Revenue coming from the program compared to other sources, within a given month, quarter, or year
- Conversion rate in specified periods – how many leads become customers in a month, quarter, or year
- Overall ROI of the program – revenue minus expenses over a month, quarter, or year
Set specific, relevant and time-based goals for your program, so you can track and measure the results easily.
As a benchmark for where to aim, the global average referral rate (i.e. the percentage of your total customers who came from a referral program) is 2.3%. While this includes all types of industries (not just SaaS), it’s a good target to consider.
2. Use referral software
You might be tempted to build your own referral functionality, but in many cases, that’s a mistake. Using a good referral software has many benefits:
- You save on time, as you can easily set up a referral program in days, rather than taking months to create a DIY solution.
- Software will link every referral to the customer responsible, so you know exactly where all your referrals are coming from.
- Most referral softwares also lets you track all of your key program metrics, so you can make informed decisions on how to refine and improve your program.
- Many referral program tools can auto-enroll customers into your program whenever they buy your SaaS product, and automatically reward customers for the new users they bring in.
- With the right software, you can customize the program to your needs and seamlessly integrate it with your internal processes.
3. Select the right referral rewards
As attractive as your referral program rewards needs to be, they should also be sustainable for your SaaS.
Some of the best rewards for SaaS referral programs are:
- Free month subscription: Everyone loves getting something for free, especially when it’s free time with a product or service they already enjoy. So, if you’re a subscription SaaS, consider offering this incentive.
- Discount on next purchase or next renewal: Coupons serve one purpose – to lure a person to make the next purchase. Discounts will always encourage future purchases. And in this case, they will also encourage referrals.
- Temporary plan upgrades: Try offering customers short-term upgrades to their subscription plans. Customers will relish the short moments they accessed better features than their original plans made available.
- Temporary free access to premium features: Even if you don’t have a subscription model, you can still opt to give customers free credits to spend on premium features. or limited free access to a premium plan. This will whet users’ appetite for these features, and may lead them to refer more friends to keep access – or spend more money on these features when their referral access runs out. So, this reward is especially sustainable!
- Branded swag: Customers appreciate free items, such as sweatshirts or backpacks, from any business. Giving swag has an added bonus for your SaaS, as it advertises your brand for free on top of incentivizing customers to share.
- Cash back: Monetary rewards are used even by popular SaaS referral programs, like Evernote used to do. Cash back can go a long way to win customers’ hearts. After all, who doesn’t like free money?
4. Think about paying out referral fees
Another popular form of referral incentive is a referral fee. Unlike cash back, which is paid in a set amount, a referral fee is a percentage of each purchase made by the new user (like an affiliate program, but for your customers instead of influencers). The more referrals a customer makes, the more money they earn.
You may also offer recurring fees, where a customer earns another commission every time a friend they referred renews their subscription. This will further motivate your users to bring in quality referrals – friends who will stay loyal to your SaaS.
5. Use a reliable incentive structure
A reliable incentive structure enables you to offer lucrative and effective rewards to your customers. Below are some best practices when it comes to incentive structure:
- Double-sided works best: This means rewarding both the existing user for bringing in a new customer, and rewarding that new customer for making their first purchase (i.e. “give 10% off, get 10% off”). Thus, a double-sided incentive structure encourages repeat referrals, customer retention, and new customer acquisition.
- If you’re a B2B SaaS, consider rewarding the customer making the referral, their business, and their friend’s business in your B2B referral program.
- Should be cumulative: For every referral a customer makes, they should be rewarded. If your incentives are progressive, customers will share again and again.
- Could be tiered: Consider using a tiered referral system, where the more referrals someone makes, the bigger the rewards. Better rewards will motivate customers to make more referrals.
- Preferably automatic: It’s best to instantly give customers their rewards when they earn them. Customers are always eager to receive their rewards, so it’s best to use software that’ll automatically send the rewards.
6. Create your referral program “elevator pitch”
Create a 20-30 second referral message that sparks interest in your referral program. This will be the “elevator pitch” you include on your program’s main page, as well as in email and social media promotions.
To grab people’s attention, keep things concise and only include essentials, like what you want users to do (share), what’s in it for them (rewards), and what’s needed to get the rewards (friends must purchase).
Here’s an example:
Most people have short attention spans, so consider placing a link to your referral FAQ or referral program landing page if you have more things to cover.
7. Promote your program
Knowing how to promote your SaaS referral program is a must. After all, even if your program is well-designed, you won’t get much traction if your customers don’t know it exists.
Consider the following ways to promote your referral program:
- On your homepage: As it’s the first contact point for your site visitors, your homepage is the perfect first place to promote your referral program.
- In navigation bars: The navigation bars direct visitors to all the main sections of your site. Capitalize on these attention-grabbing features to get your program in front of as many eyes as possible. Lead with what’s in it for them instead of something basic like “Refer a Friend”.
- On your user account dashboard: Users check their account dashboard often as they use your SaaS, such as to see their progress or status. Tap into this habit to remind them of your customer referral program.
- In your email newsletter: People who have subscribed to your newsletter are highly likely to refer you, since they’re already enjoying your content. So, be sure to ask for referrals in these emails.
- In email signatures: Embedding your program in your email signatures allows you to subtly remind customers of your program in every email you send out.
- By reaching out directly to high-value customers: These include people who have made repeat purchases, have subscribed to your software the longest, or have recently given positive reviews and social comments. They’re most likely to refer you to their network, so be sure to ask them for referrals.
- Right in your software processes: It’s also a good idea to promote your referral program directly in your SaaS, especially on occasions when customers are most happy about your software. Think beyond the static promotion on your dashboard.
- Timing is everything: promote the program to individual users at moments where they’re seeing the value of your software.
- For example, did they complete a certain task, renew their subscription, or use the software actively for a given amount of time? If so, this is a great time to promote your program.
8. Make sharing easy
Where do customers share with their friends most frequently? These channels should make up the sharing options in your program. Be sure to include multiple ways to share, including email and social media. Plus, generate unique referral links that users can easily copy and share anywhere. Users shouldn’t need to scroll much to share; allow them to share even right from the user account dashboard.
And with the right referral software, you can auto-enroll users in the program. This way, they can refer right from their account dashboard, without having to type extra info – making sharing even easier.
Remember, you’re requesting a favor from your customers, so don’t frustrate them. Customers should be able to share in just one or two clicks.
The 5 best examples of successful SaaS referral programs
Looking for inspiration for your own SaaS referral program? Check out these top 5 SaaS referral programs and what they do well. Consider using some of their techniques in your own program, as they’re all in line with the best practices we covered above.
ActiveCampaign is an email marketing and marketing automation tool for businesses of all sizes.
Why ActiveCampaign’s referral program works:
- Customers can instantly access the program from their user account dashboard
- All customers are automatically enrolled in the program – no need to enter extra info to refer friends
- Multiple sharing options, including a click-to-copy referral link (unique to each customer)
- Easy for customers to track the status of referrals and rewards, so they know when a referred friend clicks their link, signs up for a trial or purchases a paid plan
- Offers different rewards to the referrer based on the type of plan their friend buys – the more expensive the plan, the bigger the reward for the referrer
- Double-sided reward: Amazon gift card for the referrer, and $10 in ActiveCampaign credits for the referred friend
Airtable is a cloud spreadsheet and collaboration SaaS.
Why Airtable’s referral program works:
- Customers can access the program straight from their account menu – and start sharing right away
- $10 Airtable credit for every referral gives free users a taste of the Pro plan features (increasing the likelihood that they’ll create Pro plan spaces)
- Credit tracker makes it easy for customers to see how much they’ve earned from referrals – and motivates them to make more
- Rewards stack, so a super-advocate could pay for a Pro plan in the long term if they refer enough friends
- Easy-to-copy referral link, plus direct email and social sharing options
Shortcut is a project management SaaS for software businesses.
Why Shortcut’s referral program works:
- Shortcut offers rewards for the referrer, the referrer’s business, and the newly referred business, to motivate customer acquisition and retention from all sides.
- The rewards also cover different stages of the sales process. This works well for Shortcut’s multi-step sales structure, and may be a structure worth borrowing if your B2B SaaS also has a multi-step sales process:
- Tiered swag prizes for the individual referrer when their friend starts a trial period
- Two months free on any paid plan for the referred friend, after their free trial period ends (to encourage new customer acquisition and retention)
- $500 account credit for the referrer, once their friend pays for two consecutive months of Shortcut (to encourage customers to bring in friends who stay loyal to Shortcut)
- Fun but concise copy gets to the point, so customers are ready to share right away
As the name indicates, LiveChat offers sales chat software for businesses.
Why LiveChat’s referral program works:
- Eye-catching CTA shows the $39 app credit reward – and what customers must do to earn it – right away. “Invite” is even in bold!
- Three-step process, with graphics, explains the program and shows just how easy referring is
- FAQ section (at the bottom of the page) clears things up if customers have other questions about the program
- Customers receive their unique, instant-copy referral link just by entering their email
- Rewards are double-sided – the referrer receives $39 in LiveChat credit when their friend first pays for LiveChat, and the friend receives 50% off that first payment. The discount on the friend’s side is especially effective in encouraging that first purchase!
Twilio helps companies and developers engage customers with personalized experiences such as messaging, video, and emailed coupons.
Why Twilio’s referral program works:
- Equal, double-sided rewards for referrers and their friends – $10 Twilio credit for each when the friend upgrades to a paid plan
- Twilio makes the value of the $10 credit very clear (“That’s over 1250 SMS messages… or 1,000 free voice minutes… or over 12,000 chats… just for 1 referral!”)
- Referral program can easily be accessed from a customer’s account dashboard, with an attractive slogan and eye-catching red CTA button
- Once customers are there, the bullet points make the steps of referring simple
- Click-to-copy referral link lets customers share instantly
- The brand also gives ideas of what customers can say when they share the referral link, to make the process even easier
- Referral dashboard lets customers quickly track when their referrals result in trials or paid plans
If you’re planning on starting a referral program for your SaaS, take the necessary steps beforehand and carefully implement the above best practices for an outstanding referral program. If you keep all these tips in mind when setting up your program, you will create an amazing program that will bring more leads and new customers.
And although we’ve mentioned this before, it’s worth repeating that you should use the right referral program software. Referral software will not only streamline the program operations, but also lead to impeccable ROI.