How To Grow A Startup Using A Referral Program


How To Grow A Startup Using A Referral Program

Kirsty Sharman


Referral programs are one of the most cost-effective ways for a startup to grow. Imagine turning every new customer into another one! If you're running or working in a startup team you'll know that scaling customer acquisition is one of the hardest things to get right. There is a reason that VC investors look for startups with growth channels that can scale, they know how important it is to build consistent and scalable growth channels into the core of your business from the get go. Thats why referrals were the backbone of growth for famous startups like Dropbox, PayPal and Uber. These startups leveraged their own customers to refer friends and help them grow to unicorn status 🦄



The poster-child for referral marketing is Dropbox.

Dropbox is an online document storage platform. Their product is storage space. The more space you need, the more you’ll need to pay. Unless, of course, you refer your friend. Dropbox had a simple referral marketing strategy: refer a friend and you get 500 MB of storage free per friend. Plus, your friend also gets 500 MB free. Using this method, Dropbox showed the world how to grow a startup as it scaled its customer base 3900% in 15 months!! #StartupGoals 🚀


How about Paypal?

Paypal is another solid example of growing a startup through referrals. On launch, the leadership team decided on one simple marketing channel: give people cash for opening an account.

And when the new customer referred a friend, give them more cash.

How much cash?

Originally it was $20 per friend. Obviously, this got pretty expensive, so Paypal phased it down to $5 per referral and ultimately spent $70 million of their funding on this program. That’s not chump change! But, Paypal saw 10% growth per day during the heyday of this program, growing from 1 million to 5 million customers in a matter of months.


Uber also drove customer growth through referrals: Free rides for two

Uber’s referral program is simple, yet effective. Each existing user gets a referral code. They can give that code away to anyone. When someone creates a new account and uses their friend’s code, both users get their next ride free. This is another very effective 2-side referral (see a pattern?) that has helped Uber really corner the ride share market.


It’s better to reward your existing customers for referrals, than pay your ad dollars to the big guys like Meta or Twitter. Not only does it make more sense to use your budget to build brand relationships with your customers, but commercially it makes even more sense because referred customers are much more likely to convert, to spend more, to stay longer, and to refer other friends. Which ultimately means more revenue generated for your startup, in a more sustainable way.

I’f you’ve been thinking about how to grow a startup, read the stats below to see the trick you might just be missing…

“Customers acquired through referrals have a 37% higher retention rate.”

“85% of small businesses say word-of-mouth referrals are the number one way that new prospects find out about them.”

“82% of upper management claim word of mouth creates the best quality leads”

But growing a startup through referrals isn’t as easy as 1, 2, 3. It requires a strategic approach and a concerted effort on your part. The key principle here is to ensure that everyone knows about your referral program, they have clear expectations about how it works, and most importantly they are motivated to engage because you're offering a great reward to the person referring, and an even better incentive to the person invited.

PLEASE NOTE! This article assumes you have already built a referral program. If you haven't then you should first read this guide on how to create your referral program - it shows the exact eight steps you need to follow if you want to launch your own startup referral program.

Now, let's talk about how you can get your customers to refer their friends to your startup. We've done a bunch of market research with various startups, so we can offer you the best tips on how to grow a startup using a referral program. Here are 12 ways to actively promote your referral program and grow your startup faster 👇

1. Make your referral program simple to use


Implementing a referral program is a great way to grow your startup but managing it manually can quickly become overwhelming. This is where referral software comes in handy. If you want to streamline the referral process for yourself, and also the people participating in your referral program, we suggest using plug and play referral program software that has already thought about all the ways to keep things simple, and make it easy to refer for your users.

Some key features you should look for when choosing your referral software:

  • Easy to set up and get started even if you don't have a lot of technical expertise.
  • Customization so that your referral program looks 100% on brand.
  • Analytics and reporting to track the success of your referral program and identify areas that need improvement.
  • The ability to automatically issue rewards and incentives to referrers and the friends they refer.
  • User-Friendly interface that makes it simple for your users to SHARE their referral links

Using referral program software that meets these criteria, you can simplify the referral process and make it easy for your customers to refer others to your startup.

2. Offer a double-sided incentive to encourage both people


To increase the number of referrals you receive, you (absolutely) must offer a double-sided incentive. This means offering a reward or discount not only to the person who refers a new customer but also to the new customer who signs up.

By doing this, you can create a situation where everyone benefits and it becomes more attractive for customers to take part in your referral program. For the person referring, they feel more comfortable sharing their referral links with friends because they know that their friends will get something too. And for the person invited, they feel the need to take action now because they get a special incentive for converting now instead of waiting.

Pro tip: The right type of reward and incentive can make all the difference. Offering customers and their friends something that they actually want to get will encourage both sides to refer. If your product is not something that customers use regularly then offer a tangible reward like cash or a gift card. If your product is a frequent purchase then offering a reward or discount on your product will encourage more purchases. Some companies simply tap into a pre-existing reward program here, as in this case their internal departments have already done the work researching the ideal rewards.

3. Generate referral links for all your CRM contacts


If you use a customer relationship management (CRM) system like HubSpot, Intercom, Pipedrive, Zoho, Salesforce, etc - you can generate unique referral links for each of your customers simply by syncing your referral software with your CRM. Once each customer has a referral link, you can pass it back to your CRM so that you can include each customer's referral link in all communication going forward.

By having the referral links in your CRM, you can utilize your current sequences or workflows to advertise your referral program to your customers in an automated way.

People ask us all the time how to grow a startup, and the answer really is as simple as asking EVERY new contact in your CRM to refer!

4. Email your active customer base


One of the easiest and most effective ways to grow your startup is by announcing your referral campaign to your active customer base. Your existing customers are your biggest advocates because they already subscribe to your brand, this means that they're also the people most likely to refer to their friends and family.

Send an email to your active customer base, letting them know about your referral program and the benefits of participating. Make sure to include a clear call-to-action and an incentive for both the person referring and the person invited. Another important note - make it easy for them to refer friends by including a link to copy, and social buttons so they can easily share their referral links with others.

5. Promote your referral campaign in your employee email signatures


Another way to get referrals and grow your startup is to promote your referral campaign by including it in your employees email signatures. Every email you send out is an opportunity to spread the word about your referral program and get more referrals without being too pushy or intrusive. Add a simple call-to-action (CTA) or even design a beautiful banner to put in your staff email signatures, inviting your contacts to register for your referral program and earn rewards for doing so. Make sure to include a link to your referral page so that it's easy for people to join your referral program.

6. Implement referral reminders to keep your audience engaged


Sometimes your customers or users simply need a gentle nudge to refer their friends to your startup. This is where referral reminders come in handy. By sending out timely reminders to your customers, you can encourage them to refer others to your startup and increase your chances of receiving more referrals.

One way to implement referral reminders is through automated email campaigns. You can set up a sequence of emails to be sent out at specific intervals, reminding customers about your referral program and the rewards they can earn by referring their friends and family to your startup. Please remember that timing is everything, too many reminders in short succession will more than likely annoy your customers so make sure you send them out when it’s relevant.

7. Add a widget to your website


Your website is another great place to promote your referral campaign and get more referrals. Why? It’s where people go to learn more about your startup, brand, or products. People visiting your website are ideal candidates to refer to because it's clear they are interested in your topic or niche already! If you use referral software you should get a website widget included - that you can install on your website to pop up and prompt new visitors to refer.

This tactic is a simple win, if you want to know how to grow a startup fast, just ask the businesses that prompt their web visitors to refer 😉

8. Put a pop-up on your logged-in environment


If your startup requires users to log in (meaning you’re a saas / marketplace type of business), then we’d suggest using pop ups inside your logged in environment. People that are logged in are the customers who know the most about your startups product, these people are your best referral candidates by far.

Many founders and entrepreneurs find themselves googling how to grow a startup, when the answer is standing right in front of them. Just ask your most valuable (logged in) customers to refer!!

9. Embed your referral campaign in your blog posts


If you have a blog, make sure to advertise your referral program on your blog posts or go as far as actually embedding your referral program join link into your most read blog articles. This will help increase visibility and encourage more people to participate in your referral program - if someone is reading your content, there is a high chance they have friends that are interested in your startup niche too.

Alternately you can include a link to your referral campaign in the footer of your blog posts, and encourage your readers to sign up and refer friends, family and social networks. This is a great way to leverage your content and reach a wider audience of potential referrers!

10. Add your referral campaign link to ALL your emails and notifications


In addition to promoting your referral program via email signatures, you can also include a link to your referral programs in all your system emails such as product updates, newsletters, confirmation emails, and promos. Make sure the link is prominent and easy to click so that customers can quickly and easily register to participate in your program. You might not get a flood of referrals overnight by doing this, but you'll be subtly reminding people of your referral program over and over and over again.

Pro tip: Make sure you avoid advertising your referral program in emails where your customers might be angry or upset - like in support and ticketing communications.

11. Partner up with influencers to grow your startup


If you have the budget, you can also work with influencers to promote your referral program. Influencers can be a powerful way to spread the word about your startup to their followers and fans who may be interested in your product and service. To get the most value out of your influencer partnerships, choose influencers who align with your brand and target audience, and provide them with clear guidelines for promoting your referral program. This tactic can be a great way to reach a wider audience and get more referrals.

Pro tip: If you aren't sure which influencers to partner with, do some networking on social media to find people that already have built an audience that matches your target market. You can also check which influencers your competition are using, to get an idea of what works and doesn't in your industry.

12. Market your referral campaign using all outdoor advertising methods


In addition to the digital forms of marketing we’ve included above, you can also promote your referral program using outdoor advertising methods. This can include things like billboards, bus ads, or even flyers posted in public areas.

Pro tip: If your startup involves having physical interactions with your customers such as going to their homes, delivering packaged products to their offices or homes, or participating in trade shows and events. Then generate a QR code that takes people to a landing page where they can register to refer - this makes it simple for people to sign up on the spot and quickly access their referral links. If you use referral software like Referral Factory, then it will generate a QR code for your referral program automatically, look for it on your the 'promote your campaign' tab.

Startup Referral Tools You Can Use To Grow 👇

There are several tools you can use to generate referral links for your customers, so they can spread the word about your startup far and wide. Here is a comparison table we've drawn up to help you understand what tools currently exist in the market right now. Of course if you don't want to use a plug and play referral tool, you could consider development of your own referral program by outsourcing it to a developer or using your own engineers.

The tools are ranked by average review scores - across multiple independent sites like Capterra, G2, etc. Referral Factory is currently the platform holding the highest review score of 4.87/5.


About the author

Kirsty Sharman

Growth Marketer. Product Builder. Listed in M&G as one of 200 Young South Africans to watch. Co-Founded Girl Geek Dinners JHB in 2012. Founded one of the first online media buying agencies in SA, merged with Webfluential (Influencer Marketing Platform) in 2015. Current venture:

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