# Referral Program Design Guide

Based on research from [ReferralCandy](https://www.referralcandy.com/blog/referral-program-examples), [GrowSurf](https://growsurf.com/blog/referral-program-statistics), [Viral Loops](https://viral-loops.com/blog/).

---

## Referral Program Benchmarks

### Key Metrics
| Metric | Poor | Average | Good | Excellent |
|--------|------|---------|------|-----------|
| Participation rate | <5% | 5-15% | 15-30% | >30% |
| Share rate | <10% | 10-25% | 25-40% | >40% |
| Conversion rate | <5% | 5-15% | 15-25% | >25% |
| K-factor | <0.5 | 0.5-1 | 1-1.5 | >1.5 |

### K-Factor Calculation
```
K-factor = Invites × Conversion Rate

Example:
- Each user invites 5 friends
- 20% convert
- K = 5 × 0.2 = 1.0

K > 1 = Viral growth (each user brings >1 new user)
```

### Referral Revenue Benchmarks
- Average referral customer LTV: **16% higher**
- Referral customer retention: **37% higher**
- Referral CAC: **70-80% lower** than paid

---

## Referral Program Types

### 1. Double-Sided Incentive
**Both referrer and referee get reward**

| Example | Referrer Gets | Referee Gets |
|---------|---------------|--------------|
| Dropbox | 500MB storage | 500MB storage |
| Uber | $10 credit | $10 off first ride |
| Airbnb | $25 credit | $25 off first stay |

**Best for:** Products with viral potential, two-sided value

### 2. Single-Sided (Referrer Only)
**Only referrer gets reward**

| Example | Reward |
|---------|--------|
| Tesla | $1,000 credit |
| Cash back apps | % of purchase |

**Best for:** High-value referrals, luxury products

### 3. Single-Sided (Referee Only)
**Only new user gets reward**

| Example | Reward |
|---------|--------|
| Many SaaS | Extended trial |
| Courses | Discount on first purchase |

**Best for:** Building goodwill, charitable referrers

### 4. Tiered/Gamified
**Rewards scale with referral count**

```
Tier 1: 3 referrals → Swag
Tier 2: 5 referrals → Free month
Tier 3: 10 referrals → Lifetime discount
Tier 4: 25 referrals → Featured partner
```

**Best for:** Power users, community building

### 5. Community/Affiliate
**Commission-based ongoing rewards**

| Model | Commission |
|-------|------------|
| One-time | $X per signup |
| Recurring | X% of monthly payment |
| Tiered | % increases with volume |

**Best for:** B2B, high LTV products, influencers

---

## Incentive Design

### Reward Types
| Type | Pros | Cons |
|------|------|------|
| Cash | Universal appeal | Transactional feel |
| Credit/Discount | Reinforces usage | Limited to your product |
| Free months | High perceived value | Revenue impact |
| Swag | Brand building | Logistics complexity |
| Features | Zero marginal cost | Limited appeal |
| Points | Gamification | Requires system |

### Optimal Reward Sizing
| Product Price | Referral Reward | Referee Reward |
|---------------|-----------------|----------------|
| $10-50/mo | $10-25 | $10-25 or % off |
| $50-200/mo | $25-50 | Free month |
| $200+/mo | $50-100+ | Extended trial |
| One-time <$100 | $10-20 | $10-20 off |
| One-time >$100 | $20-50 | $20-50 off |

### Psychology of Rewards
| Principle | Application |
|-----------|-------------|
| Reciprocity | Give referee value first |
| Loss aversion | "Don't lose your reward" |
| Specificity | "$25 credit" not "free stuff" |
| Immediacy | Instant reward > delayed |
| Visibility | Show progress to next tier |

---

## Program Mechanics

### Share Mechanics
| Method | Conversion | Ease |
|--------|------------|------|
| Personal link | Medium | High |
| Referral code | Low | High |
| Email invite | High | Medium |
| Social share | Low | High |
| Direct message | Highest | Medium |

### Best Practice: Multiple Options
```
Share your link:
[🔗 Copy Link]

Or invite by email:
[📧 Email Invites]

Share on social:
[Twitter] [LinkedIn] [Facebook]
```

### Attribution & Tracking
| Method | Tracking |
|--------|----------|
| Unique link | Best, automatic |
| Referral code | Manual entry |
| Cookies | 30-day window typical |
| Email domain | B2B, limited |

### When to Credit Reward
| Trigger | Pros | Cons |
|---------|------|------|
| Signup | Fast reward | Low quality leads |
| Verified email | Quick, validated | Still no value |
| First action | Engaged user | Delays reward |
| Paid conversion | Quality | Long wait |
| After trial | Balanced | Medium wait |

---

## Program Promotion

### Discovery Points
| Location | Method |
|----------|--------|
| Post-signup | Welcome email |
| Post-purchase | Confirmation email |
| In-app | Dashboard widget |
| Settings | Referral section |
| Success moment | After key action |
| Anniversary | Yearly reminder |

### Email Templates

**Initial Introduction:**
```
Subject: Give $25, Get $25 with [Product]

Hi [Name],

Love [Product]? Share it with friends and you'll
both get $25 credit.

Here's your personal link:
[REFERRAL LINK]

How it works:
1. Share your link with friends
2. They get $25 off their first month
3. You get $25 credit when they subscribe

[Start Sharing →]
```

**Reminder Email:**
```
Subject: You have 3 pending referrals

Hi [Name],

Your friends are almost there! 3 people clicked
your referral link but haven't signed up yet.

Send them a friendly reminder:
[Send Reminder Email →]

Your referral link: [LINK]
```

---

## Referral Page Design

### Essential Elements
```
┌─────────────────────────────────────┐
│ Give $25, Get $25                   │
│ Share [Product] and earn rewards    │
├─────────────────────────────────────┤
│ Your unique link:                   │
│ [example.com/r/abc123] [Copy]       │
├─────────────────────────────────────┤
│ [📧 Email] [Twitter] [FB] [LinkedIn]│
├─────────────────────────────────────┤
│ How it works:                       │
│ 1. Share your link                  │
│ 2. Friend signs up                  │
│ 3. You both get $25                 │
├─────────────────────────────────────┤
│ Your Stats:                         │
│ Invited: 12 | Signed up: 5          │
│ Earned: $125                        │
├─────────────────────────────────────┤
│ Recent Activity:                    │
│ ✓ Sarah signed up (You earned $25)  │
│ ⏳ Mike clicked (pending)           │
└─────────────────────────────────────┘
```

### Mobile Optimization
- Easy copy/share buttons
- Native share sheet
- Progress visualization
- Simple reward tracking

---

## Viral Loop Optimization

### Viral Coefficient Levers
| Lever | Impact | How to Improve |
|-------|--------|----------------|
| Invites sent | High | Prompts, reminders |
| Invite quality | High | Personalization |
| Conversion rate | High | Reward, landing page |
| Time to convert | Medium | Follow-up sequence |

### Reducing Friction
| Friction Point | Solution |
|----------------|----------|
| Finding referral link | Prominent placement |
| Sharing is awkward | Pre-written messages |
| Referee doesn't trust | Show mutual benefit |
| Complex signup | Streamlined flow |
| Unclear reward | Specific, immediate |

### Pre-Written Share Messages
```
Email template:
Hey [Name],
I've been using [Product] for [time] and thought
you'd love it too. Use my link and we both get $25:
[LINK]

Twitter template:
Loving @Product for [use case]. Use my link to
get $25 off: [LINK]
```

---

## Measuring Success

### Key Metrics
| Metric | Formula | Target |
|--------|---------|--------|
| Participation Rate | Referrers / Total Users | >20% |
| Share Rate | Shares / Referrers | >30% |
| Click Rate | Clicks / Shares | >20% |
| Conversion Rate | Signups / Clicks | >15% |
| K-Factor | Invites × Conv Rate | >1 |
| Referral Revenue % | Ref Revenue / Total | >15% |
| Referral CAC | Program Cost / Referrals | <50% of paid CAC |

### Cohort Analysis
Track referral customers separately:
- Retention vs non-referral
- LTV vs non-referral
- Engagement vs non-referral
- Time to value vs non-referral

---

## Common Mistakes

| Mistake | Impact | Fix |
|---------|--------|-----|
| Hidden program | Low participation | Promote actively |
| Complex rules | Confusion | Simplify terms |
| Delayed rewards | Demotivation | Faster gratification |
| No tracking | Can't optimize | Add analytics |
| Generic messaging | Low conversion | Personalize |
| One-time promotion | Fades away | Ongoing nudges |
| Only cash rewards | Transactional | Add experiential |
| No social proof | Low trust | Show success stories |

---

## Program Templates

### Simple Double-Sided
```
Name: "Give $X, Get $X"
Reward: Equal credits/discounts
Trigger: After first purchase
Promotion: Post-purchase email
Tracking: Unique links
```

### Tiered Ambassador
```
Tiers:
- Bronze (3 refs): Swag pack
- Silver (10 refs): Free month
- Gold (25 refs): Annual free
- Platinum (50 refs): Partner status

Recognition:
- Public leaderboard
- Social badges
- Community shoutouts
```

### B2B Commission Program
```
Structure:
- First year: 20% of first payment
- Recurring: 10% ongoing
- Bonus: $500 for enterprise deal

Requirements:
- Quality introduction
- Customer stays >3 months
- Maximum 50 referrals/year
```

---

## Tools & Platforms

### Referral Software
| Tool | Best For | Pricing |
|------|----------|---------|
| ReferralCandy | E-commerce | $49+/mo |
| GrowSurf | SaaS | Free-$799/mo |
| Viral Loops | Startups | Free-$149/mo |
| Friendbuy | Enterprise | Custom |
| Ambassador | Enterprise | Custom |
| Rewardful | Affiliates | $29+/mo |

### Key Features
- Unique link generation
- Email integration
- Reward automation
- Fraud detection
- Analytics dashboard
- A/B testing
- Multi-currency support
