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Oct 25, 2011
Case Study

Word-of-Mouth: Email tactics power referral program with 111% ROI

SUMMARY: Advice from a friend can be worth more than gold, which is why word-of-mouth referrals can be powerful sales drivers. But how can email marketing encourage your customers to suggest your company more often?

While we're at B2B Summit 2011 in San Francisco this week, we're highlighting this B2B referral program and the email tactics that drove its 111% ROI. Find out how notification emails are a top contributor to program registrations.
by Adam T. Sutton, Senior Reporter

The marketers at SendGrid, an email infrastructure provider, had one of those eye-opening moments in research. By analyzing its customer base, the team discovered an overwhelming majority of sales came from referrals.

"We were analyzing different marketing opportunities, and we realized our strongest marketing to date at that point was word-of-mouth," says Tim Falls, Community Guy, SendGrid.

This surprising trend occurred despite the company's lack of a formal referral program. The marketers were researching opportunities to drive more business and thought this was it.

"Recognizing the fact that this was an effective marketing channel, we wanted to increase that activity and reward our customers for spreading the word and getting people to sign up," Falls says.

CAMPAIGN

The team designed a referral program that depended on email marketing tactics. Although such a program is often considered a consumer-marketing tactic, this B2B team was not concerned, Falls says.

"A really large number of our customers are smaller companies who have 50 employees or less. … Small teams can maintain that consumer identity a little bit more than larger corporations you might say."

Here are the steps taken:

Step #1. Reward customers and incentivize sales

The team wanted to reward customers who were referring colleagues to SendGrid, and also wanted to sweeten the offer to referred prospects. The team's referral program included the following terms:

  • Open account

  • The link to sign up for SendGrid's referral program is not prominently featured on the company's website, but anyone can sign up for the program. This is so experts, consultants and other people familiar with the company can send referrals without being a customer.

  • Discount price

  • Referral program members can send their contacts a link to a landing page to sign up for SendGrid. This page is very similar to the company's standard pricing page; however, it reflects a 25% discount for any version of the service, which gives the referred prospects more incentive to buy.

  • Financial reward

  • A program member will receive a $20 credit to their PayPal account (which is as good as cash) for every person who signs up for SendGrid through their referral link. The team tossed around the idea of offering gift cards or credits for SendGrid's services, but decided cash would be the most widely appreciated reward.

Step #2. Create referral tools

The team did not have the development resources to build tools for this program that could meet its standards. Instead, it researched third-party providers and selected one with a ready-made platform.

The platform provides a unique URL to each program member to share with contacts. Any site traffic or sales made through these URLs is attributed to a specific program member. This powers the program's tracking and analytics.

Quick sign-up

After clicking a link to visit the referral program's page, a layover form immediately asks visitors for their name and email address. Visitors are then presented with a page that explains the referral program in simple terms. The page offers several tools for sending referral messages:

  • Email

  • The most obvious tool on the page is the email tool, which has an open form field for recipient's addresses, and includes a default message. The tool sends a text-based email that mentions the 25% discount, the value of SendGrid, and includes two referral links. The email uses the program member's first name in its signature and is delivered from the member's email address.

  • Copy-and-paste URL

  • The page also directly gives members custom URLs. This makes it easy for members to encourage referrals in any platform.

  • Social media

  • The page provides buttons for members to share their referral link with contacts on Facebook, Twitter and Blogger. You can click here to view the default Facebook message. Here's the default tweet:

    "Relax. Let SendGrid handle your email delivery. Get 25% off any plan by clicking my link. http:// sendgrid.tellapal.com/a/clk/3ZbXV"

Ask for passwords later

Every member's profile provides stats on the number of links they've sent and the number of sales they've generated. The team asks members to set up a password to protect this information. However, since the team's priority is to get members to send referral messages, it asks them to setup a password after they've sent a referral message. Asking them to setup a password beforehand would likely harm conversion rates.

Step #3. Promote the program

Anyone can sign up for SendGrid's referral program, but the team only wanted to invite people who were familiar with the company and its services to join. Promoting the program more broadly could have attracted spammers and fraudsters.

Here are the main ways the team spread the word:
  • Approval email

  • New customers are put through a screening process to ensure they are legitimate before they can use SendGrid. They receive an email notice once they're approved. Since they cannot use SendGrid until receiving this email, customers anticipate the message and typically open and read it thoroughly, he says.

    "It is not uncommon for someone to be sitting there and refreshing their inbox and waiting for that confirmation email to come through," Falls says.

    The team includes a call-to-action at the end of this email to visit the referral program page and sign up. Since this email is sent to and read by almost every new customer, it is a very effective driver of registrations, Falls says.

  • In-system messaging

  • Customers who log in to their SendGrid accounts first see an accounts overview page. This page includes a button and copy to encourage customers to register for the referral program.

  • Social media

  • At launch, the team wrote a blog post about the referral program and mentioned the program in updates to its Facebook and Twitter accounts. The team continues to periodically mention the program in its updates on social networks, Falls says.

Step #4. Monitor results and combat complaints

The team continuously checks the metrics surrounding the referral program to detect anyone trying to game the system. The team has not encountered any problems but follows a "better safe than sorry" philosophy.

"We keep close tabs on referral statistics throughout each month, and we reconcile all the transactions we record on our end [with the transactions recorded in the referral platform] … We keep an eye on the fact that all the transactions are valid and no fraud is happening," Falls says.

The team also keeps a close eye on the program's top performers. Some of their sales are generated through referral links that have changed hands multiple times. Take the following scenario for example:
  • Customer A is assigned a referral link and shares it with Customer B

  • Customer B sends the link to Customer C

  • Customer C purchases

Customer A would receive the $20 reward in this scenario. The team tolerates this activity as long as the referrers are reputable and appear trustworthy, Falls says.

Offer the discount when requested

SendGrid only allows new customers to take advantage of the discounted rate offered to referred customers. However, the team also offers a free-trial service. Customers wanting to upgrade from the trial to paid service are expected to pay full price, but the team has received many requests from these customers for the discounted rate.

In these cases, the team provides customers a coupon code to receive the discount. The team plans to provide a back-end fix that will allow trial customers to sign up at the discounted rate without making a special request, Falls says.



RESULTS

The referral program generated a 111% ROI in its first six months. Furthermore, because SendGrid is software-as-a-service that is billed monthly, the program has generated thousands of dollars in recurring monthly revenue.

The success of SendGrid's referral program was driven in large part by the team's email tactics, Falls says. The "account approval" emails are the most effective driver of program registrations, and the program's referral emails are the most effective driver of sales.

"Analyzing the statistics, email comes up as the number-one referral method, or sharing method, of those URLs that are actually generating conversions," Falls says.

Here's a channel-by-channel breakdown of where the program's sales came from for a recent five-month period:
  • Email: 75%

  • Copy-and-paste URL: 22%

  • Twitter: 2%

  • Facebook: 1%

  • Other: 2%

As you can see, the overwhelming majority of sales (97%) were generated through referral emails and the provided URL.

Useful links related to this article:

CREATIVE SAMPLES:
1. Landing page
2. Layover form
3. Program page
4. Referral email
5. Facebook message
6. Blog post

Email Marketing: Triggered email nets 75% of referral program signups

6 Steps: Simple Referral Process Keeps Surge in Registrations Coming for UGC Site

Extole - powers SendGrid's referral program

SendGrid


See Also:

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