Referral Program Framework
Every referral program needs to begin with your KPI. What are you looking to accomplish and what are you willing to spend to make it happen?
Referral platforms – especially good ones – can cost hundreds of dollars every month. When calculating the value, remember that the economics of a referral program should account for:
- Cost of Carrot – If you’re qualifying the Carrot on an actual purchase and this is under your net profit (or if you’re banking on ongoing revenue from a repeat user), this should be easy to accommodate.
- Platform Cost – While some light-weight programs exist that cost $30-$50/month, many referral platforms can run $400-$500/month, creating significant overhead.
- Operations Cost – How long will this take you to design, implement and maintain?
Airbnb attributes its successful referral program to being data-driven. Make sure you know what you’re funnel is. This funnel typically looks like:
- People who hear about your program
- People who decide to join the program
- Number of referral links shared
- Number of links clicked
- Actions taken (signups, purchase) by referred users
Unlike most funnels, steps 3-5 can easily exceed the scope of the higher stages of the funnel. A perfect referral program funnel will look more like an hourglass from top to bottom. Here’s how it looks: