How to Setup a Referral Campaign for Your SaaS Marketing Campaign
Published on November 6th, 2023
9 min read
Published on November 6th, 2023
9 min read
Many SaaS companies need help with high acquisition costs. The primary challenge lies in connecting with B2B buyers. Additionally, the B2B sales cycle tends to be lengthy, and there’s a risk of leads dropping off at any juncture, resetting your progress. Interested in acquisition costs while boosting lead generation and customer acquisition? If you haven’t already, it’s time to explore the idea of establishing a SaaS referral campaign.
You can leverage your existing customer base to bring in high-quality leads. In this article, we’ll delve into the advantages of SaaS referral programs and guide you through the precise steps to launch your own program. Keep reading to learn more!
By implementing a referral program, you can effectively reduce your Cost Per Acquisition (CPA), boost your conversion rate, and enhance customer retention rates and Customer Lifetime Value (CLTV).
Acquiring a customer via a referral program only involves expenses related to the incentives offered to the referrer.
Imagine you establish a referral program where customers who successfully refer their friends receive a waiver of one month’s subscription fees. In this scenario, your opportunity cost would equal one month’s subscription fees per customer. However, assuming you don’t incur any variable costs in providing your tool to an additional customer, you won’t have any additional expenses.
Conversely, if you initiate a digital marketing campaign to acquire users, you can anticipate a significantly higher Customer Acquisition Cost (CAC). Many SaaS-related keywords are in high demand on Google Ads, potentially leading to expenditures of up to $100 for a single click.
Statistics indicate that referral marketing yields conversion rates that are 3-5 times higher compared to other marketing channels. Consider this: when someone recommends your SaaS tool to a friend, they are essentially endorsing it and vouching for its quality. This social proof significantly amplifies conversion rates!
In the realm of Software as a Service company, the aim is to acquire customers who will remain loyal over the long term. Clearly, a customer who consistently utilizes your tool for, let’s say, a decade holds considerably more value than one who subscribes for just two months before discontinuing their subscription.
As per Deloitte, customers referred by other customers exhibit a 37% higher retention rate, aligning perfectly with your strategy. Similarly, research from the Wharton School of Business reveals that a referred customer’s Customer Lifetime Value (CLTV) surpasses that of non-referred customers by 16%. Quite impressive, isn’t it?
Fantastic! You’re now well-versed with all the advantages of SaaS referral programs. This section will outline the steps for establishing your SaaS referral program.
The foundation of SaaS referral programs rests on the premise that your customers genuinely adore your product and would enthusiastically recommend it to their circle. For instance, if you’re searching for an essay writing service and discover that some of your peers have had an exceptional experience with a specific one, you’re likely to consider it seriously. Conversely, if this isn’t the case, there’s a significant risk of your referral program falling short.
Therefore, if you’re contemplating creating a SaaS referral program, the initial imperative is to gauge customer satisfaction levels and ascertain that your users are content. You can progress to the next step if you receive abundant positive feedback.
However, if you encounter users expressing dissatisfaction and indicating they aren’t pleased, it’s crucial to allocate time to address these concerns and refine your product before proceeding further.
While it would be wonderful if customers naturally referred your product due to their enthusiasm, reality often differs.
It’s essential to recognize that your users, being busy professionals, have tightly packed schedules. Offering an incentive is a wise strategy to motivate them to take time out of their day to recommend your product.
Consider these referral program ideas:
Pro-tip: Studies indicate that non-cash rewards are 24% more effective in enhancing referral performance than cash incentives, so keep that in mind!
While it’s possible to establish a referral program manually, for a more streamlined approach and efficient tracking of program effectiveness, it’s recommended to utilize a referral platform like one of the following:
When establishing a referral program, it’s crucial to outline all the terms and conditions to ensure comprehensive coverage.
First and foremost, it’s essential to determine whether you’ll be providing a referral bonus for every referral made or exclusively for successful referrals (i.e. when the referred individual becomes a customer). Most companies opt for the latter approach to avoid customers indiscriminately referring your product to everyone in their contacts solely for personal gain.
Additionally, specify who qualifies for earning referral bonuses and whether there’s a cap on the number of bonuses that can be earned.
When it comes to requesting a referral, timing holds significant importance. If you ask too early, your customers may not have derived enough value from your product, making it unlikely for them to recommend it. Conversely, if you ask too late, their initial excitement about your product may have waned, diminishing the likelihood of a referral.
When is the opportune moment to seek a referral? Since there’s no one-size-fits-all answer, don’t hesitate to conduct experiments and gauge what aligns best with your company. Here are a couple of initial options to consider:
Creating a landing page for your referral program is just the beginning. To truly leverage its potential, actively promote it across various channels such as email, social media, and beyond.
Consider the following approaches:
Similar to any other marketing initiative, it’s crucial to track and assess the outcomes of your newly established referral program.
First, identify the key metrics you want to observe and devise methods to track them. Common referral metrics encompass:
Continuously monitor the progress of your referral program every month and brainstorm ways to enhance its effectiveness. For example, consider conducting A/B tests on two incentives to determine which resonates better with your customers.
SaaS referral programs offer a win-win scenario, enabling you to acquire customers at a lower cost without compromising on their readiness or quality.
If you need to incorporate a referral program into your customer acquisition strategies, you’re leaving potential revenue untapped. Waste no time—set up your SaaS referral program today!