Trends #0025 — Referral Programs

“Show me the incentives and I will show you the outcome.”

🔍 Problem

You need to make sales, find employees or get deal flow.

💡 Solution

Referral programs incentivize others to help you sell, hire and invest.

Rewards may be cash, credit, discounts, products or experiences.

Done right. And you have an aligned, diverse salesforce.

Done wrong. And you’re plagued by fraud, brand damage and cannibalized sales.

🏁 Players




🔮 Predictions

  • Referral programs will be used in most newsletters. Tools like RabbitRabbit and SparkLoop make this easy.
  • As firms get smaller, referral programs will become more popular. Creators will focus on core competencies and get help selling.

☁️ Opportunities

  • Use dual-rewards. Dropbox gives referrers and referees 500 MB of storage. Amuze gives both $25 off. Trunk Club gives $50. Seedrs allows the referrer to decide who gets the reward.
  • Use referral programs to get deal flow. FoundersClub and have scout programs.
  • Use referral programs to sell digital products. Daniel Vassallo and Wes Bos use affiliates to sell courses.
  • Build a referral program for your productized service. See WP Engine and Gloat.
  • Buy niche sites and negotiate commissions. This shortens your payback period. Matt Giovanisci routinely negotiates with merchants. You’ll have more leverage with smaller vendors. See micro private equity for more ideas.
  • Build apps to generate affiliate income. See Honey and Skyscanner. Both are billion-dollar companies. You can do this on a smaller scale. Growth tools can promote your products. Or someone else’s.
  • Summarize your favorite books. James Clear earned a small fortune with Amazon Associates. He ranks #1 on Google for book summaries. You can learn by teaching, make money and build a personal brand. Nat Eliason summarizes books as well. And sells lifetime access to his brain.
  • Run contests instead of giving 1-for-1 rewards. Think 99Designs meets referral programs. Leaderboards also work. Most people value status more than wealth. They play, you profit. See gamification for more ideas.
  • Build a referral program for your paid community. Food Blogger Pro, a learning community, pays 20-40% commissions on a recurring basis.
  • Use referral programs to build marketplaces. Lenny Rachitsky shares how he attracted new hosts to Airbnb.

😠 Haters

“Why did you mention affiliates? The topic was referrals.”
Referral programs target existing customers. Affiliate programs target partners. The goal is the same. Sales. The title was a toss-up.

“Why not do sponsorships instead?”
They’re not mutually exclusive.

🔗 Links

  1. How I Made $150,000 From My Bedroom Joe made $150k from a niche site in 15 months.
  2. From Zero to $55k MRR to Exit (In 2 Years) With Feedback Panda Danielle Simpson and Arvid Kahl built and sold Feedback Panda. They used a referral program for growth.
  3. The Affiliate Marketing AdventureDom Wells, founder of Human Proof Designs, went from running his own niche sites to building them for others.
  4. Building a Referrals Program • How to use referral programs to build marketplaces. Tips from Lenny Rachitsky.
  5. How to Run an Affiliate Program on Instagram • How influencers and brands are using Instagram to sell.

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