How SaaS Startups Can Build a Customer Referral Program from Scratch

May 16, 2019 · 8 min read

Are you a SaaS marketer?

Perhaps you double as the CEO — or head of the product development team?

For SaaS startups, determining marketing strategies that tackle early challenges are difficult.

Simultaneously, startups must:

  • Build early demand for their product
  • Acquire new customers at a low cost
  • Prevent customers from canceling subscriptions

And this must be done through great marketing of an extraordinary product.

So what long-term strategies should SaaS startups invest in?

With a limited budget, team, and resources — how can you maximize your marketing plan?

Serial SaaS entrepreneur and coach Dan Martell say the top reason companies fail is that of poor money management.

“It’s not about how much money you have it’s about how to deploy that capital and in what timeline. One of the biggest decisions a startup gotta make is what are the time constraints? If you only have so much money what’s the resources constraints?… It’s not about capital, its about capital management”.

And venture capitalist Tomasz Tunguz reports, “SaaS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence”.

Whether you’ve wasted time on unprofitable marketing or haven’t fully committed to one strategy; you need cheaper methods to drive customer acquisition and sales.

And you — my overwhelmed friend, can do just that.

You can grow your startup by building a customer referral program.

In this blog post, we’ll show how to create a program from scratch, present bulletproof marketing tactics, and advice for consistent results.

Every SaaS Company Needs a Referral Program

Nothing screams ‘i’m insecure’ more than lack of authority and assertiveness in marketing.

Weak marketing will destroy you.

Blissfully founder Ariel Diaz recently spoke at SaasConnet and warned, without a brand, business apps will become drowned by thousands of competitors.

SaaS customers need to trust your product, your process and support methods before making a buying decision. So how does the new kid at school make friends and squeeze into tight-knit cliques?

According to Forbes, 3 subtle indicators of trust are demonstrating you’ve been accepted by others, sharing your company’s story to secure trust, and showcasing a personality that matched those of your target audience.

All you need is one friend from that clique, and you’re in.

Through customer referrals, your leads are coming from a friend they know and trust. Validation of your product and service has been made and positioning yourself against the competition just became easier.

The benefits of referral marketing are endless, here are a few.

Lower Costs of Customer Acquisition

If your organization is wasting money on unqualified leads, a customer referral program with help centralize your lead generation and sales pipeline.

Let’s take a look at what goes into lead generation.

  • Content marketing and blogging
  • Search engine optimization
  • Paid ads (PPC)

These methods work but take upfront investment and time to see results.

The average salary for a content writer or strategist is 61,000 — $74,000 yearly, while search engine optimization can take anywhere from 4–6 months to see results to bring in leads.

You don’t have $74,000 to invest in content, luckily customer referral software is cheaper to operate.

Our referral software iRefer integrates seamlessly into your SaaS application, with plans starting at just $19/ monthly. Alternative software starts at higher costs — -and don’t cater specifically to SaaS needs.

[check out pricing plans here]

Convert Prospects into Customers Faster

Word-of-mouth marketing will allow customers to tap into your ideal buyer.

You save time by not having to walk them through your marketing funnel and grab them by the wallets just as they’ve been amazed by your product offer.

Influitive confirms, “Referral leads convert 30% better than leads generated from other marketing channels”, also B2B companies close at a rate of 69% or higher. The Wharton School of Business states, “Referred customers have a 16% higher lifetime value”.

Meaning your leads are not only high quality, but they’ll increase your monthly recurring revenue longer. Buyers are more informed when making a purchases. Having the referral from colleagues or friends will maximize your marketing tactics.

Social capital is the new currency, let your customers guide and convert prospects into new customers faster, for you.

Lower Churn Rates

You need customer retention for your startup to grow, that’s why canceled subscriptions are the biggest migraines for marketers.

Here are a few reasons why customers leave

  • Your product doesn’t solve their problem
  • Pricing doesn’t correlate to value
  • Your customer wasn’t your ideal buyer

As you can see, marketing plays a major role in the type of leads you attract and overall satisfaction with your product and service.

Tomasz Tunguz states “The median SAAS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month”. If your product, service, support, and marketing don’t align to retain customers, your churn rates will continue to rise.

Customer referrals can increase retention Extole confirms, “Customers acquired through referrals have a 37% higher retention rate and 81% of consumers are more likely to engage with brands that have reward programs.”

Incentivizing your customer to stay with referral rewards will provide time to figure out what they need and disrupt churn.

How to Start a Customer Referral Program

Weave your customer referral program into your marketing strategy, used in conjunction with other plans, but not an end-all solution. Remember, this takes time to build and will pay off in the long run.

Tailor your customer referral program to your business model, customers, and resources available.

B2B vs B2C for Referral Marketing

The biggest mistake is marketing your B2B SaaS product like it’s a B2C product and vice versa. There are distinct messaging and marketing channels one should utilize to optimize their customer referral program.

Let’s take a look at the difference.

Before you lay down the framework of your program, we need to address the differences between B2B and B2C marketing.

B2B Marketing

B2B marketing requires authority and credibility to close a sale. When you sell to another business, remember they are experts in their industry. You need to convince them your product will make them more money.

Not all SaaS marketers are experts, and sometimes miss the mark when reaching out to business professionals.

You’ll need to put in the legwork and showcase your knowledge to order to secure referrals from customers. Kraftblick finds, “According to the statistics from the “State of B2B Product Marketing 2015” survey, 76% of B2B technology marketers use social media to market their products. When asked about platforms for their product launches, 81% of B2B technology marketers said that they use LinkedIn, and 71% said that they use Twitter”.

No professional will waste colleagues’ time if your product delivers lackluster results, even if it’s free.

So get your messaging right.

B2C Marketing

B2C marketing sells products to everyday consumers, they’re not experts and require education to close a sale.

Before you launch your program, analyze your messaging and website to ensure it educates customers on your product and benefits to them. Consumers traditionally enjoy being entertained, rejecting overly-complicated language.

Eleonora Israele from Agorapulse writes that B2C companies can be found on fun media platforms such as Snapchat, Facebook, Pinterest, and Youtube. B2C marketing also needs to focus heavy on branding. Consumers need to identify with your message before they join, while B2B marketing focuses on building leads first.

Eleonora Israele also indicates, “Marketing automation in both groups set vastly different goals. B2B desires lead generation with person-to-person interaction while B2C focuses on branding and building customer loyalty.”

These characteristics should help lay the groundwork for your referral campaigns.

What to Look for in a Referral Software?

Because your team is small or adjusting to growth, you may have key players who wear several hats.

Find straightforward campaign software with templates every team member can use, down to junior employees.

A plug-in-play software that integrates into your website is best to save time from coding yourself or hiring developers.

TrueSaaS API tools help automate your email marketing and sales initiatives by capturing signs-ups, segmented referral lists, and increase sales conversions by triggered website engagement.

How to Craft Mouth-Watering Incentives and Rewards

Your incentives and rewards should be 3 things: seductive, relevant, and valuable to both parties.

Example: A B2B SaaS startup who provides office productivity services to remote team members.

Incentive: The referrer receives points to their account, and the referral gets 2 weeks of your premium services for an entire remote team.

Try to scope out your competitors and see if you can out-do their rewards. If they offer $10 in cash, how about you do $20.

Wave, an online accounting software launched in 2012 created their Refer-A-Friend program to grow their small business clientele.

Both the referrer and referral received a generous $50 discount off their service.

Be direct and state who you want your customer to refer on your program.

Citrix, a business and data security software shows ideas of who they’re looking for in their partner program.

Customers jump at the chance to receive discounts and may refer anyone. Don’t lose valuable leads assuming they’ll get it right.

The Best Time to Ask for Referrals

The best time to ask your customer to share your program is after they’ve completed a project or milestone with your tool.

Texas Tech University says, 83% of consumers are willing to refer after a positive experience — yet only 29% actually do.

Asking for referrals should be ongoing, you can ask towards the end of blog posts, in monthly newsletters or triggered pop-ups on your site.

Create Great User Experience to Drive Referrals

What story does your website tell?

Your website’s design should be user-centered. One that pulls your prospect into your product and gets them to try out your service.

Great interface design researches customers and considers them in the design process.

Draw customers in with your interface, choose color combinations that are easy on the eyes, images that represent your customer and crystal clear call to actions.

Don’t expect your referral program to achieve viral growth with poor user experience.

Think about it, when’s the last time you held a party in a sketchy area?

You want your friends to have a great time and feel safe; your website should do the same.

Almost 60% of users say they will not recommend a business that has a badly designed mobile site, informs Magnet 4 blogging.

Signing up for your program should have little resistance.

Best practices:

  • Referral link should be at the top of your homepage
  • Referring a customer should take 1–2 clicks
  • Explain the benefits of joining within 5–7 words
  • Create pre-filled messages to share on social media

Optimize your website to convert on a desktop and mobile devices.

Tracking and Measuring Campaigns

Once you’ve launched your first campaign, analyzing your metrics is crucial. You want to look for areas you can improve your marketing strategy and customer engagement.

To build a profitable, long-term program that drives leads and sales, you must look for where your referrals are coming from.

1. Tracking Referrals: Are you getting the biggest leads through Twitter, Linkedin, or email sign-ups? Do you have a popular customer or industry authority who’s bringing in referrals?

Directing your time towards top customers and sources will boost your efforts and give insights to the type of content to produce for those audiences.

2. Measure Results: Monitor impressions of your program, If you’re underperforming for the amount of money invested see areas where you can improve. Upgrade your incentive or ask customers again to share your program.

Our detailed campaign analytics give an overview of your program and its progress.


Building a customer referral program from scratch is not hard, but will take time to see results. You’re playing the long game.

SaaS marketers are confused on which long-term investments to make; we say there’s no better one than referral marketing. This strategy works hand-in-hand with your content, social media, and paid advertising.

With precise planning, you’ll have qualified leads, better customers, loyal advocates, and credibility within your industry.

To get started building your SaaS customer referral program book a demo with us.

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