Friday Q&A: The Best Customer Referral Strategies For SaaS Companies

Friday Q&A: The Best Customer Referral Strategies For SaaS Companies
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Every Friday, we’re answering your questions about business, startups, customer success and more.

Happy Friday!

This week’s question comes from James McBryan, who asks:

Referrals are absolutely critical to the growth of just about every successful business I’ve seen.

Customers who are referred by loyal customers tend to become loyal customers: they trust you more from day one, they stay with you longer and they spend more over their lifetime.

This is a challenge that we’re continuing to explore, test and learn more about. One of the most important strategies, we’ve learned, centers around the timing of when you ask for a referral.

I’ve written about referral timing in the past, but it’s worth repeating:

If you ask at the wrong time, you’ll either get ignored (if you ask when they’re simply not thinking about you) or worse, you’ll get an angry customer (if you ask when they’re actually dealing with an issue with your product).

Aside from the built-in referral buttons that we have on Groove customers’ support widgets—which are static and not time-based—we do ask our customers for referrals from time to time.

What I’ve found to work best here is to make the ask when the value that you deliver is most apparent to them.

That will be different from business to business, but for us, that might mean:

  • Right after a support interaction where we’ve helped them accomplish something
  • Right after hitting a particular usage milestone (e.g., sending 1,000 support emails through Groove)
  • Right after they add-on another feature/product (e.g., a third-party integration)
  • Right after they positively respond to an NPS survey

It’s not something we’ve perfected yet, but it is something that we’re continuously working on.

The idea here is to make the ask when they’re most likely to give you the best, most positive (and effective) referral.

As for SaaS-specific strategies, I’m not sure that they differ too much from the Dropbox/Uber approaches that James mentions in his question.

Now, you probably won’t excite many B2B customers with a $20 credit, but the principle remains the same: show your customer how they can win by referring you. In the case of Dropbox/Uber, the customer wins in two ways: by getting free product/credit, and by helping their friend do the same.

There are a number of ways you can apply this principle in B2B:

  • Helping a friend CAN be its own reward, if you sell it well. If you can make the case that your customer will win by being a good friend AND helping their friend get value by using you, you can inspire referrals that way. Of course, this requires you to have a product that people love.
  • If the referrer isn’t incentivized by free credits to your product because they’re not paying for your product out of pocket, try offering other things that can make their lives better or easier: Amazon/Starbucks gift cards, productivity tools, etc… One contractor in my neighborhood is well known for giving baseball tickets in exchange for referrals (to both the existing customer and the new one), and people love it.
  • If your customers are people who would value credit or free product, then, just like Uber or Dropbox, offer that to them. The right offer depends on how the economics and results play out for you, but consider free months, extended trials, discounts or any other “currency” (like storage space or seats) your product deals in.

In terms of tools to make the process easy and seamless for your customers, while we haven’t used them ourselves, I’ve heard great things from people I trust about both Referral SaaSquatch and Ambassador.

I’d love to hear what others have experienced in their own testing. Let us know in the comments!

Alex Turnbull
Alex Turnbull Alex is the CEO & Founder of Groove. He loves to help other entrepreneurs build startups by sharing his own experiences from the trenches.