How To Get Your Customers To Refer Their Friends

In: Marketing|UniversityTutor.com By: Brian Armstrong

25 Apr 2010

I was reading this presentation by the Dropbox.com Founder, Drew Houston, the other day and the most interesting part about it was that most of their marketing with Adwords and conventional approaches completely failed.

Yet Dropbox has over 4 million users. So how did they do it?

Apparently it was almost entirely word of mouth – but they did it in a smart way.

You can click above to see the full set of slides (they are worth reading). But one important point that stood out to me was the 2-sided incentive for referrals that he mentioned above.

I logged in to Dropbox to see what it looked like and here it is:

The key here is that he is giving them more storage as the reward and not money. I like this for a few reasons:

It’s closer to what Dropbox users actually want.
It’s cheaper for Dropbox to give this away because they are dealing in trade.

It’s sort of like if you ask your friend to give you a ride to the airport, and when you get there you pull out your wallet and give him $10. He’d probably feel insulted – it cheapens the act of kindness. But if you give him a ride the next time he needs one, or return the favor in some other way that isn’t money, then it’s all good.

Sometimes money isn’t the best gift.

So with this in mind I started thinking about how I could improve my own site, UniversityTutor. My current referral program pays tutors $3/month to refer other tutors. But those other tutors not only have to signup, they also have to upgrade – which only 1-2% of them do. So it’s tough for tutors to make much doing this, and $3 isn’t very motivating.

This weekend I took a few hours to change UniversityTutor’s referral program to more of a Dropbox model. The free account on UniversityTutor is based on the number of job requests you get (first 3 are free, after that you can upgrade) instead of storage like Dropbox. So now when a tutor refers a friend they both get another free job request up to a maximum of 20.

It will be interesting to see if this is more effective than money. My hunch is that it will be – when tutors reach the end of their free account, the conversation in their head is much more around how to get more tutoring jobs, not how to get $3. What do you think?

Until next time, keep breaking free!
Brian Armstrong

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12 Responses

Patrick Toerner

April 25th, 2010 at 8:10 pm

That is very interesting. I wonder if it will work in a similar manner with UniversityTutor. I like the idea of allowing the user to get an added job request. I am assuming the job request is added just for referring a friend not only if they upgrade, correct?

Anyways, I like the idea, I am glad you are always trying to improve all of your sites, even the old ones :)

Brian Armstrong

April 27th, 2010 at 5:48 am

Hey Patrick,

Yep it’s just for the referral – no upgrade required. Thanks for the encouragement :)

Samuel

April 26th, 2010 at 4:48 pm

Hi,

It’s a good idea in principle and I hope it works for you. I have messed around with a similar model before though and what I found is that you don’t get targeted referrals, especially in a small niche like tutoring (do private tutors hang out with loads of other private tutors? I don’t know).

What I found you get is people submitting spam or secondary e-mail addresses they own just to get the freebies. Unless I’m mistaken, it doesn’t seem like you have a way to avoid this?

Good luck,

Sam

Patrick Toerner

April 27th, 2010 at 4:09 am

I was re-reading this post and saw this comment and felt the urge to reply :)

I just wanted to say that you have an awesome point. I have 5+ email accounts and it would be no trouble for me to sign up those 5 and get 8 free contacts instead of just 3.

You could possibly implement something where the profiles have to be fully completed or something, but you still might get spam/duplicate sign ups.

Anyways, good luck with it, keep us posted!

Brian Armstrong

April 27th, 2010 at 5:51 am

Hey Sam…great point. This could turn out to be a problem.

I am checking whether the referred tutor actually fills out a profile before issuing the credit. Then again, it may be a bad thing because it will mean the fake profile actually goes live on the site! :)

Otherwise…I suppose if 10% of people try to game the system I’m ok with it. After all, it costs me nothing. But you’re right I’ll have to watch out for spammy looking profiles.

Great feedback.

Mar

April 27th, 2010 at 12:22 pm

Indeed it won’t cost you anything more than it originally would (for the referral part), plus let’s assume that not everyone is genuinely out to hoodwink UT into getting those extra benefits. With nothing to lose and much to gain, I applaud this shift.

It’s great that you’re focused on giving this referral promotion thingy more beneficial than ever (where you now include more perks for free users). When people see the benefits, they tend to share it via word of mouth, and that’s sort of marketing is indeed invaluable.

Btw, we’ve all seen Facebook’s ‘Like’ button right? It could be viral.

Now I’m no programmer or developer but just how difficult is it to allow registered users to ‘like’ your service and get rewarded with a few more job requests? Assuming they’re on Facebook of course.

Brian Armstrong

April 28th, 2010 at 5:12 am

Hi Mar,

Good point – I’m not aware of any way to tap into the “like” button through an API. I imagine Facebook has terms of service against enticing people to click it, but you never know – people might start to do just that if it led to additional traffic for them.

Chuck Cohn

April 29th, 2010 at 2:25 pm

Interesting topic, Brian. I’m going to try implementing a 2-way referral program with my service and see what happens.

Brian Armstrong

April 30th, 2010 at 7:14 am

Cool, let me know how it goes!

Mark Bossert

May 7th, 2011 at 5:18 am

Very cool idea and finding Brian!

Totally stealing it! We have a local SEO business – I will think this through but thinking 500 extra links built for customers referrals; I’ll test smaller incentives for Facebook likes, blog comments, twitter follows, linkedIn connects…

alex

January 7th, 2012 at 2:12 pm

Finally a good link! I have found out that if you sign up with this link, you get 5GB instead of 2GB and you can still add referrals!

Signup here for 5GB FREE: http://db.tt/xtZkf4fl

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How To Get Your Customers To Refer Their Friends

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