Viral loops might be the key to your growth
But here's how to make them work
Hi there,
Viral loops are incredibly impactful, they are the growth dream.
Everyone will tell everyone else and we will be swimming in growth…
Please, don’t wake me up, let me dream about endless growth.
Ok reality: most startups have some type of referral programme that isn’t doing that much.
I’ve become a bit of a sceptical realistic for D2C brands. I do believe referral programmes can be helpful but more often they are an add on vs. a massive jump, especially for high end products or physical products.
People feel awkward referring things for what seems like them getting money. I also believe the best word of mouth is the natural one.
So how do you build on that and get a loop going?
Structure of a loop (Co-created with Thorsten Strauss from Hello Growth)
Invest into creating a superior value and experience for your customers first, and only then worry about which program or tactic you want to apply.
Find the pocket of customers that absolutely love your product. Start here with your referral program.
You can then understand through interviews the practicalities of it:
Ask them what job your product allows them to do and how meaningful that is to them.
Understand who refers in your customer base
When do they do this and to whom?
How do these conversations come about?
What are their exact words?
How long after they became a customer do they refer?
What would lead them to refer more (e.g. better incentive or better trigger)?
This then allows you to build on a strong natural moment to make it:
Easier to refer. Help them explain it, and know what offer to suggest to them.
Push it on the right moment to the right people. Rather than blanket ask your list for a referral.
Find what would encourage them to refer more. Again this doesn’t have to be financial, I loved Bower Collective’s newest referral offering that allowed me to send a few of their best products as a gift to try, I definitely don’t feel awkward referring that!
Then over time you’ll see it grow - studies suggest that referred customers can deliver profit margins as high as 25%, as referral leads convert 30% better than non-referral leads.
There are of course exceptions, where a certain element like initial hype / competition can grow it further like the famous Harry’s referral scheme when they started.
Razor company Harry’s referral page
This had all the elements of a strong loop:
A product that was different and of high value to the customer - Super cheap razors through the mail were not a thing when they started
High value rewards - You could get free products as part of the loop, 50 successful referrals, resulting in an entire free year of shaving blades!
Urgency - Getting in and on the list before they launched
Small step - They were asking for emails rather than purchases making it easy to sign up
The result was before launching 77% of their 100,000 emails in the first week came from referral. But I do fear cases like these create this magical ‘growth hack’ feeling. What we must not forget is that they not only had a lot of key elements and a group effort from the team to get the loop started.
-
Recommendation
If you want to learn more about how referrals work, Thorsten Strauss (Hello Growth) and I wrote a whole in-depth guide on what viral loops are, how to get them working and measure their success.
-
What I hope I’ve done is not be a dream killer, but manage expectations.
Referral loops are hard work, you need to get the various steps right and continue to test and communicate to get them working for you.
A loop is only as strong as its momentum,
Daphne