How Referrals for Subscription Businesses Surge Acquisition

by Sean Ogino |

We recently talked about the current scenario of subscription businesses, the challenges, opportunities that are waiting in the corridor, and how loyalty programs can help in addressing some of their hurdles. But I genuinely believe that loyalty programs are a half taken measure if they’re not coupled with referral programs. Empirical evidence has proved the organic relationship between loyalty and referrals. The former is a cause and the latter one is an effect, as loyalty creates advocacy. And this is true regardless of the industry and business segments or types. But apart from this clear reason for their natural co-existence, there are two main characteristics of the subscription industry that make referrals for subscription companies a logical move.

It’s not necessary to have a loyalty program in order to properly implement referrals for subscription businesses. Indeed, in certain ways, a simple referral incentive works well to reward long term customers who share your brand. However, for ultimate effectiveness, it’s wise to pair them together.

Referrals for Subscription Companies Supply Necessary New Customers

The modus operandi of referrals is very simple. Someone buys from you. He likes your product and he becomes your repeat buyer. After a while, he becomes vocal about the positives of your product and he shares those positives with his friends, colleagues, and relatives. Here’s a guide to referral marketing for beginners for a lengthier look at it and the basics of starting a program.

Naturally, the quality of customers that come through this process is high, as your customer must have found your product suitable enough to refer it to his friends. Thus, generally, there is no disparity between the expectation of the referred customers and the brand’s offering. And that’s why people are 4 times more likely to buy when referred by a friend.

As the ultimate subscription growth potential is a factor of a volume of subscribers and revenue-per-subscriber, how many subscribers your business can acquire and how much each will pay for their subscription(s) are the vital factors for any subscription model. Similarly, as its revenue is based on a customer renewing a subscription, revenue stagnates if you fail to continue to grow subscribers. One more point to note here is that in the absence of a huge marketing budget, you cannot rapidly buy your way to certain minimum volumes of subscribers. Over a period of time, a referral platform creates a steady and an incremental pool of members- an absolute must for a subscription model.

Referrals for Subscription Companies: The Necessity-Oriented Nature of Subscription Models

Whether a subscription business sells razors, boxes of dog treats and costumes, or streaming services like video games or movies, the fact is that customers subscribe to it because they want these goods or services on a regular basis. In short, these are things that are “needed” by users in their daily lives.

This regular visibility and action with the product or service makes sure that it will be at the top of your customers’ minds. They won’t forget about you because they continue to log on or receive a new order every month. Consequently, these customers are primed to make referrals. You can put a referral reminder in the box itself or a CTA on your login page. This scenario is highly unlikely if you are selling mattresses as people only buy them once a while. That’s a glaring advantage that subscription services have over regular e-commerce sales. And this is the same advantage that makes referrals for subscriptions such a natural fit.

Likewise, the flexibility of referral platforms in structuring the reward has enabled many subscription businesses to practice good economics. You can design rewards in such a way that you don’t have to spend money on referrals that you don’t get. You can pay for referred sales. By this, whether you choose a cash payment or a discount coupon as an incentive, you only have to pay when you have made a successful referral sale. As it is giving you value for your money, it can ensure higher ROI. Our client Try The World, a provider of the food subscription boxes, has experienced it.

Try The World

We implemented Annex Cloud’s unified platform that combines both loyalty and referral programs. Based on Try The World’s two different products, we gave two different versions of Refer a Friend. To allow immediate sharing, we also incorporated a post-purchase Refer a Friend solution. As a result, Try the World’s team saw surge in customer acquisition and engagement.

For subscription based companies, growth is vital. A referral platform certainly carries what it takes to reach out to that growth, while rewarding your advocates! To get a better understanding of referral platform, take a look at our best practices white paper, “The Step by Step Guide for a Powerful Referral Program!” And check out the power of Sharing and Referrals and Social Login in our case study with Vivobarefoot–they’re seeing a 10:1 ROI and a 38% increase in orders!

[White Paper]
[White Paper]