Referral Marketing: Catapulting SaaS Businesses to the Next Level
MAY 22, 2015
When was the first time you hopped on an Uber? Chances are that you did so after a friend recommended its services. It’s true that we all tend to highly value a recommendation when it comes from friends or acquaintances.A lot has changed since the first Software-as-a-Service (SaaS) venture came into being, and if we go by its growing popularity and acceptability, one can clearly say that this industry is on a roll. Though there are various sales and marketing tactics that may have sprinted its growth, referral marketing is the one that stands out.
A study done at Manchester Business School on word-of-mouth marketing (aka referral marketing) establishes its history and cites unique examples going back to the times of Aristotle. And while the marketing landscape has changed drastically over time, referral marketing still resonates with marketers. Though the Manchester study was done in 1998, a more recent global study conducted by Nielsen affirms the power of referral marketing: word-of-mouth recommendations from friends and family, often referred to as earned advertising, are still the most influential, as 84% of global respondents across 58 countries to the Nielsen online survey said this source was the most trustworthy.
Why SaaS Start-ups Adopted Referral Marketing
The online revolution witnessed the birth of a new age of entrepreneurs bursting with innovative business ideas, which included the demand and acceptance of SaaS products. SaaS gained popularity because it provided unique platforms for both businesses and users to plug-and-play into their existing environments. Considering that most of these ideas bloomed at an early stage start-up, they faced three key challenges:
1) Consistent customer acquisition
2) Retention
3) Customer growth
Entrepreneurs needed a strategy that would help them overcome these obstacles, without spending too much of their revenue. That’s when Dropbox (a SaaS product) made news by using referral marketing to scale its business. Though Dropbox’s approach was simple, it was well ahead of the times. That’s because no one could ever imagine that tactics such as sign-up-driven pages, refer-a-friend, or bringing in unique referral links could help a business model to strike a cord with users. As a result, Dropbox today has millions of users and is estimated at a whopping $10 billion.
Today, it’s not surprising to see that many SaaS ventures have found this extremely useful and have adopted this strategy as a part of their marketing. Referral marketing has found its way into the mainstream again.
The Difference between Referral and Affiliate Marketing
Before we dig deep into the science of referral marketing and how SaaS products benefit from it, it’s important to understand the difference between referral and affiliate marketing, which are often confused. Referral marketing is simply a request of an existing user to tap their network (by referring their product or service to a friend or acquaintance), and it may not always involve a monetary benefit. On the other hand, affiliate marketing is motivated purely by financial and business incentives.
Because referral marketing offers many benefits and is more adaptable, it is seen as a more advantageous strategy to deploy. But before you plan to initiate a referral marketing strategy, it’s best to analyze the various techniques that can be put into action. Here are a few techniques and examples for you to consider:
1) One-Way Referral Technique
The most common way to acquire customers is through a ‘one-way’ referral marketing technique. This technique asks existing users to refer the product/service to their friends and acquaintances in exchange for some type of benefit.
For example, this approach was adopted by Yesware, a SaaS product that offers a sales productivity suite comprising of email tracking, analytics, and other features. Launched in 2010, Yesware owes its revenue margin to its successful referral program. The Yesware referral model offers its users a convenient way to refer, by providing an auto-filled message. Users can invite multiple friends and then earn points for referral. They can then redeem their points by choosing either a t-shirt (6,000 points) or an Amazon gift card (12,000 points).
Read more at http://www.business2community.com/brandviews/marketo/referral-marketing-catapulting-saas-businesses-to-the-next-level-01233267#erUMh9qiuhqC1FCS.99
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