The Referral Program experiment assesses whether your existing customers are willing to promote your product or service to others. By creating a structured program with incentives, this experiment captures data on customer enthusiasm and potential growth through referrals. It is ideal for understanding your product’s virality and its alignment with customer values.
Cost
Costs can include setting up a referral platform, designing incentives (e.g., discounts, free months, etc.), and potentially marketing the program.
Evidence
This experiment generates tangible metrics based on customer actions, providing credible data on customer willingness to advocate for the product.
Metrics
- # of Advocates: Total number of customers who agree to participate in the referral program by accepting a referral code.
- # of Advocate Shares: Number of times advocates actively share their referral code with friends.
- Advocate Share Rate: The proportion of advocates who received a code and then shared it with at least one friend.
- # of Friends: Total number of people who received the referral code from advocates.
- # of Friend Clicks: Number of friends who clicked on the referral code or link.
- Friend Click-Through Rate: The percentage of friends who clicked the referral link after receiving it.
- # of Friend Conversions: Total number of friends who signed up or made a purchase after clicking the referral link.
- Friend Conversion Rate: The percentage of friends who clicked the referral link and then completed the desired action.
Success Criteria
- Advocate Engagement: At least 15%–20% of advocates who received a referral code must share it with their friends.
- Click-Through Effectiveness: At least 50%–80% of friends who receive the referral code should click on it, depending on the channel.
- Conversion Rate: At least 5%–15% of friends who clicked on the referral code should sign up or make a purchase.
Setup Time
Includes time for planning, selecting tools, setting up tracking systems, and creating promotional materials.
Run Time
The run time for a referral program is long, typically lasting several weeks or months. This duration allows enough time for advocates to share their referral codes and for their friends to decide whether to act on the referrals.
Risk Categories
Ideal for testing the...
Ideal for testing with customers how to organically scale your business.
Setup
- Identify the Incentive:
Determine what motivates your customers (e.g., discounts, free months, exclusive content). - Choose a Referral Tool:
Use a platform or build an in-house tool to track referrals and rewards. - Plan Messaging:
Craft clear instructions and benefits for participating customers. - Design Tracking System:
Ensure you can measure all key metrics accurately.
Run
- Launch the Program:
Announce the referral program to existing customers via email, social media, or in-app notifications. - Monitor Engagement:
Track customer participation and measure metrics such as referrals sent and conversion rates. - Adjust as Needed:
Refine messaging or incentives if engagement is lower than expected.
Analyze
- Collect Data:
Consolidate metrics from the referral tool. - Evaluate Performance:
Compare metrics against success criteria. - Draw Insights:
Identify customer segments that are most active and effective in driving referrals.
Additional Information
- Requirements:
A functional referral mechanism (software or manual) and a clear incentive structure. - Risks:
Misaligned incentives might attract low-value customers or disengage existing ones. Ensure rewards are compelling yet sustainable.