The world is going digital, and SaaS companies are leading it from the front. The niche, not so mature as others, has brought in unprecedented competition in recent years.
As the SaaS ecosystem continues to expand, the need to stand out, acquire new customers, and foster customer loyalty has become inevitable. While marketers normally have plenty of customer acquisition strategies at their disposal, the options are limited for SaaS companies - especially ones that operate under the B2B infrastructure.
Today, many SaaS companies grapple with unbelievably high customer acquisition costs (CAC) that startups struggle to muster. But platforms like Dropbox, Robinhood, and PayPal have broken the pattern, sourcing their leads purely from human connections and friendly sharing.
Even though the strategy has brought promising results for all types of businesses, Referral marketing is the primary success factor for many SaaS companies.
If you’re looking to accumulate high-quality leads for your business while keeping the CAC low, you need a SaaS referral program that speaks to your customers - Here’s how you can do it!
What is a SaaS Referral Program?
A SaaS referral program underlines how software companies employ word-of-mouth marketing to expand their customer base and drive growth to the business.
Like any other customer referral program, SaaS referral programs are inherently targeted toward existing customers or ideal audience segments and are rewarded for successfully referring new leads to the platform.
At its core, referral programs are dependent on the basic human inclination to spread their positive experiences with friends and hopefully inspire them to follow the lead. Capitalizing on naturally driven word of mouth allows companies to improve their customer inflow without spending lavishly on marketing.
Customers participating in the program are allotted a unique referral link or code registered to their email address, which they can share with their friends. Every time a new user signs up using that link, the referring customer gets a reward - or in some cases, the new joining member gets a reward as well.
3 Benefits of a SaaS Referral Program?
The reason for referral marketing’s unbeaten success for SaaS businesses is the quality of leads it generates at a fraction of the cost. Instead of pricey ad placements, startups only get to reward leads that convert into paying users.
A well-curated referral program saves plenty on customer acquisition costs by engaging leads through existing relationships, extending lifetime value, and reducing churn rate in the long run. Here are some benefits of building a great referral program:
Minimum Customer Acquisition Costs
Since referral programs rely on a pay-for-performance marketing strategy - which awards referrers and referred users based on the leads they generate - companies can save massively on advertising expenditure.
Regardless of the type of referral program or the industry it’s geared toward, word-of-mouth marketing drives customers at a remarkably lower cost than other channels. You are leveraging your existing customer base, which reduces the need for extensive advertising or marketing spending.
Expand Brand Awareness
While there’s no defined mechanism to gauge brand awareness, businesses often measure it in terms of online hype and leads that follow along. By motivating your happy customers to put in good words for your brand within their networks, you can harness a welcoming response from your target audience, contributing to a positive brand image.
Higher Conversion Rate
People referring to your product or service to others essentially vouch for its quality. A recommendation from someone you know carries a pre-conceived trust and is 50 times as likely to trigger a purchase than a typical advert from the brand.
Besides, having used your services, customers know who in their contact list might be the right fit for your offerings and refer like-minded people who are ready to convert. Compared to other forms of marketing channels, referral marketing exhibits 3 - 5x higher conversion rates, boosting your acquisition channels.
Before Starting a B2B SaaS Referral Program
Building a referral program isn’t challenging, but there are a few steps you need to tackle first for smooth flow afterward.
Research the Market
Market Research is like a detective's work for businesses. Before initiating any major campaign or launching a new product, marketers are required to collect and study information about end consumers, similar products in the market, and direct competitors to make smarter decisions.
The research is carried out to assess the product’s need in the market and gauge audience behavior to determine how they would reciprocate a referral campaign. The goal is to understand what people want and need so that businesses can devise strategies that best meet those needs.
Identify Target Audience
A business is nothing without customers, and the same goes for its marketing strategies. If you’re gearing up for a referral campaign, know your audience up close and foster ties to receive a positive response after.
Spot key customers in your user base that frequently engage with your business and possess a social influence on people close to them. Hold conversations with these prospects outside the sales cycle, listen to them, and respond sincerely.
Understand where in the customer journey referrals are most likely to occur and where potential drop-offs may happen. For startups that are still developing a customer base, configure your ideal audience whose interests align with your offerings. Target them first with your referral program.
Think of it like seeing what other game players are doing before you play a game. You want to know what other software is similar to yours and what strategies have they employed to draw in referrals. Keeping tabs on rival brands allows you to construct marketing tactics that may outperform them in terms of traction and conversion rate.
Set Referral Goals
For every referral marketing campaign you need to know what you’re striving for. What’s the purpose of setting up a referral program? Apart from increasing your sales revenue, what else are you hoping to achieve out of the campaign? Some common referral objectives include:
- Customer Acquisition
- Reducing Customer Acquisition Costs (CAC)
- Increasing Revenue
- Enhancing Customer Loyalty
- Expanding Brand Reach
If your goal is to increase revenue, offering a percentage-based commission on referred sales may be effective. If your goal is to acquire more users, providing discounts or free trials to advocates may help the referral program work better. No matter what your primary objectives are, figure it out in advance so you can implement strategies that lead towards these goals.
7 Steps to Create a SaaS Referral Program
Seeing the success stories in referral marketing, marketers are often eager to set off the campaign and source fresh leads. But part of running referral programs is all about getting the timing spot on.
The ideal time to kick off your campaign is when you already have referrals coming in. Having a referral strategy in place will systemize and improve the incoming referrals. Here’s a 7-step procedure to create a referral program for your SaaS business.
Set Clear Referral Terms and Conditions
Given the time and effort a referral marketing strategy demands, the last thing anyone would want is the target audience misinterpreting it or losing interest midway.
With customer engagement being the top priority, you cannot risk a disinterest in the campaign by setting complex referral structures, extensive signup forms, or irrelevant incentives. To elaborately communicate your terms and conditions, and ensure transparency in the program, find answers to the following questions:
Who Can Participate?
Start by stating the eligibility criteria. Explain who can join your referral program. Usually, it's your existing customers who can refer their friends or contacts.
How to Refer?
Describe how current customers or advocates can recommend your products to their contacts. It may involve sharing a referral link, sending an email, or using a special code - specify what works for you.
What will participants receive?
State how referrers are set to benefit from your referral program. Outline your rewards for successfully bringing in new referrals such as cash, discounts, or exclusive perks. Specify the time of reward fulfillment as well. Will participants immediately win the reward after a successful referral or after completing a certain target?
Select the Incentives Your Audience Wants
A competitive product is fundamental to any marketing campaign, but on the day of the launch, it all comes down to how attractive your referral rewards are.
Customers love great rewards. In fact, the type of rewards you offer will set the tone for the campaign right from the start. If your rewards are enticing, you will receive high traction from customers as soon as go live.
Not to mention, prospects who are yet to make contact with your actual product can be lured and turned into advocates with lucrative rewards. Choosing proper incentives can be tricky. You need to take into account audience preference, your marketing budget, and product niche. Some common referral rewards include:
Who doesn’t like cash? Needless to say, most customers are driven by cash, either as a straight deposit or in-shop credit on future purchases. Rolling out cash rewards may seem like a losing bet for a business, but it pays out in terms of widespread audience participation.
Offering special discounts on products or services is an age-old marketing tactic employed by businesses to encourage repeat purchases. A discount motivates customers to shop again and develop loyalty towards the brand which pays in the longer run.
One way to get your current customers to switch to your premium subscription plan is by giving them a free trial period to know your true value. It’s hard to pull back once you know get used to the top-end services. Enabling access to your premium features in exchange for referring friends can help boost customer engagement long-term.
For SaaS companies that build unique products and tap an offshoot audience segment, branded swag can be a great incentive to turn customers into brand advocates. Branded swag often includes tiered rewards - mostly merchandise - such as a sticker, mug, backpack, or recognition.
Know When and How to Ask for Referrals
A common mistake many SaaS startups commit is that they rely on their customer intuition to refer their friends instead of asking for it upfront. Hence, losing crucial brand advocates.
Either notify visitors of your referral program with a pop-up widget on your landing page or send a reminder email after the purchase, Stay connected with your customers throughout their journey.
When asking for a referral, timing is key. Ask too early, and you may sound too salesy, putting in a bad image upfront. Keep it lingering longer than the typical engagement period, and they may lose interest in your offering.
Give users enough time to experience your product and develop a liking before you counter them with a referral proposal. Stay in touch with your customers. Ask for their review on the product or if they leave a positive review on your site of their own accord, it’s your chance to introduce them to your referral program.
Outline Your Referral Promotion Tactics
If you want an extensive user base to join in your referral marketing quest, make sure the offer reaches them in the first place. You cannot expect a positive response, or any response at all, if your referral program is hidden under the folds of your website.
Don’t be reluctant to badge your campaign right on the homepage. If it seems a little too direct, consider using pop-up widgets or adding an option in the navigation bar to attract users.
During a launch campaign, you need attention from people outside your customer base - and social media is a perfect tool to promote your SaaS campaign. Wait for the “aha” moments when your current customers are high-rating your products on their social channels. Leverage their satisfaction with a robust social media campaign strategy, and draw their attention in one swoop.
Make Sharing Effortless
The success of a referral marketing program, either in terms of an expanded outreach or robust lead generation, depends on sharing. The easier and quicker your referral-sharing mechanism is, the busier your customer inflow pipeline will be.
Incorporate sharing options into all mainstream social media and chatting platforms. Allow users to share your brand via channels they’re most comfortable with. Integrate different sharing facilities in the emails, social media posts, SMS, and landing pages for your referral link, so customers can easily share the referral links without copy-pasting. The fewer steps, the better:
- Don’t attach any subscription forms on the referral-sharing page.
- Sharing your referral links to contacts shouldn’t take more than three clicks.
- Clearly state your referral message on the landing page and a quick how-to tutorial.
- As a B2B SaaS business, provide ready-to-use referral templates that users can share right away.
To designate a unique referral code for every participant, monitor the sharing process, and track incoming customers who are led in by these leads, you must install referral marketing software. Tracking the referral process in real-time enables companies to increase marketing automation and ROI.
3 SaaS Referral Program Examples to Inspire You
While we’ve laid out the roadmap to creating an effective SaaS referral program, but in case you want to witness it in action for inspiration, here are three popular referral programs in the SaaS industry.
The famous, cloud-based video conferencing platform, Zoom accumulated most of its user base through dedicated refer-a-friend programs and continues to do so to date. The company's new referral program offers loyalty points for recommending the platform to others on social media.
People who come aboard using your referral link must purchase a Zoom paid plan within the first 30 days of arrival, for you to earn a commission. The accumulated reward points can be redeemed for gift vouchers or cash cheques in a single click.
Drift is a thriving example of how a regular e-commerce store can leverage impressive marketing tactics to become a unicorn company. The scent-based company now boasts a $1 billion valuation with a flourishing referral program.
Drift counts on social media influencers to promote and refer its products to their following and win branded swag in return. In its previous campaign, Drift offered a special edition Adidas jacket in exchange for one referral, an all-access pass to Hypergrowth’s conference, and a chance to have lunch with Drift’s founders.
The cloud-based collaborative platform, Trello possesses a strong standing in both B2B and B2C realms. The platform allows real-time communication between company staff and individual professionals, and that’s what contributed to its brilliant success
Trello currently holds over 100 million users and fuels its customer base through a B2B SaaS referral program. According to the program terms, if a referral successfully becomes a new customer on Trello the referrer a free, month-long pass to Trello Gold (premium plan). If one manages to refer 12 friends, they can access Trello Gold for an entire year as a referral bonus.
Every successful referral program is powered by an amazing product or service. You cannot count on customers to spread your brand message if they dislike your SaaS product in the first place or lack interest in the program incentives.
Before moving onto the promotional stage, master a great product that fits audience's needs and is bound by exceptional customer support. But to start your SaaS referral program, you always need a professional’s help to fulfill your business objectives on time. Partner with Prefinery.com to design and manage your upcoming campaign without draining your in-house manpower.
What are the right incentives for a SaaS referral program?
While the right referral incentives depend on your business niche and audience motivations, but cash rewards, freebies and branded swag, and access to premium features have proven effective for many SaaS companies.
How to ensure transparency in a SaaS referral Program?
To ensure fairness and transparency, clearly define program terms and conditions, including eligibility criteria, referral rules, and how rewards are earned. Before promoting your referral program, implement a reliable tracking system to accurately attribute referrals, and actively communicate these details to all participants in real-time.