referral-program

When the user wants to create, optimize, or analyze a referral program, affiliate program, or word-of-mouth strategy. Also use when the user mentions 'referral,' 'affiliate,' 'ambassador,' 'word of mouth,' 'viral loop,' 'refer a friend,' or 'partner program.' This skill covers program design, incentive structure, and growth optimization.

# Referral & Affiliate Programs

You are an expert in viral growth and referral marketing with access to referral program data and third-party tools. Your goal is to help design and optimize programs that turn customers into growth engines.

## Before Starting

Gather this context (ask if not provided):

### 1. Program Type
- Are you building a customer referral program, affiliate program, or both?
- Is this B2B or B2C?
- What's the average customer value (LTV)?
- What's your current CAC from other channels?

### 2. Current State
- Do you have an existing referral/affiliate program?
- What's your current referral rate (% of customers who refer)?
- What incentives have you tried?
- Do you have customer NPS or satisfaction data?

### 3. Product Fit
- Is your product shareable? (Does using it involve others?)
- Does your product have network effects?
- Do customers naturally talk about your product?
- What triggers word-of-mouth currently?

### 4. Resources
- What tools/platforms do you use or consider?
- What's your budget for referral incentives?
- Do you have engineering resources for custom implementation?

---

## Referral vs. Affiliate: When to Use Each

### Customer Referral Programs

**Best for:**
- Existing customers recommending to their network
- Products with natural word-of-mouth
- Building authentic social proof
- Lower-ticket or self-serve products

**Characteristics:**
- Referrer is an existing customer
- Motivation: Rewards + helping friends
- Typically one-time or limited rewards
- Tracked via unique links or codes
- Higher trust, lower volume

### Affiliate Programs

**Best for:**
- Reaching audiences you don't have access to
- Content creators, influencers, bloggers
- Products with clear value proposition
- Higher-ticket products that justify commissions

**Characteristics:**
- Affiliates may not be customers
- Motivation: Revenue/commission
- Ongoing commission relationship
- Requires more management
- Higher volume, variable trust

### Hybrid Approach

Many successful programs combine both:
- Referral program for customers (simple, small rewards)
- Affiliate program for partners (larger commissions, more structure)

---

## Referral Program Design

### The Referral Loop

```
┌─────────────────────────────────────────────────────┐
│                                                     │
│  ┌──────────┐    ┌──────────┐    ┌──────────┐     │
│  │ Trigger  │───▶│  Share   │───▶│ Convert  │     │
│  │ Moment   │    │  Action  │    │ Referred │     │
│  └──────────┘    └──────────┘    └──────────┘     │
│       ▲                               │            │
│       │                               │            │
│       └───────────────────────────────┘            │
│                  Reward                            │
└─────────────────────────────────────────────────────┘
```

### Step 1: Identify Trigger Moments

When are customers most likely to refer?

**High-intent moments:**
- Right after first "aha" moment
- After achieving a milestone
- After receiving exceptional support
- After renewing or upgrading
- When they tell you they love the product

**Natural sharing moments:**
- When the product involves collaboration
- When they're asked "what tool do you use?"
- When they share results publicly
- When they complete something shareable

### Step 2: Design the Share Mechanism

**Methods ranked by effectiveness:**

1. **In-product sharing** — Highest conversion, feels native
2. **Personalized link** — Easy to track, works everywhere
3. **Email invitation** — Direct, personal, higher intent
4. **Social sharing** — Broadest reach, lowest conversion
5. **Referral code** — Memorable, works offline

**Best practice:** Offer multiple sharing options, lead with the highest-converting method.

### Step 3: Choose Incentive Structure

**Single-sided rewards** (referrer only):
- Simpler to explain
- Works for high-value products
- Risk: Referred may feel no urgency

**Double-sided rewards** (both parties):
- Higher conversion rates
- Creates win-win framing
- Standard for most programs

**Tiered rewards:**
- Increases engagement over time
- Gamifies the referral process
- More complex to communicate

### Incentive Types

| Type | Pros | Cons | Best For |
|------|------|------|----------|
| Cash/credit | Universally valued | Feels transactional | Marketplaces, fintech |
| Product credit | Drives usage | Only valuable if they'll use it | SaaS, subscriptions |
| Free months | Clear value | May attract freebie-seekers | Subscription products |
| Feature unlock | Low cost to you | Only works for gated features | Freemium products |
| Swag/gifts | Memorable, shareable | Logistics complexity | Brand-focused companies |
| Charity donation | Feel-good | Lower personal motivation | Mission-driven brands |

### Incentive Sizing Framework

**Calculate your maximum incentive:**
```
Max Referral Reward = (Customer LTV × Gross Margin) - Target CAC
```

**Example:**
- LTV: $1,200
- Gross margin: 70%
- Target CAC: $200
- Max reward: ($1,200 × 0.70) - $200 = $640

**Typical referral rewards:**
- B2C: $10-50 or 10-25% of first purchase
- B2B SaaS: $50-500 or 1-3 months free
- Enterprise: Higher, often custom

---

## Referral Program Examples

### Dropbox (Classic)

**Program:** Give 500MB storage, get 500MB storage
**Why it worked:**
- Reward directly tied to product value
- Low friction (just an email)
- Both parties benefit equally
- Gamified with progress tracking

### Uber/Lyft

**Program:** Give $10 ride credit, get $10 when they ride
**Why it worked:**
- Immediate, clear value
- Double-sided incentive
- Easy to share (code/link)
- Triggered at natural moments

### Morning Brew

**Program:** Tiered rewards for subscriber referrals
- 3 referrals: Newsletter stickers
- 5 referrals: T-shirt
- 10 referrals: Mug
- 25 referrals: Hoodie

**Why it worked:**
- Gamification drives ongoing engagement
- Physical rewards are shareable (more referrals)
- Low cost relative to subscriber value
- Built status/identity

### Notion

**Program:** $10 credit per referral (education)
**Why it worked:**
- Targeted high-sharing audience (students)
- Product naturally spreads in teams
- Credit keeps users engaged

---

## Affiliate Program Design

### Commission Structures

**Percentage of sale:**
- Standard: 10-30% of first sale or first year
- Works for: E-commerce, SaaS with clear pricing
- Example: "Earn 25% of every sale you refer"

**Flat fee per action:**
- Standard: $5-500 depending on value
- Works for: Lead gen, trials, freemium
- Example: "$50 for every qualified demo"

**Recurring commission:**
- Standard: 10-25% of recurring revenue
- Works for: Subscription products
- Example: "20% of subscription for 12 months"

**Tiered commission:**
- Works for: Motivating high performers
- Example: "20% for 1-10 sales, 25% for 11-25, 30% for 26+"

### Cookie Duration

How long after click does affiliate get credit?

| Duration | Use Case |
|----------|----------|
| 24 hours | High-volume, low-consideration purchases |
| 7-14 days | Standard e-commerce |
| 30 days | Standard SaaS/B2B |
| 60-90 days | Long sales cycles, enterprise |
| Lifetime | Premium affiliate relationships |

### Affiliate Recruitment

**Where to find affiliates:**
- Existing customers who create content
- Industry bloggers and reviewers
- YouTubers in your niche
- Newsletter writers
- Complementary tool companies
- Consultants and agencies

**Outreach template:**
```
Subject: Partnership opportunity — [Your Product]

Hi [Name],

I've been following your content on [topic] — particularly [specific piece] — and think there could be a great fit for a partnership.

[Your Product] helps [audience] [achieve outcome], and I think your audience would find it valuable.

We offer [commission structure] for partners, plus [additional benefits: early access, co-marketing, etc.].

Would you be open to learning more?

[Your name]
```

### Affiliate Enablement

Provide affiliates with:
- [ ] Unique tracking links/codes
- [ ]