PUBLISHED: Mar 1, 2022

Referral Marketing Strategies for SaaS Websites

Tarasekhar Padhy
Referral Marketing Strategies for SaaS Websites
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People talk. It’s their business.

Unless they are talking about your business. Unless those talks direct their purchasing decisions.

Then, it definitely matters.

According to a statistical report by Nielsen, 92% of people trust referrals from people they know, customers referred by a friend are four times more likely to make the purchase, and referrals account for companies’ 65% new deals.

It’s time we had a talk about referral marketing strategies for SaaS websites.

In this post, we will talk about what is SaaS referral marketing, why you should consider them, how to create one, and some examples. Let’s get straight into it.

What Is SaaS Referral Marketing?

SaaS referral marketing is a form of word-of-mouth marketing in which satisfied customers of a SaaS business are turned into raving fans and their words drive more customers in. Those satisfied customers and the new customers they bring in are rewarded for that through coupons, gifts, and discounts.

Using incentives to get new customers and increase revenue, isn’t that affiliate marketing?

Often, referral marketing is confused with affiliate marketing, let’s clear that up.

The difference between referral and affiliate marketing

Even though there is a similarity between referral and affiliate marketing in terms that they use incentives to get more customers, they are quite different.

In referral marketing, existing customers spread the word within their network that gets the said business more customers. In affiliate marketing, a third-party business called an affiliate, is responsible for advocating your brand and getting you new customers.

Referral marketing is a type of word-of-mouth marketing where a person just shares their experiences with their network that leads them to the business where they had the said experience. Affiliate marketing is a form of performance-based marketing in which the affiliate partners, who are third-party businesses, showcase your products and services to their audience.

Another critical difference is the customers who are referring you have used your product, whereas, your affiliate partners are usually just aware of it.

The incentives in both cases are different too. In referral marketing, it is altruism, coupons, discounts, etc. In the case of affiliate marketing, it is primarily money (typically a percentage of the sale they are responsible for).

But, why should a SaaS business consider referral marketing?

SaaS referral marketing has lots of benefits, let’s look at them one-by-one.

Benefits of SaaS referral marketing program

SaaS referral marketing has five great benefits that will improve your business’s bottom line.

Increase brand awareness

Think about the last time you saw an ad for Starbucks. Can’t remember? That is primarily because people know Starbucks through referral marketing! If you open social media and start scrolling, you will run into an image similar to the one below quite soon.

People don’t trust faceless companies, they trust their friends. Even though having a Starbucks-level impact is not easy, there is no question about the fact that referral marketing increases your brand awareness.

Lower customer acquisition costs (CAC)

Customer acquisition is a pain for every marketing team. Every customer that you have presently(or used to have), you spent money to get them. SaaS businesses spend on content, webinars, advertising and many more to get more customers. That money spent is known as the “customer acquisition cost”, and referral marketing has the lowest of that.

For example, one of your customers gets so satisfied with your service they write a post on LinkedIn about it. Some on their network see that and you end up with a few new customers. Did you spend any money to get them?

Healthier customer lifetime value

According to research by Wharton Business School, referred customers have 16% more lifetime value and an article from Forbes suggest a 37% higher retention rate. It means, not only they will give you more business, they will give you more business longer.

And who knows how many others they will refer to?

Better lead quality and quantity

According to an article by Forbes and research by Social Media Today on referral marketing:

  • 78% of B2B marketers believe it generates quality leads
  • 60% of marketers believe that the leads come in higher numbers

The above traits coupled with lower customer acquisition costs make referral marketing the most valuable form of SaaS marketing.

Higher conversion rates

According to an infographic by Influitive, marketers have experienced that:

  • 70% of leads by referrals convert
  • Referred leads close 67% faster

What’s more, companies with efficiently executed referral marketing strategies experience 86% of revenue growth within two years. And yet, only 30% of B2B companies have referral marketing programs in place!

If you’re in that 30%, it’s about time you change that.

Let’s take a look at how to create robust and adaptive referral marketing strategies for SaaS-y websites.

How to Create a Rockstar SaaS Referral Program 

For a SaaS business, a referral marketing program is not a “nice-to-have”, it is a “must-have”. It has tons of benefits as we explained above and above all, it is easy to set one up.

Let’s take a look at the steps that will help you set up a referral marketing program for your SaaS-y website.

Deliver a world-class experience to your customers

If you are the best in your vertical and your product or service is mind-blowing, half the work is already done. If your customers consistently rate you more than 9/10, then they are already talking about you to their network.

Deliver a world-class experience to your customers because you can and they deserve it.

How? Ask your customers what their feedback is. Ask them what they want. Act on it. Research your competitors and learn from them. Keep up with the times by constantly upgrading your product or service. Make this a continuous process.

Decide what referral technique will you use

Incentives are the heart of a professional referral marketing strategy. There are two types:

  • One-way referral technique: This is where only the referrer gets the reward.
  • Two-way referral technique: This is where both the existing and new customers get the reward. Often, the reward for both is the same.

The two-way referral technique works better because it mutually benefits both parties. Choose the technique that you think will work best or conduct A/B testing.

Choose the right rewards to motivate customers

There are many ways through which you can reward your satisfied customers to get you more customers.

  • Cashbacks: Everyone likes cash. Your customers can easily calculate how much they can make in a tangible way. You can send it directly to their account, or to their online wallet.
  • Redeemable reward points: If you don’t want to give cashbacks, this is the next best thing. The best part about reward points is they will be spending it back on you.
  • Discount Coupons: Discounts are a great way to retain your existing customers or even get more business by making them transferrable.
  • Free subscription for a month: It is a great reward for legacy customers as well. Also, new referred customers can see this as a great incentive.
  • Extended trial: When someone joins through referral, give them a longer trial period. It will give them a chance to explore your product well.
  • Features and upgrades: Existing customers can use certain features that are unavailable on their plan. Extended features can also be given to customers who are referred, for instance, more storage on the cloud.
  • Goodies or branded swag: A sticker, a mug, or a superhero t-shirt work as great motivators. However, not all of your customers will be excited about this, so make it a giveaway based on referrals.
  • Coupons for other businesses: No matter which business you are in, no one will say no to a coupon for a pizzeria. Your customers need other things as well.
  • Affiliate partnership: Affiliate partnerships give cold hard cash. If a certain customer can provide you with enough high-valued customers, there is no reason to not reward them and make them a partner.

While choosing rewards for your customers, keep the following in your mind:

  • The cost of acquisition of a customer and their lifetime value.
  • The time it will take for you to reach there.
  • The resources (time, money, and people) you can expend for this.
  • Do the risk vs. reward analysis.

Make a dedicated page with a shareable link

The first thing you need to do while initiating a referral marketing program for your SaaS website is to put all the information in one place and make it easily sharable. A dedicated landing page for your referral marketing program does just that. Interested customers can easily learn everything they need to know and can share the information with the click of a button. Here are a few handy tips to keep in mind:

  • Keep it direct and simple.
  • Adopt a good template.
  • It should have social media share buttons.
  • It should not take more than 2 clicks(or taps) to share the message.
  • Add a link to the terms and conditions page.
  • Provide auto-generated messages that your customers can forward.
  • Use bullet points.

Specify everything in the Terms and Conditions 

The terms and conditions page should contain the rules of engagement that ensure there is no grey area. For example, if a customer refers a SaaS product and the referred customers quit after trial, then sending them the reward is a mistake. A lot of people attempt to take advantage of referral programs in that manner.

Make sure to adhere to the legal guidelines of the country of concern.

Promote your SaaS referral program

Your existing customers need to know that you have a referral program that you want them to take advantage of (because your customers deserve the best). Here are some handy tips that you should follow:

  • Send it via email. All the contacts in your CRMs should get it.
  • Post it on your socials. Multiple times, consistently.
  • Include it in your drip campaign so that new subscribers or users get the message.
  • Add it to the onboarding tour of your product/service.

Track and measure results

If it can get measured, it can get managed. There is no point in executing a SaaS marketing strategy unless you can measure and optimize it. You can start by tracking the following data:

  • The amount you give away as incentives.
  • The amount you spent to keep the program running.
  • The amount you made from referred customers.

Test it out for a couple of months and draw a conclusion after you have gathered some data.

Iterate your SaaS referral marketing strategy

If you didn’t hit the mark you aspired to, change your approach. Of course, it can be a lot of things that might not be working. It could be that the existing customers are referring people who are not a fit, or maybe it was not the right incentive, or maybe you didn’t promote it properly.

Isolate and test each element, like you would in any SaaS marketing program.

Now, let’s take a look at the five best SaaS referral programs that will inspire you to take the next step.

5 SaaS Referral Programs to Inspire You

Here we have compiled the details of referral programs run by five different companies with five different referral marketing strategies.

1. PayPal

Once you refer PayPal to a friend and they carry out a transaction of $5 or more, both of you will receive $10. There is an upper limit of $50. According to statistics compiled by Viral-Loops, PayPal grew its user base daily by 7-10% and reached 100M users. They stopped after that for some time.

Even though it all worked out great, keep in mind that referral programs like this are quite risky and many will just sign up to get the reward. PayPal had given out around $70M to their users for signups and referrals.

Key takeaways:

  • There is a risk for every potential reward, make sure you know what it is.
  • Don’t give cash as a reward if you are running short.
  • If you need to pull the plug, do it.
  • Elon Musk is a genius.

2. Dropbox

Dropbox has a great referral program. They give their users 500MB of free space for each successful referral, up to 16GB. If you are using a paid account, you will get 1GB/referral up to 32GB! This strategy was great because it gave the thing that their users wanted in the first place: storage space. Not only did they gain a lot of users, but they also increased engagement. According to statistics compiled by Viral-Loops, from 2008 to 2010, Dropbox doubled its user base each quarter and grew 3900% in 15 months.

Key takeaways:

  • Giving your actual product’s value is quite effective.
  • Always put a cap on the rewards.

3. Trello

Trello’s referral program rewards its customers with its premium plan, Trello Gold. For each successful signup, you will get one month of Trello Gold for up to 12 months. If you open their referral page after signing up, you will get a custom referral link that can be easily shared. Here are some learning points from Trello’s referral program:

  • Information on their landing page is direct and simple.
  • The referral link is customized and sharable.
  • They are advertising their premium plan simultaneously.
  • Not giving away money as an incentive attracts genuine users.
  • The cost of acquisition per new user is low.

Key takeaways:

  • Your product’s premium plan is a great incentive as it attracts genuine users.
  • Using a premium plan as a reward keeps the cost of acquisition low.
  • A good landing page, an auto-generated custom link, and share buttons reduce the barrier to action.

4. Uber

Uber’s referral program is for both riders and drivers with different rewards depending on various conditions like geographical location.

  • For riders: They will receive the reward if the referred enters their customized referral code and completed a ride.
  • For drivers: If the referred driver completes certain trips or matches certain conditions.

According to a detailed article by,

  • Uber spends $40 to acquire a new customer with both the referrer and referred getting $20 each. (although it depends on other factors like location, country’s rules, etc.)
  • An average Uber user spends $95/month.
  • Uber takes 25% of whatever a user spends.

Even though the cost of acquisition is relatively higher, Uber easily makes that up within two months. And compared to a customer’s lifetime value, it is a drop in the ocean.

Key takeaways:

  • If you are giving a cash reward, make sure the customer lifetime value is high.
  • Take all factors into consideration while setting up the program.
  • Set different kinds of rewards for different kinds of users.

5. Wise 

Wise is a London-based FinTech company that enables its customers to send money internationally. Formerly known as TransferWise, Wise’s referral program gives different rewards for both the referrer and the referred.

  • For the referrer: The referrer will receive 50GBP or equivalent when each of the invited friends completes an international transaction of 200GBP.
  • For the referred: Their first transaction will be fee-free.

Key takeaways:

  • Tailor your rewards so that they can’t be taken advantage of.
  • Try your best to keep the cost of acquisition low.

Wrapping up

Referral marketing strategies for SaaS-y websites are effective and economical to get more revenue and increase your user base. Referral marketing has great potential if done right. As usual, there is a learning curve and a testing phase before you will see the results you desire. Be patient, do your research, and make data-backed decisions.

Happy referral marketing!

Image Sources – PayPal, Dropbox, Trello, Uber, Wise 

Tarasekhar Padhy

Tarasekhar Padhy is a Creative Content Writer at Growfusely, a SaaS content marketing agency specializing in content and data-driven SEO.

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