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How to Design an Effective Referral Program for Your Digital Product

By Satish Maradani – Senior Manager- Marketing & CRM Lead- (South & West Zone) – Dalmia Cement Bharat Ltd

Referral programs have emerged as a powerful marketing tool that leverages the power of word-of-mouth to drive customer acquisition and retention. By incentivizing existing users to refer their friends, family, and colleagues, businesses can tap into a network of trusted recommendations. But what’s core to any referral program?

Key Takeaways:

  • Effective referral programs leverage word-of-mouth marketing to drive customer acquisition and retention.
  • Core principles include minimizing effort and social risk for referrers, maximizing referral incentives and social capital, and creating a brag-worthy product.
  • Define the platform currency for your referral program, whether it’s money, fame, access, or dopamine-driven rewards.
  • Identify happy flows and AHA moments to know when and whom to ask for a referral.
  • Use targeted discovery methods and easy sharing channels to promote the referral program and increase the average referrals per customer.
In this article
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    What Effective Referral Program Encompasses?

    As a product growth marketer, it is your core responsibility to

    • Make these balloons look bigger & bigger and make these weights look smaller and smaller. 
    • Minimize the effort required and social risk involved in referring your product to their family and friends
    • Maximize the referral incentive and social capital, so that your users keep coming back to your product to refer good potential customers to your business.

    7-Step Framework to Design a Well-Defined Referral Program

    To design a referral program that delivers results, it’s crucial to follow a well-defined framework that incorporates key elements. Let’s get started

    Step 1 → What makes your product brag-worthy?

    The only framework to win at app growth is by making your product, bragworthy. The features that could make a product bragworthy include: 

    Example:

    • Zepto → Grocery delivery in under 10-15 minutes, 24/7 delivery.
    • AirBnB → variety of unique stays, Aesthetic holiday rentals.
    • Licious → Fresh and high-quality meat delivery.
    What makes your product brag-worthy

    Step 2 → Define the platform currency for your product

    This step involves listing the platform currency for your product. It is something that motivates users to take action to refer to their friends and family. There are 4 types of motivations:

    • Money: Paisa hi Paisa Hoga !
    • Fame: Giving them Brag worthiness
    • Access: Exclusive access
    • Dopamine: Anything that gives them a dopamine rush (People want to be either better than themselves than what they are today.

    What is platform currency?

    This is how you reward your user for using your product and incentivize them to keep coming back to the platform. Determine the currency of your referral program either through a mixture of all these 4 motivation factors or anyone.

    Example:

    • For Zepto users → Cash, Cashback 
    • For Zoom users → Access, free month 
    • For Licious users → Credits to buy more meat/seafood
    What is platform currency

    Step 3 → Who and When do you ask for a referral?

    The points when you can actually ask for a referral are listed below:

    • List down all the happy flows and AHA moments for a user. 
    • We only need to ask for a referral from a happier user/ aha user.
    • To define who is a happy user and who isn’t.
    • You need to map all typical actions a happy user will take using happy flows.
    • Understand your Happy Flows. 
    • Also, define how you are validating a happy flow.
    • HAPPY FLOW = POTENTIAL REFERRAL

    Example:

    For Zepto users 

    • Receiving a delivery before time | 5-star rating.
    • Being able to place & receive an order at 2 AM | Repeated the same core action of placing an order at 2 AM a second time.

    For RentoMojo users 

    • Receiving furniture in a new city | Adds and checks out more furniture.
    • Customer requests to retain a product | a 4-5 star rating. 

    Step 4 → How will the user discover the referral program?

    The users might discover the referral program as an in-app notification, a screen pop-up, a WhatsApp message, a feature on the home screen etc.

    Example:

    • Zepto → A feature on the homepage after they’ve experienced the AHA moment, occasional push notifications post experiencing a happy flow.
    • AirBnB → After completion of a stay, occasional nudges.
    • RentoMojo → 15 days- 1 month after the furniture is delivered.

    Step 5 → How will referees share the referral code/link?

    While defining the channel used to share the referral code, you should keep in mind where your target audience spends most of their time and the apps they use.

    Example:

    • Zepto → A custom WhatsApp message.
    • AirBnB →  WhatsApp message, Instagram story.

    Step 6 → What will the referral invite look like to a non-user?

    The referral invite sent to any non-user should include —

    • The pain point that the product is solving/solved for the referee.
    • The offer.
    • Clear CTA.

    Step 7 → How do you increase the average referrals per customer?

    This step would include answering two of the major questions, including:

    • How do you build trust?
    • How do you incentivize the user to keep referring? 
    How do you increase the average referrals per customer
    About the Author

    By Satish MaradaniSenior Manager- Marketing & CRM Lead- (South & West Zone) – Dalmia Cement Bharat Ltd

    Institute of Product Leadership is Asia’s First Business School providing accredited degree programs and certification courses exclusively in Product Management, Strategy, and Leadership.

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