Referral Program
SKILL.md
skillsstrategySKILL.md
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# Referral & Affiliate Program Strategy
You are an expert in growth loops and referral mechanics who understands that the best customers come from other customers. Word of mouth isn't luck — it can be engineered.
## The Referral Truth
**Most referral programs fail because:**
- The incentive doesn't match the ask
- The product isn't remarkable enough to share
- The referral process has too much friction
- They launch once and never optimize
**Great referral programs:**
- Make sharing feel natural, not transactional
- Reward both parties meaningfully
- Remove friction at every step
- Continuously test and optimize
---
## Referral vs. Affiliate: Which Do You Need?
### Customer Referral Program
**What:** Existing customers recommend to their network
**Who refers:** Your happy customers
**Motivation:** Help friends + earn rewards
**Best for:**
- Products with natural word-of-mouth
- Community-driven brands
- Lower-ticket products
- High customer satisfaction
### Affiliate Program
**What:** Partners promote for commission
**Who refers:** Content creators, influencers, partners (may not be customers)
**Motivation:** Earn money
**Best for:**
- Products with clear value prop
- Higher-ticket items that justify commissions
- Established brands with demand
- Scalable customer acquisition
### Hybrid Approach
Many successful companies run both:
- Simple referral program for customers (small rewards)
- Structured affiliate program for partners (larger commissions)
---
## The Viral Loop Framework
### The Referral Mechanics
```
┌─────────────────────────────────────────────────────────────┐
│ │
│ 1. TRIGGER 2. SHARE 3. CONVERT │
│ ───────────── ────────── ───────────── │
│ User experiences User shares Friend signs up │
│ something worth via preferred and becomes user │
│ sharing channel │
│ │
│ │ │
│ └─────────────────4. REWARD─────────────────┘ │
│ Both parties rewarded │
│ Cycle continues │
│ │
└─────────────────────────────────────────────────────────────┘
```
### The Viral Coefficient (K-Factor)
**K = i × c**
Where:
- i = Invitations sent per user
- c = Conversion rate of invitations
**Interpretation:**
- K > 1: Viral growth (each user brings 1+ new users)
- K < 1: Referrals amplify growth but don't sustain alone
- K = 0.5: Each user brings 0.5 new users (50% amplification)
**Example:**
- Average customer sends 4 invitations
- 10% of invitations convert
- K = 4 × 0.10 = 0.4
**Improving K:**
1. Increase invitations sent (better prompts, multiple channels)
2. Increase conversion rate (better landing experience, stronger incentive)
---
## Program Design Framework
### Step 1: Identify Your Trigger Moments
**When are customers most likely to share?**
High-potential moments:
- First "aha" moment (they get it)
- After achieving a win with the product
- After receiving exceptional support
- When they're being asked "what tool do you use?"
- After renewal or upgrade (recommitment)
- When they've just told you they love it
**Map your product's trigger moments:**
1. [Moment] — [Why they'd share here]
2. [Moment] — [Why they'd share here]
### Step 2: Choose Your Incentive Structure
**Single-sided (referrer only):**
```
Give: $20 credit for each referral
```
- Simpler to communicate
- Works for high-value products
- Risk: Referred person has no urgency
**Double-sided (both parties):**
```
Give $20, Get $20
Give a friend their first month free, get yours free too
```
- Higher conversion rates
- Creates win-win framing
- Most common for a reason
**Tiered (gamified):**
```
3 referrals: $50 credit
10 referrals: Free month
25 referrals: Free year
```
- Drives ongoing engagement
- Creates achievable goals
- More complex to communicate
### Step 3: Select Incentive Type
| Type | Pros | Cons | Best For |
|------|------|------|----------|
| Account credit | Drives product usage | Only valuable to active users | SaaS, subscriptions |
| Cash/gift card | Universal value | Feels transactional | Marketplaces, fintech |
| Free period | Clear value, high perceived worth | May attract freebie seekers | Subscription products |
| Exclusive features | Low cost to you | Limited appeal | Freemium products |
| Physical swag | Memorable, shareable | Logistics complexity | Brand-focused companies |
| Donation to charity | Feel-good | Lower personal motivation | Mission-driven brands |
### Step 4: Calculate Incentive Value
**Maximum you should spend per referral:**
```
Max Reward = (Customer LTV × Gross Margin) - Target CAC
```
**Example:**
- LTV: $500
- Gross margin: 80%
- Target CAC: $100
- Max reward: ($500 × 0.80) - $100 = $300
You can offer up to $300 total (split between referrer and referred) and still meet your CAC goals.
**Typical ranges:**
- B2C: $10-50 or 10-25% of first purchase
- B2B SaaS: $50-500 or 1-3 months free
- Enterprise: Higher, often custom
---
## Sharing Mechanics
### Share Method Hierarchy
**Ranked by typical effectiveness:**
1. **In-product share** — "Invite team members" (highest intent)
2. **Personal link** — Unique URL to share anywhere
3. **Email invite** — Send directly from product
4. **Social share** — One-click to Twitter/LinkedIn/Facebook
5. **Referral code** — Memorable code for offline sharing
**Best practice:** Offer multiple options, but lead with highest-performing method.
### Reducing Share Friction
**Make sharing as easy as possible:**
- Pre-written share messages (customizable)
- One-click copy link
- Mobile-optimized experience
- Social share buttons
- QR code for in-person sharing
- Email invites with auto-complete
### The Referral Landing Page
**When someone clicks a referral link, they see:**
- Who referred them (personal connection)
- What they get (their incentive)
- What the product does (quick value prop)
- Easy signup (minimal friction)
**Elements:**
```
"[Referrer Name] invited you to try [Product]"
"Get [their incentive] when you sign up"
[Clear product description]
[Strong CTA]
[Social proof if available]
```
---
## Referral Program Examples
### Dropbox (Classic)
**Structure:** Give 500MB, get 500MB
**Why it worked:**
- Reward tied directly to product value
- Both parties benefit equally
- Gamified with progress tracking
- Low friction sharing
### Uber/Lyft
**Structure:** Give $10 ride credit, get $10 when they ride
**Why it worked:**
- Immediate, clear value
- Double-sided incentive
- Easy code/link sharing
- Triggered at natural moments
### Morning Brew
**Structure:** Tiered swag rewards
- 3 referrals: Stickers
- 5 referrals: T-shirt
- 10 referrals: Mug
- 25 referrals: Hoodie
**Why it worked:**
- Gamification drives ongoing engagement
- Physical rewards are conversation starters
- Status/identity created
- Low cost relative to subscriber value
---
## Affiliate Program Design
### Commission Structures
**Percentage of sale:**
- Standard: 10-30% of first purchase or first year
- Best for: E-commerce, SaaS with clear pricing
- Example: "Earn 25% of every sale"
**Flat fee per action:**
- Standard: $5-500 depending on action value
- Best for: Lead gen, free trials
- Example: "$50 for every qualified demo"
**Recurring commission:**
- Standard: 10-25% of recurring revenue
- Best for: Subscription products
- Example: "20% of monthly subscription for 12 months"
**Tiered commission:**
- Best for: Motivating top performers
- Example: "20% for 1-10 sales, 30% for 11+"
### Cookie Duration
How long after click does affiliate get credit?
| Duration | Use Case |
|----------|----------|
| 24 hours | High-volume, impulse purchases |
| 7-14 days | Standard e-commerce |
| 30 days | Standard SaaS/B2B |
| 60-90 days | Long sales cycles |
| Lifetime | Premium partnerships |
### Affiliate Recruitment
**Where to find affiliates:**
- Your own customers who create content
- Industry bloggers and reviewers
- YouTube creators in your niche
- Newsletter writers
- Consultants and agencies
- Complementary (non-competing) tools
**Outreach template:**
```
Subject: Partnership opportunity — [Your Product]
Hi [Name],
I've been following your content on [topic] — particularly [specific piece].
[Your Product] helps [audience] [achieve outcome], and I think it would be valuable to your audience.
Our affiliate program offers:
- [Commission structure]
- [Cookie duration]
- [Additional benefits]
Would you be interested in learning more?
[Your name]
```
### Affiliate Enablement
**Provide affiliates with:**
- [ ] Unique tracking links
- [ ] Product overview and key benefits
- [ ] Target audience description
- [ ] Competitor comparison points
- [ ] Creative assets (logos, banners)
- [ ] Sample copy and talking points
- [ ] Case studies and testimonials
- [ ] Demo access or free account
- [ ] FAQ and objection handling
- [ ] Payment terms and schedule
---
## Measuring Program Performance
### Key Metrics
**Referral rate:**
```
Referral Rate = Customers who refer / Total customers
```
- Benchmark: 10-25% is good, 25%+ is excellent
**Referrals per referrer:**
```
How many successful referrals per referring customer?
```
- Benchmark: 1-2 average, 2-5 is good
**Referral conversion rate:**
```
Conversion Rate = Successful referrals / Total invitations sent
```
- Benchmark: 10-25% is solid
**Viral coefficient (K-factor):**
```
K = Invitations per user × Conversion rate
```
**Program ROI:**
```
ROI = (Revenue from referred customers - Program costs) / Program costs
```
### Tracking What Matters
**Track per cohort:**
- Source of original referrer
- Time from signup to first referral
- LTV of referred customers vs. organic
- Churn rate of referred vs. organic
- Number of subsequent referrals (viral chains)
**Typical findings:**
- Referred customers have 16-25% higher LTV
- Referred customers have 18-37% lower churn
- Referred customers refer others at 2-3x the rate
---
## Program Optimization
### Increasing Referral Rate
**If few customers are referring:**
- Ask at better moments (after wins)
- Simplify the sharing process
- Test different incentive types
- Make referral more prominent in product
- Send reminder email campaigns
- Reduce friction in the flow
**If referrals aren't converting:**
- Improve the landing experience
- Strengthen incentive for new users
- Test different messaging
- Ensure referrer's endorsement is visible
- Shorten path to value
### A/B Tests to Run
**Incentive tests:**
- Reward amount ($10 vs $20 vs $50)
- Reward type (credit vs cash vs free month)
- Single vs double-sided
- Immediate vs delayed reward
**Messaging tests:**
- How you describe the program
- CTA copy on share buttons
- Email subject lines
- Landing page copy
**Placement tests:**
- Where referral prompt appears
- When it appears (timing/trigger)
- How prominent it is
- In-app vs email prompts
---
## Fraud Prevention
### Common Fraud Types
- Self-referrals (creating fake accounts)
- Referral rings (groups referring each other)
- Coupon sites posting codes publicly
- Fake email addresses
- VPN/device manipulation
### Prevention Measures
**Technical:**
- Email verification required
- Device fingerprinting
- IP monitoring
- Delayed reward payout
- Minimum activity threshold before reward
**Policy:**
- Clear terms of service
- Maximum referrals per period
- Reward clawback for refunds
- Manual review for suspicious patterns
**Structural:**
- Require meaningful action from referred user
- Cap lifetime rewards
- Pay rewards in product credit (less attractive to fraudsters)
---
## Tools & Platforms
### Referral Program Tools
- **ReferralCandy** — E-commerce focused
- **GrowSurf** — SaaS and tech
- **Viral Loops** — Template-based campaigns
- **Friendbuy** — E-commerce and subscriptions
- **Ambassador** — Enterprise programs
### Affiliate Program Tools
- **PartnerStack** — SaaS focused
- **FirstPromoter** — SaaS affiliate management
- **Rewardful** — Stripe-integrated
- **Impact** — Enterprise partnerships
- **ShareASale** — Large network
---
## Output Format
### Program Design Document
```
# Referral Program Design: [Product Name]
## Program Type
Referral / Affiliate / Hybrid
## Incentive Structure
- Referrer receives: [X]
- Referred receives: [Y]
- Payout timing: [When]
## Target Viral Coefficient
- Target K: [X]
- Invitations goal: [X per user]
- Conversion goal: [X%]
## Sharing Mechanics
- Primary share method: [X]
- Secondary methods: [X, Y, Z]
- Referral landing page: [URL/spec]
## Trigger Moments
1. [Trigger] — [Integration point]
2. [Trigger] — [Integration point]
## Fraud Prevention
- [Measure 1]
- [Measure 2]
## Success Metrics
- Referral rate target: [X%]
- Conversion target: [X%]
- CAC from referrals: [$X]
## Launch Plan
- Phase 1: [Soft launch to segment]
- Phase 2: [Full rollout]
```
---
## Questions to Ask
If you need more context:
1. What type of program are you building (referral, affiliate, or both)?
2. What's your customer LTV and current CAC?
3. Do customers naturally talk about your product?
4. What tools/platforms are you considering?
5. What's your budget for rewards?
6. Is your product naturally shareable?
---
## Related Skills
- **launch-strategy**: For launching referral program
- **email-sequence-builder**: For referral email campaigns
- **marketing-psychology**: For referral motivation principles
- **analytics-tracking**: For tracking referral attribution
- **pricing-strategy**: For structuring rewards relative to LTV
ReadyReferral Program
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