Ask HN: Dos & Don'ts of Referral/Invite Programs

Another great example that I have learned and applied to one of my projects is from http://forkly.com/ . After you give your email for the invite, they provide a link that you can share on fb and/or twitter and if you share with at least 3 friends they will give you priority access.

Is it working for you? I agree this is innovative but I feel it is spammy with no value shared. Basically it's like getting into a bar early for spamming all my friends and telling three of them to get in the regular line.

In the Linode model, the user must keep their Linode instance for at least 90 days to get the $20 credit. Since the cheapest Linode plan is $20/mo, that means Linode makes at least $40 per referral. Even if that was a 2-sided incentive (the referred user gets a free month too), Linode makes at least $20 per referral (minus costs, so you have to watch your margins).

Its not a downside as much as just something to think about, but:

In a double sided referral (especially when giving money) you are splitting the discount between two people. This can mean that the new customer gets less of a discount.

If you have $10 to acquire each new customer, you have one option where you say "$10 off for new customers!" and hope people see it, or you split that amount "$5 off for both of you if your friends sign up".

The benefit of the latter is that you are essentially offering a deal to get high quality referalls. However, you might be offering less to the end customer.

The genius of giving away product like dropbox has (or giving store credit) is that the cost to you is alot lower so you can give away more for double ended referrals. Then, everyone wins. The deal is better, both parties get the deal, and the company is happy.

We think its a really interesting problem area that we're trying to solve.

I think the key points are to align incentives, provide authenticity, and make it opt-in.

Dropbox and Groupon align everyone's incentives by offering benefits to both parties and acquiring customers at a much lower cost than traditional ads. They provide authenticity because the folks referring their friends are genuinely using their products.

Many consumers now frown upon affiliate marketing because they feel taken advantage of--the affiliates say whatever they think you want to hear in order to get you to buy, and some make an awful lot of money doing it.

Plaxo was perceived very negatively because they were inviting their user's contacts without their permission.

The book "The Ultimate Question" contends that asking "How likely is it that you would recommend this company to a friend or colleague?" is the single most important metric you should measure in your business. Thus, if you find that you have to offer too large of an incentive to your customers, you should instead focus on improving your product.

We're building a social referral platform right now with these factors in mind that will make it super easy to run different referral programs and find what's best for your business. We're focusing on eCommerce now, but are getting into SaaS and other services very soon.

Send us a note at hello _at_ curebit.com if you're interested in piloting with us.