Give Your Product Away… fo’ Free
The power of referral programs and the positive impact they can have on your startup.
At DRYV we recently hosted a lunch and learn at WeWork Chicago to share a bit about how we use a referral program to get new users. For this event we also partnered with Joe Anhalt, a local growth hacker who used the internet to get over $2k in DRYV credits via our referral program.
At first you may think, whoa, that’s a lot of free DRYV, but from our perspective it’s great! Think about it, we have a power-user organically referring hundreds of new customers at an extremely low cost. Below are two major benefits for giving product away, especially in the early days.
- CAC (customer acquisition cost) = how much it costs to get a new user
If a customer costs $10 to acquire across all channels, and 30% of your customers refer 1 additional customer, then you’re actually getting 1.3 customers for $10 which gives you an affective CAC of $7.70 (23% cheaper).
If you can increase the referral rate this will continue to drive down your CAC which means you can scale your business for cheaper. Also, referred users can be some of your better customers because they’re likely to fit a similar profile as the power-user who referred them.
2) Cheap feedback — by giving away free product you’ll begin to see activity from early adopters who are usually cool with giving you free feedback. This feedback is valuable for product iterations. Early usage also gives you real-world experience in servicing your customers. There will no doubt be gaps you overlooked when designing the first version, so this lets you optimize. All the while, as people start to have good experiences you’re building a base of power-users which then supports point 1 — increased referrals and a lower CAC.
We’ve learned a lot about the power of referrals, and in 2016 we will continue to focus on further enabling our users to share good experiences and refer their friends.
EXAMPLE: Dropbox nailed these concepts which did great things for their growth in the early days.
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