Pay both sides of the referral
Referral programs work better when the new user gets a reward too, not just the person doing the inviting.
Dropbox tried the grown-up playbook first. According to Drew Houston’s 2010 slides, search ads cost $233 to $388 to acquire a customer for a $99 product. His one-word verdict on the slide: “Fail.”
What worked was a referral program with a two-sided incentive: the inviter and the new user both got bonus storage. Houston says the idea was inspired by PayPal’s $5 signup bonus, and that it permanently lifted signups by 60%. In one 30-day stretch in April 2010, users sent 2.8 million direct referral invites, and 35% of daily signups came from the program. These are company-reported numbers, but the mechanics are easy to copy.
Give the new user a reason to accept, not just the inviter a reason to nag. Pay in your product’s own currency, like credits, seats, storage or a free month, so the reward costs you little and pulls both people deeper into the product. Then put the invite where people already feel the value, not three menus deep in settings.
The example
- Instead of
- “Refer a friend and get 10% off your next invoice.”
- Try
- “Give a friend a free month of Plunger. You get one too when they sign up.”
Before you flush
Write a one-line referral offer where both the inviter and the new user get something from your product, and add it to your next product email.