What a referral program is and how it helps to bring investment into FinTech startups
Referral programs are a quick and almost cost-free way of attracting loyal users to a project. Most companies use this as a tool to expand their client base, while the most advanced businesses find it helpful in obtaining additional investment.
In this article, I will describe the different types of referral programs and look at the example of how we in BDCenter Digital have attracted investment and new customers for our clients using this tool.
Why use referral programs?
Referral marketing is based on the premise that people have more trust in their friends' recommendations than in direct advertising. That's why the main aim of referral programs is to create such favourable terms that the user would want to recommend the product to somebody else.
Properly designed, a referral program helps businesses to find new customers and increase the loyalty of their existing ones. Such a program can become a decisive factor for the user when choosing between companies that basically offer the same services. Meanwhile, the frequent mention of the company's brand name due to referral marketing leads to a higher ranking on the internet.
Recent studies conducted by Nielsen and Influitive+Heinz indicate the effectiveness of referral marketing. Thanks to this tool, the client base of major companies in B2C niches has increased by 25%. As for those in B2B fields, theirs has increased by almost 60%.
Depending on the method used, the system can be implemented at minimal or no cost.
Single-sided and double-sided referral programs
A single-sided referral program implies that only the referrer - the one who has recommended a product or service - receives a reward. In a double-sided program, both the referrer and the referee who agrees to use the offer are rewarded.
Examples of single-sided referral programs
Scribe Writing Publishing offers $2,000 for each referee. For this, you will need to become the company's ambassador and recommend the author who would like to publish a book. A referral reward can be given as money or donated to charity.
The Yesware email service rewards its referrers with bonus points that can then be exchanged for a T-shirt or Amazon gift card.
Examples of double-sided referral programs
This referral marketing scheme is considered to be the most effective and widespread in the market. It is designed to take into account the interests of the referrer and to motivate referees.
One example is Airbnb, the online housing-rental platform. According to its terms, a referrer is given a bonus of $30 and a referee receives a discount of $30 for his first booking. The bonuses can be used to pay for travel reservations.
The Gorham Printing Referral Program allows existing customers to earn 10% additional free books on their next order when they refer a new customer to Gorham Printing.
Referral programs as an investment promotional tool for FinTech start-ups: eChat case study
Referral activity in blockchain projects attract not only clients but also money. This is very well demonstrated by the following example:
eChat is a blockchain messenger with its own internal currency tokens. They became clients of our agency at the initial stage. Our goal was to run a marketing campaign to attract investment. In order to use all the conditionally free channels as much as possible, we decided to create an inflow of new users by implementing the referral program.
What has been done
We've developed a single-sided referral program. Under its terms, the user receives interest on the amount invested by each new participant he has invited:
- 5% - when the total amount of investment is anything up to $50,000.
- 7.5% - from $50,000 to $100,000,
- 10% - $100,000 and more.
Users have a chance to learn about the features of the referral program on the website and via mailings.
The launch of the referral program enabled us to achieve the following results:
- After launching the referral program, we were able to increase our website traffic. The total traffic amounted to 1 million unique visitors, 32,500 of whom signed up for the project.
- The referral program brought us 11% of new investors.
- 12.4% of all investment was made by the participants who signed up through referral links.
- The total amount of investment made by users who came via the referral program exceeded the total investment attracted by ICO trackers and advertising networks.
Thus, through the referral program, not only have we increased the number of active users, but we have also raised some extra money for the project.