Show Notes
This episode ended up being a brainstorming exercise on how Tyler can increase usage of
Less Annoying CRM’s customer referral program. Tyler may focus in the following areas:
- Trying to increase usage of the existing referral program by driving more awareness
- Trying to capture more information from signups to determine if they were referred
- Trying to repackage the referral program to make it more transactional.
Takeaways include:
- It’s important to have a remarkable product experience (that people want to talk about) before you focus on referrals
- Decide what the objective of your customer referral program is upfront
- For example, is it to create leads or paid signups?
- It’s hard to create a customer referral program for products with long sales cycles
- If you have a long sales cycle, consider creating or packaging a mini-product that is more transactional in nature to make it easier for your customers to refer (e.g. Hubspot’s website grader)
- It’s hard to incentivize referrals on a low-ACV product
- This is especially hard if there is also a long sales cycle
- Considering gamifying and /or tieing referrals into product features
- Think of your customers referral program as a product that requires its own product / market fit.
- Consider the size of your market (customers and their potential referrals) and how to build the right product for both parties
- Once you think you have a solid referral program product, make sure your customers are aware of it
- Be careful, you don’t want to be annoying or spammy
- Considering marketing it passively as part of larger “join the movement” community building
- With thoughtful design, you can do this in passive sections of your newsletters, emails, website pages and app pages. (But, don’t be too annoying)
- Morning Brew, a daily newsletter, provides a good example of an awesome referral program.
Introduction
Tyler: We're framing it as, how to structure a referral program. But let me dive into why I'm thinking about this.Less Annoying CRM, my business, is currently at about two and a half million dollars in annual recurring revenue. We're growing about 20% per year. I'm happy with both of those numbers, but every company obviously wants to grow, at the very least continue growing and maybe even increase growth. We have not had a lot of success with a lot of marketing things we've tried. One of the reasons for this is totally my fault that I refuse to do certain things. I don't want to do retargeting advertising because I think it's a privacy violation. Anything that's not permission marketing, I'm pretty much opposed to. Also, it's just not one of our core competencies, and because our price point is so low, we don't have the type of budget to compete with other companies on marketing. As a result of that, the way we grow is almost entirely through word of mouth, which is awesome because it's free, it aligns what we're doing with customers. I really like word of mouth growth, but the downside is we have no control over it. I think that's... Would you agree that's true with most companies, that you just cross your fingers and hope word of mouth happens?
Rick: Yeah, I would say so. It's definitely one of those voodoo marketing tricks versus a systematic levered sales approach.
Tyler: Right? Word of mouth is a big topic. Making the product better, for example, maybe is one way to help with it. That's not what I want to talk about today. What I want to specifically do is say, in as much as we can control word of mouth growth, well, A, we have to be able to track it in order to do anything with it, and B, a referral program is one of potentially many ways to increase word of mouth growth. That's what I want to talk about. Historically, what we've done as a company is, we've offered a deal. It's basically the Dropbox deal, which is, anyone of our customers who refers someone else, that other person gets an extra free month of their free trial, and the person who did the referring gets a $10 credit. A free month themselves.
Rick: Give one get one.
Tyler: Give one get one. A pretty classic approach, it's worked plenty of times before. Unfortunately, not many people actually use this. Anecdotally, we have quite a bit of reason to believe that lots of people... almost all our growth comes from word of mouth, but the vast majority of that, I would estimate it at about five to 10%, actually uses the referral program. Which is not great because it means we can't track it, we can't tell what's working, we can't experiment very easily. Basically what I would like to talk about today is, how do we offer some kind of referral program that gets our users, when they refer someone, when they do the word of mouth thing, the person who's signing up actually uses a link that tracks back to... Or maybe that's not even the way to do it, but that one way or another we can track it back to the person who did the referral. This might involve giving incentives, it might be restructuring how the technology for the link tracking works. I don't know, but that's the basic problem I'm interested in talking about.
Rick: Yeah. Recapping, I want to make sure I got this. You've got a couple of challenges. Well, you've got a great product that people want to talk about, that's the good thing.
Tyler: Yeah, that's the good thing.
The challenge of low ACVs
Rick: You know that that's happening, you just don't have control over it. One constraint you have is that you have a low ACV, which means you can't spend a whole lot of money on this. I think the bigger constraint though is your philosophical constraints that you're placing on yourself that don't allow you to engage in some of the marketing activities that actually do give you control over this in terms of data collection.
Tyler: Fair. Maybe we should talk about this because it's a case by case basis I guess.
Rick: Yeah. I think it's hard enough to control marketing on a low ACV by itself. Then when you add, "Oh I'm not going to do that-"
Tyler: Sorry, ACV is annual contract value, right?
Rick: Correct. Thank you. Annual contract value, which is... Let's just talk in, it's $10 per user per month. With that amount of money, you don't have a whole lot of money to spend on advertising or anything like that. Then on top of that you're saying, but I wouldn't even be willing to do that if I did have the money because I don't believe in it.
Tyler: That's one of the reasons I'm trying to constrain to say, there is a whole range of topics about marketing that we could be talking about. But just to keep this constrained I'm saying, people are already doing word of mouth like referrals. I want to be able to track it and consider ways to specifically enable them. One of the things I love about word of mouth is that the customer wants to refer people to us. Everyone is aligned here. I just want to empower them to do it and make it as easy for them, and as effective as possible.
Control versus growth
Rick: Yeah. I guess where I was going was, I'll try to get this right. One of my board members at PeopleKeep, and largest shareholders, he was from a different background than software as a service, but he had some good, just general, business wisdom. One of the phrases he always used was, "Control, profitability, growth." His point was, control is really the key to a great business. Before you want to worry about profitability or growth, you want to get control over your business. Control, typically, becomes before growth, in your situation you're growing without control. I guess, when you say that the goal might be to get control, I want to ask you, are you willing to sacrifice growth to get control?
Tyler: That's an interesting question. I mean, my mind immediately jumps to, asking an extra question during a person's sign up decreases their chances of signing up, but we have more information. I don't know if that's where you're going with that? To some extent, yes. Although I would say our willingness to do that is limited because this is our main channel for growth. At the end of the day I'm not that opposed to just saying, "Whatever. I can't control it." As long as it happens, I'm fine with it. But yeah, I guess once again it'd be a case by case basis in terms of how much of a sacrifice are we making?
Rick: Yeah. I guess what I'm getting to do is, it seems like there's two goals that you want to talk about today, and I want to clarify, this is a customer referral program that we're talking about here. This is not a general referral program that anyone can use. We're talking specifically about an existing paying customer of Less Annoying referring another paying customer. This isn't a third party affiliate referring.
Tyler: Right, sometimes we partner with people with affiliate stuff, but that's not what we're talking about here.
Rick: That's not what we're talking about here. It seems like there's two objectives you have. One is that you have a hypothesis that you believe that there's a reason... you have a referral program that's, from a structure standpoint, is built for the customer, but it's just not getting used. One goal is to reduce resistance and increase incentive for your customers to take advantage of the referral program that exists. The second, it seems like a secondary not primary goal, is to get more control over this thing.
Tyler: Yeah, I think that's right. Yeah, one way of looking at this is, even if we don't increase the word of mouth growth at all, just knowing it's there would be super valuable because we have a hypothesis about what our future growth is going to look like and it's really based... Every marketing channel does not scale, but word of mouth scales with the size of our customer base. Having a good sense of, "Is our word of mouth growth greater or less than churn?" That's the difference between the company plateauing in six months or having sustainable growth forever.
Rick: That's great. Yeah. I think that's... Yeah, totally. Are you slowly dying without knowing it or are you slowly growing?
Tyler: We are doing exactly what should be impossible. We've had basically linear growth for the last however many years, three or four years. In theory, what should happen is either we plateau, because churn is higher than word of mouth, or we hockey stick up, because word of mouth is higher than churn. If you look at the numbers, you cannot see one or the other of those happening. Maybe they're exactly canceling out right now.
Rick: That's interesting. I totally understand why you want to know this. Maybe we can start with control because I think it'll drive... Actually the reason you want people to use the referral program is because you can actually track the activity. Really the objective here could be control and more referrals.
Tyler: ... if we have control, I can take that and say, "Okay, now we're going to run experiments and this and that." Yeah, I agree that just getting people to use something we can track is probably a good first step. Yeah.
Rick: Cool. Do you want me to start throwing out ideas?
Why aren't customers using the existing program?
Tyler: Well, there's one thing I haven't said yet which is, what I think the problem? Why don't people use the current program?
Rick: That's great. That's a good question. Yeah. Why aren't they?
Tyler: Knowing you, and you're probably going to be right, you're going to push back on what I say here, but I suspect that the reason people don't use it is... I think maybe they do use it, but that the buying journey that people go through is not, "Oh, my friend sent me a link to a CRM. I'm going to go sign up and pay at the end of my free trial." I think what it really is, over the course of months or years, you have CRM in the back of your head, you see a million different things, you read blog posts. A friend sends you a link, you're like, "Oh, Less Annoying CRM cool. One day I'll go there." But by the time you actually sign up and are ready to buy, that link is history. We're just not able to connect the two from a reporting standpoint. That's my theory on this.
Rick: Yeah, I mean, yeah, maybe. I don't disagree with you. One thing I thought of while you're talking was, one of the ways to think about this holistically, and this is what I've done at previous companies and then also I've consulted on this concept a couple of times, is I like to think about the referral program as a product that you need to achieve product/market fit on. Right now you have extremely low utilization, which suggests that you don't have product/market fit or maybe that the market... What I can't tell here is, do you have a product/market fit in a really small market for this referral program, or do you have a big market with the wrong product?
Tyler: Yeah, I don't know how big the market is, but I think it's the wrong product. Also customers tell me all the time, "Oh, I just go to meetups and tell people." There's a lot of in-person stuff. Yeah, I think probably the product... maybe there is no correct product here and this is impossible, but we don't have the right product probably.
Rick: Yeah. What's interesting about this is, your product is something that you're offering to your customer that they are in turn going to offer to one of their connections, right? You got a two-sided problem here. You've got to be providing enough value for the customer to want to spend the time and pain of going to do it, and then you've got to enable them to provide enough value to the connection, to have them actually appreciate it and take the action necessary to go through whatever time investment they need to go through to have it get used.
Rick: Oh yeah.
Tyler: Because one of the main takeaways in that is, people don't refer other people because they want to benefit from it. They do it because it makes them look savvy or... it's an interpersonal, "I get points for doing this," and that our referral program should make someone better at getting those social points, which giving a $10 credit, that's not why my customers are doing it. But I don't know what is the thing.
Rick: Yeah. It sounds to me, my guess and I don't really like talking in hypotheticals either, but I mean, it seems like people like your product. They like it so much, and they like your brand and your service so much. It's so remarkable that they're willing to talk about it. The referral program isn't probably the reason that they're doing any of this.
Tyler: It's absolutely not
Rick: It could be.
Tyler: The perfect product here in this, I don't mean the product, the CRM that we're selling, the referral product, would say... Actually, so I was just at the conference. I just talked to 50 users face-to-face, and these are the people who do refer us, these are our biggest fans. None of them, as far as I know, use our referral program. I talked about this a little bit, but yeah, they love us. What can we offer them? What can we do to make them even... Yeah, I don't know. I'm not articulating this well, but I think we're on the same page that, if the type of person who is at the conference isn't using this program, then the program, it does not have product/market fit.
Rick: Yeah, totally. The way I might think about this is, if you think about the referral program as a product, and you think about what product by itself would make it... what would your customers get value out of, and taking advantage of, then you could come up with some pretty interesting ideas on how to structure the referral program.
Tyler: Okay. Can we just dive in and do that?
Rick: Yeah, I think so. Then, once you get the customer using it then we can move to, "Okay, how do we package this for the person being referred so that they get value out of it on the other side?"
Tyler: Okay. Let's leave that. Maybe that's another podcast episode sometime in the future. Let's say for right now we're saying, "What is the product that I want to offer to my super fans who are already referring people that encourages them to actually want to use this thing?"
Is there a better referral program “product”?
Rick: I tell you what, the referral program that... if I were going to build a referral program today, it would be modeled after, what do you call it?
Morning Brew. Are you familiar with Morning Brew? It's a newsletter.
Tyler: I don't read it. I've heard of it.
Rick: It might be worth subscribing to just so you can get a taste of their referral marketing. But they've grown. I don't know how much advertising they do, but their referral program is impressive. I am not a person who actively participates in referral program, but there've been times where I'm like, "I'm going to participate in this thing," but I always talk myself out of it because I don't want to take the time to register or whatever it is.
Tyler: Yeah. What do they do that's so effective?
Rick: They have a number of different things. They've actually written
a blog post about it, which I will find and send to you.
Tyler: Yeah. Can you put that on the show notes, the description you write up?
Rick: Yes. I'll put them in the show notes. But they basically have a referral link and it's a little bit different than your model, let me be clear. They have a transactional newsletter sign up, so it's very easy to invite and get people to sign up. There is a catch there that I think is a little bit different, but they have a gamified system of, your first referral gets you features in the software. I think once you refer one person, you get access to the Sunday version of Morning Brew, otherwise you don't have access to that. Then, I don't want to butcher this, but I'll give you the general concept. Then after five or so referrals, you get a Morning Brew coffee mug, at 10 referrals you get another shirt, at 20 referrals you get an even nicer piece of swag and it continues. Then each week they run actual referral programs. Maybe it's not each week, maybe it's a monthly thing, but they give away MacBooks and they give away all these things.
Tyler: Now, it was years ago, but we did try something like that and that didn't move the needle for us. Maybe it's worth getting in another shot. But I'm really interested in the idea of giving swag because, generally speaking I'm like, "Well, who wants a Less Annoying CRM coffee mug?" The person who's telling everyone they know about Less Annoying CRM, that's the person who wants the coffee mug.
Rick: Maybe.
Tyler: Right? We actually... Sorry I keep referencing the conference here. Several people walked up to us. Last year at the user conference we gave these leather-bound folio things, those folder things, that said Less Annoying CRM on them. One of the people from last year heard one of the other attendees didn't take theirs when they left and he came up, he emailed us in advance he was just like, "I want it, I want a second one. It would mean so much to me if I could get that person's..." People came up and asked for T-shirts, they asked for all kinds of stuff. I do think it would motivate the right type of person.
Rick: Cool.
Tyler: More than $10 would probably.
Rick: Yeah, and I think... Then you get into the next question which is, Morning Brew, you can quickly refer... I could refer you to Morning Brew right now and get the Sunday edition because all I've got to do is go sign up, right? Enter your email address and click, sign up.
Tyler: Yeah, yeah.
Rick: They have that all tracked through their referral linking. Now, you're not the same way. This gets into an issue of, "Do I believe I can get the Sunday Brew? Yes. I just have to refer one person," and it takes like 10 seconds for you to go refer it. In fact you're going to go do that right now because you're now interested in their referral program. I need to send you my referral link.
Tyler: All right, you can have your T-shirt.
What should be incentivized? Leads or signups?
Rick: Yeah. But with you, if you wait until... No one's going to be interested in waiting nine months for their friend to buy a CRM so that they can get a coffee mug.
Tyler: That's fair. Here's something that's been on my mind that maybe is too convoluted to work, but what if there's an intermediate step before them signing up for a free trial that's effectively raising their hand to say, "I'm somehow qualified." We could reward the refer based on that or not, either way. What that would allow us to do is then track their journey from then on. Yeah. You're giving facial expressions like you like that. Have you heard of anything like that before?
Rick: Yeah, I think what we're really talking about is, what is the objective of the referral program? Is it to generate customers, or is it to generate leads that you can convert into customers? It sounds like what you just thought of was maybe a way for you to focus more on incentivizing lead generation through the referral program that you could figure out what to do with from there, versus rewarding signups.
Tyler: Yeah, and especially... If we're giving a meaningful monetary reward to people for it, I would probably want to wait for someone to actually convert, because we don't have a whole lot of money to play with here, like we were saying. But if we go back to the idea that the reason one of our big fans refers somebody, it's to make themselves look good to that person. What I'm trying to think through is, maybe the incentive is, "We're going to give you tools to really help this contact and you're going to look like the expert before sign up." I don't have this fully formed, I'm being very vague with this, but maybe the initial reward is, look really good to the other person, and then down the line the reward is, get a T-shirt or a coffee mug.
Rick: Yeah, how could you deliver that? It could be a course on what a CRM is and how to use it, it could be that you did it for free, it could be a book that you write, an ebook of some kind. There's a lot of different ideas there.
Tyler: I wonder if that... It'd be even better if the thing makes that person look good though. Sorry, I'm being... I have the half-formed thought here, but let's say John Doe is our customer who's referring his friend. The thing is, "Here's John Doe's tips for how to use a CRM." They're probably more motivated to use that than, "Here's Less Annoying CRM tips on how to use it."
Rick: Yeah, I see what you're saying. When you were talking to these people at the conference, did you talk to them and say, when you refer, what do you say about Less Annoying CRM, and how do you choose who to refer?
Tyler: That first question I think I definitely should have asked, "What do you actually say?" And I didn't. The second one, they basically volunteer.... once again, huge selection bias. This is not all of our customers that are this way, but they are like, "I literally tell every business contact I come into touch with about Less Annoying CRM." That's primarily what I heard. In particular... We serve all different industries, but a lot of them are business coaches or financial consultants, people who are in the business of giving advice, so they really benefit from looking like, "I've got my shit together. Look at this tool that you've never heard of that I'm going to bring into your life."
Rick: Yeah, it's hard. This is a hard thing.
Tyler: Let's say it's an ebook, just so we have something specific to talk about. How do you imagine the mechanics of it working? How do we promote this to our customers? How do they send it to their customers?
Rick: I almost think an ebook is too specific in a way. I don't like it as a use case. I mean, what if you just promised value to the referee, and by referee I mean the person being referred. What if you just generally said, "Hey, spread the word about Less Annoying CRM, we'll provide them information." Maybe it's a weekly newsletter about how to live life less annoyingly. I'm getting into... Here's what I'm trying to get to. One of the problems that you have is not only the long sales cycle, but with Morning Brew, the number of people I know who would benefit from Morning Brew is way higher than the number of people I know that would benefit from Less Annoying CRM. It's almost like Less Annoying CRM as a product is not a great product for a referral program for the reasons we mentioned before.
Asking signups if they were referred
Tyler: Yeah. I buy that. Except it seems like we should at least be able to capture the people who are already referring.
Rick: Yeah. That seems like that's going to happen less on the front-end and more on the back-end capturing, "Hey, were you referred? Click here for a $10 discount."
Tyler: Yeah. I should probably, for people... You and I talked about this in the Google Doc beforehand, but just so everyone listening knows, we did do something like this in the past where, when people signed up we asked... I forget exactly how we framed it, but we had a question, how did you hear about us, and different options. One of them was, "I was referred," and then if people said that we tried to follow up and figure out referred them. First of all, this is a tedious process for a $10 a month product. In the early days when someone signs up for something, they're already getting a thousand emails from you, "Verify your email address, set up a demo, drip emails." I think it got lost in the noise to some extent, but the worst problem is, then we'd identify a number of areas where just the data was flat out wrong. We just couldn't trust the data. People would say, "Oh, I clicked on an ad," and then we'd be talking to them and they're like, "Oh yeah, my friend Gina told me about this." I'm like, "Well, you just said you clicked on an ad." Maybe they're both true, I don't know. But we basically didn't trust any of the data.
Rick: Yeah. How did you hear about us is probably a different question than, were you referred. You might get different results with a more direct question.
Tyler: Yeah. I get what you're saying and I totally agree. I'm a little nervous about this. It's like when you go to a site that's like, "Do you have a coupon code?" And you're like, "Well, I better go get a coupon code." I don't want to make people who weren't referred to feel like they're getting a raw deal.
Rick: And you don't want to incentivize people going to make up referrals. This is getting back to the control versus growth trade off.
Tyler: Yeah. That's fine with me. Something some people do that every time it happens I just laugh because it's so clever. We have a feature on our website, anyone can spin up a live demo without signing up or giving us any information. Just because we never bothered to the referral program is not disabled for demos. People will spin up a demo and then refer themselves. Every time they do it, I'm like, "Oh, good for you. You get 10 bucks." I mean they have to pay, right? We're not losing money on it. It just extends the free trial by a month but...
Rick: Everyone who listens to this podcast to this minute will know the secret.
Tyler: This is your reward for being a listener of the podcast.
Rick: Yeah. I mean, I guess where I was going was, what if you looked at... maybe you looked at referrals as more of a lead generator start with there. Then if you had a product that was easier to refer and more applicable to a broader audience, then that would work. I'm going straight to some sort of newsletter.
Creating a more referable mini-product
Tyler: What you're saying is we should make a new 'product'. We're not saying, "Refer someone to the CRM," we're saying, "Refer someone to this other product," and that's transactional, and then we can drip campaign our way towards the rest of the buying journey.
Rick: Yup.
Tyler: Okay. I like the idea of newsletter because it has this ongoing touch point. Because if we're talking about an ebook, it's like, okay, they download the ebook, we capture their email, but what then? This is bringing me back to something else, if I can tangent a little bit here. A long time ago, you taught me about ToFu, MoFu BoFu, so top of funnel, middle of funnel, bottom of funnel. How the buying journey starts at the top of the funnel where someone just has a problem identified, "I need more sales." Then they go to middle of funnel where they're researching solutions. Is that right? "I need a CRM," and then bottom of funnel is, "I'm looking at Less Annoying CRM." We've tried to execute on this and it's never worked because we could never get anyone in the top of funnel. Maybe what we're saying here is, we're going to use our current customers to put leads into the top of this funnel that we've never been able to get work before, and then just run through the normal marketing playbook as if they were any other lead.
Rick: Yeah, but be very careful about that because you have to do it through a newsletter.
Tyler: Right? Well, sorry-
Rick: Be very careful about that. Whatever you're using to capture them at the top of the funnel, whether it's a newsletter, a blog, you've got to be very careful not to abuse... You know this-
Tyler: Oh it's not spam people-
Rick: When you take someone's email address, you can't spam them about. You don't want to nurture them through a CRM pitch.
Tyler: Yeah. Everyone who's ever done marketing at this company leaves hating me because they're like, "You wouldn't let me send anyone any fucking emails." Yeah, we're going to be on the other side of that problem probably, but yeah.
Rick: Yeah, it seems your... How many people do you have in your database or larger audience that are not users?
Tyler: Oh well, the total database a lot. I realize this isn't what you're asking, but one opportunity for the future, we have about 100 million contacts that our customers are storing in the CRM. That's the broadest answer to that. We have about, I want to say 200,000 people who have ever signed up for a free trial, maybe. That might be high because that might count guest accounts, but 100,000 let's call it. We've got 14, I want to say, thousand people on our newsletter, maybe four or 5,000 of them are current customers. What happens there, every time someone signs up for a free trial, the first thing they see when they log in as a pop up that's like, "Do you want to be on the newsletter?" And they can click yes or no. These are all opting. Then only 25% of those people pay at the end of the free trial. That's why we have a newsletter with a lot more people on it than the minority of the newsletters actually paying us, but they don't unsubscribe for whatever reason.
Rick: Is that the only email capture point you have currently?
Tyler: We have one on our blog, but we just don't get any traffic to our blog except people who are already customers, are already free trial users. Basically, yes, that's like 99% of our newsletter growth is from that.
Rick: Yeah. We're getting a little off-topic here. Coming back to the customer referral program, it feels like people are... If you could somehow gamify it, make it more fun, then maybe you'll get some more usage of the referral program. But yeah, it sounds like you have a... The reason we shifted to this conversation is, really, it sounds like you have a top of the funnel problem and you want to expand the top of the funnel. If you could figure out how to make a customer a referral program do that for you, great.
Tyler: Yeah, I don't know if I agree with that. I mean, every business would love to have more top of the funnel leads, but the reason I'm excited about this is because it would help the referral program, not the other way around.
Rick: Okay, cool. Yeah, I guess I don't know what else... Is there any other topics you want to cover?
Marketing your referral program to you customers
Tyler: Let me ask you this. Let's say we've got this product, the newsletter or whatever else, we've got some drip campaign to take them from the top to the bottom of the funnel. How would you go about making customers aware that this exists? Because I do think probably at least one problem with our current system is nobody knows it's there.
Rick: Oh man, I can't believe we skipped that. I meant to ask you that. Do you think awareness is a problem?
Tyler: Yeah. Okay, if you go to our current app and you go, if you go to the settings page, it's big. If you were just doing a SEO analysis of it, you'd be like, "This is the main thing on the page." But it's in such a way users just gloss over it, and I think a lot of people actually don't know it's there.
Rick: Yeah, I mean, can you immediately go change that?
Tyler: Well that's my problem. It is visually very obvious, but I'm just saying someone looks at it and they're like, "I'm looking for a setting that's not a setting." There's no reason you need to be on the settings page-
Rick: Yeah, but you have to go to settings to see this. I'm wondering if you... It feels like if you can make your referral program fun in its own right, regardless of how you handle the back end, and you can tell that story from free trial all the way through using the product without being annoying, then that might work. If it doesn't, I would run away from this. I would do the very minimum to capture referrals, but I wouldn't spend much more time on customer referral programs.
Tyler: Yeah, I hear you. The making a fun thing and all that I buy, but let's say I've achieved that. I'm just trying to think of the... What's the right way to make people aware of it without annoying the hell out of them-
Rick: Seven times. You have to put this-
Tyler: Do what? Put it where? I'm talking specifically, do you email it? Do you...
Rick: I mean I would... I don't know what your onboarding flow looks like, but if you can-
Tyler: It's like five drip emails I think.
Rick: Well, I'm thinking just your actual workflow on signing up. I mean-
Tyler: Beginner stage, it's the main one.
Rick: Yeah. Yeah. They're doing the beginner's guide. Is that what it's called?
Tyler: It's a series of ten-ish short videos. The idea is they watch the video-
Rick: What forms are they filling out?
Tyler: Sorry?
Rick: What forms are they filling out?
Tyler: There's a signup form. A decent number of people do demos with us, but definitely not the majority.
Rick: I'm not asking the right question. How much of your onboarding flow from first hit to the website, to usage of the product, talks about being a part of the community, and growing the community, and being part of the Less Annoying movement.
Tyler: Yeah, none.
Rick: Okay. That's what I'm trying to get to is, maybe this is less about a $10 referral program, and more about being part of the Less Annoying community and inviting more people more often to that community and to participate. Part of that community is the referral program, and the fun that comes with that, and the incentives that come with that. Then part of it is just telling the story about bringing them on-board to this community that has many benefits, of one which is a referral program, but they should be excited to be a part of. It's a part of the product, it's just not a feature. It's not a CRM feature but it's part of the product.
Tyler: I buy that, I think probably, making it more of a community and stuff. How would you apply that to... There actually has to be a time where we say, "Go refer people," or many times. Do you think it's just... Because if we're talking about community the whole time, we're not saying, "Go refer people."
Rick: Right now I look at the customer referral program as a small piece. I know we're talking about customer referral program right now, but I see it as a small piece of a larger word of mouth campaign that starts when they first interact with your brand and continue through usage. The phrase that's popular right now is, "Join the movement." There are a number of ways that your users can join the movement. The deepest way might be attending the conference. The second deepest way might be participating in a referral program. But before that, maybe it's... I don't know what else you're doing.
Tyler: I hear you.
Rick: Maybe it's join the newsletter.
Tyler: Yeah. We're getting a lot of... About 50% of the people who sign up for a free trial opt into the newsletter. One thing I'm thinking here... Like I said earlier, I'm really hesitant to send emails to people that... Basically, my rule is, if this email is directly helping them with a specific thing, we can send it. Every business is like, "Well, indirectly it helps them because blah blah blah. If they refer us customers, we make more money and then we can build better futures." I'm not talking about that. But the newsletter... Yeah, go ahead.
Rick: Yeah. Let me be clear, you can't ask for referrals. That is rule number one.
Tyler: I understand that, but make them aware that it exists.
Rick: You can't ask for referrals, but you can do is passively market the referral program, in your newsletter, in your onboarding flow, in your app.
Tyler: That's what I'm talking about as the specific tactics of doing that. You said newsletter. I'm thinking that's one where people opted into it. It's promotional for us by definition. It's not a transactional email. I'm thinking that's probably the number one thing. That only touches 50% of our free trial users, but that's a good start-
Rick: Yeah, so the emails, right? Let's just break it down into where. There's emails and there's public website pages, and then there's app pages. Are there any other content types?
Tyler: I mean, I'd say with... Well, we have blog posts and stuff. I guess that's a public page. I'd break emails into, emails sent by the software to its users versus newsletter.
Rick: Yeah. Newsletter, emails, and then let's just call it website pages. If we were to look at 100% of one of your app pages, what percentage is dedicated to promoting something for Less Annoying CRM?
Tyler: Our app pages?
Rick: Any page on your app? On average, what percentage of the page is dedicated to promoting?
Tyler: I mean, aside from that referral thing I mentioned, yeah.
Rick: Yeah.
Tyler: We don't have anything else to promote. We don't sell anything else.
Rick: You have a referral program that you're not promoting right now.
Tyler: Yeah. Well, I think putting it in the...
Rick: Yeah, I guess you're a good designer. I think you're a great designer. It seems to me that if you adopted a mentality of, "We need to promote things X% of the time," and you designed with that in mind, you'd have a lot more places that weren't overly intrusive to present this. Coming back to Morning Brew, Morning Brew does this in their email newsletter very thoughtfully. They have asterisks next to all promotional stuff and you can skim past it. It's in every newsletter so you know it's going to be there, but it's surrounded by so much valuable content and I don't know how you do that without... you have to do that very skillfully, especially within the app if you're going to do it.
Tyler: I'm hesitant in the app because we just... As I say every week, we're working on a redesign and one of the goals is to really use screen real estate effectively. One of the things is, we just completely removed the old referral stuff, the links to it, thinking, "Oh, we'll figure out a place to put this." But I keep thinking about it, I'm like, "I have no clue where it can fit," because the page is being used pretty effectively now.
Rick: Yeah. It sounds like you haven't designed your product with, join the movement referral being a part of the messaging on every page.
Tyler: Yeah. I do think... You mentioned the beginner's guide earlier. That's one place, there's plenty of real estate there. Now, people leave that of course.
Rick: Yeah. But I guess what I'm trying to get across to you is, going back to the designs and trying to fit it in is different than designing with word of mouth growth in mind.
Tyler: I completely agree. But I think one of the reasons people are willing to refer the product is because we are designing it with their value in mind and not our value.
Rick: That's fair. That's fair. Their value though is predicated on your ability to sustain yourself, and so you could... I'm not going to go there.
Tyler: That goes back to that....
Takeaways
Rick: I'm not going to go there. I'm not going to go there. One last thing to me, if I were in your shoes, I would start with focusing on awareness and tracking your usage now with the awareness you're doing now and then try to do some measurable things to increase awareness and see if that has an impact. May give you some more evidence as to the value of the program as it is today. That's where I would start, and once you've... I would probably add the question to-
Tyler: To the signup.
Rick: ... to the signup form-
Tyler: Have you been referred?
Rick: Have you been referred and tested for 30 days and see what... I'd design some time frame of tests to see if you can increase usage of the referral program the way it is right now. Driving awareness and then capturing more data on how many of your new users are being referred versus not.
Tyler: Yeah, so that's less about a referral program. Maybe we can just go to takeaways here.
Rick: Yes, that's great.
Tyler: Okay. There's two areas here. One is, how can we better track who's being referred and who's not, and probably just asking them in a better way. I agree, probably the way we were asking them was wrong. Your way is better. Still won't be perfect, but that pretty much solves that problem. Just ask people when they sign up. The second thing is how do we actually get people to use our referral program, which is not quite the same thing. The conclusion there, and I think this is probably going to be true for any B2B SaaS app because they all have... It's never a transactional sale. Is you need to make something else you can offer the person being referred a product, so to speak, that is transactional. That's where the linking between the referrer and the referee gets made and then everything after that's just a traditional marketing funnel to get them to sign up.
Rick: Yeah, and I'm actually realizing... Take
HubSpot. Remember HubSpot back in the day-
Tyler: Mm-hmm (affirmative)-
Rick: ... when we were looking at it? They have a customer referral program, sure. But the way they generate most of their leads was not customers of their core product. It was websitegrader.com, and eventually it became grader.hubspot.com (actually, is
website.grader.com now) but it was basically a tool that you put in your email address and you uploaded some certain information. I think you just put your website in and it analyzed it, and you put your email address in at the end, and it sent your report. I think it was so much value that you naturally shared that information and then people came to that simple product. I realize. I think a lot of the really good B2B companies here have designed a transactional product at the top of the funnel that helps them qualify leads for their core product, but also has some sort of natural referral effect.
Tyler: This is also the idea behind using freemium with B2B is no one is going to refer an enterprise CRM but people might refer a quick contact manager that's free to use.
Rick: Yup.
Tyler: Okay, cool. That'll give me a lot to think about. I will almost certainly bring up a follow-up topic as a feature. We'll do this and it'll either work or it'll fail, but I think word of mouth is such a bigger topic than what we got into today that probably over the coming episodes we'll pick off bits and pieces of this. Thanks for all your thoughts on that.
Rick: Any other takeaways before we sign off?
Tyler: I have a lot of other ideas that are probably so specific I should just go talk about it with other team members here. But yeah, probably that's good for the podcast.
Rick: All right, everyone, thank you for listening. You can join the conversation on this topic and review past topics by visiting
startuptolast.com. If you have questions, contact us via the website or on Twitter. We'd love to hear your thoughts and ideas. That's
startuptolast.com. See you next week.
Tyler: See you.