This document discusses how referral marketing can help lower costly user acquisition costs for online retailers. It provides examples of how Uber, Dropbox, and Airbnb successfully used referral programs to reduce their customer acquisition costs and increase user referrals. The key points are: 1. Referral marketing allows existing customers acquired through other channels to invite friends, which decreases spending on channels like paid ads. 2. Successful referral programs incentivize both referrers and referees and integrate sharing mechanisms into the core user experience. 3. Referral marketing should be a continuous marketing effort that amplifies other channels, not a one-time campaign. When implemented correctly, it can provide up to 40% of new users and

1. DECREASE COSTLY
USER ACQUISITION COSTS
THE UBER WAY
A Referral Marketing Primer
for Online Retailers

3. It’s easy to forget how they started winning:

4. It’s easy to forget how they started winning:
• Felt a deep user acquisition pain
• Innovated new social sharing mechanisms
• Applied sharing mechanism across the fold

5. This strategy is not exclusive to
their business model!

6. IN FACT
Referral Marketing works just as well
for online retailers.
eCommerce brands have the same
opportunity to take advantage of
referral marketing and its benefits.

7. It’s true that…
Some brands aren’t winning with referral marketing
for a few reasons…

8. A few reasons why referral
marketing wouldn’t work…
1. The product might not be a good fit (though most are)
2. Poor attention to referral user experience design
3. Using sub-optimal technology to power program
4. Suffering from a lack of viral acquisition knowledge

9. MOST BRANDS SEE
PROMISING RESULTS…
…even from In-House efforts

10. BECAUSE…
REFER A FRIEND
=
LOWER CAC

11. Basically, Refer-A-Friend is a CMO’s
Secret Superpower

12. Everybody Knows
The truth is that everybody is aware of what
referral marketing can do, but few fully grasp the
impact referral marketing can have on a
company.

13. Example: Beyond The Rack
BTR initially built and launched an in-
house referral program to enable it to
compete from a customer acquisition
point of view.
Though it gained early traction, BTR’s
program quickly plateaued and its
initial overall impact stayed minimal.
After more tightly integrating their
referral program into the user
experience, overall Marketing ROI
shot up to 12X and registrations
increased by 8%.
FULL CASE STUDY >>

14. After all…
What is the point of a referral program if cannot
scale across your marketing mix?

15. Lesson #1: More than a nice-to-have.
Did they think Referral Marketing was a “nice-to-have?”

16. Referral Marketing is one of the
largest and most effective channels
Most companies in B2C verticals
with successful referral programs
see as much as 15% to 40% of their
new user acquisition coming from
refer-a-friend programs.
Referred customers’ lifetimes values
are many times greater than that
acquired via traditional paid media.
7%
8%
10%
11%
29%
35%
$25
$50
$75
$100
Paid LTV SEM LTV Social LTV Referral LTV

17. How is that even possible?

18. Lesson #2: Referral Marketing is Continuous
Referral Marketing
≠
One-off Campaign

19. Leverage Referral to Amplify the rest of
your marketing mix on a continuous basis.
A referral program will:
• Allow customers acquired via SEO/SEM campaigns to invite
friends, decreasing SEM-related CAC
• Help users acquired via social campaigns to drive greater
social sharing, boosting your social traffic
• Incentivize your brand’s promoters to be vocal about your
brand in greater frequency and volume

20. Example #1: Dropbox

21. Dropbox’s referral program was born out of necessity, not interest.
• PPC Ads were getting more expensive, threatening business model
• Had to find a way to reduce Cost of Customer Acquisition (CAC)

22. Dropbox launched a double-sided reward program.
It incentivized both the referrer (parent) and the
referred (child) to take immediate action.

24. $233-$388 CPA ➡ $151-$220 CPA

25. $233-$388 CPA ➡ $151-$220 CPA

26. Example #2: Airbnb

27. Airbnb is worth over $25Billion today — that’s DOUBLE last year’s valuation.
Their offer was compelling but was very smart because Airbnb only paid for
referrals after new users had made a purchase (this still works today).

28. Most importantly, Airbnb’s
marketing mix is continuously
amplified by its referral program
Anyone who lands on Airbnb -
regardless of the traffic source - is
a viable source of referrals.

29. Recap
• Referral marketing is far more than a nice-to-have and
is one of the largest and most effective marketing
channels available to marketing executives
• It can be applied in any context, and E-Commerce is
an excellent candidate
• Dropbox’s CAC savings raised the tide for all of its
other marketing activities
• To be successful, E-Commerce brands must weave
social sharing mechanisms deep into the core
shopping experience

30. Thinking of Implementing a Referral Program?
Download the Best Practices
for Successful E-Commerce
Referral Marketing eBook.
Learn the essential principles
marketing executives should
utilize for online retail referral
success.
GET THIS FREE EBOOK >>

31. Full Service E-Commerce Referral Marketing