Will: Hi, and welcome to the Advocacy Channel, a customer marketing podcast. I'm your host, Will Fraser, and this is our twenty-fourth episode and final episode of our first season. Today I'm thrilled to welcome Keith Posehn to the show. Keith is a marketing leader with over 17 years of experience in performance and customer marketing for companies at different stages of growth from founding to fundraising to sale or IPO. Keith joins us today to provide valuable insights into the world of referral and affiliate marketing, addressing common mistakes companies make with their referral programs and how to avoid them. Keith, thank you so much for joining us today. I am so excited to have you on the show and cannot wait to have you share some of your amazing experiences with us.
Keith: Thank you. My pleasure to be here. I appreciate the invite.
Will: Our listeners just heard a quick intro about you in the opening to the show, but I think it's always better to hear it directly from yourself. So maybe before we get into the details, you could give us a brief story about your experience in the industry and maybe some of your experience in referral and affiliate type marketing.
Keith: So I got my start about 20 years ago in the ad agency world, doing search ads and display early user of Facebook ads as well. I ended up founding my own affiliate marketing company in the ad agency as well for a number of years. Then joined Caviar, the food delivery startup in San Francisco, which was an absolute blast.
In the job application, they had a little field that said, "Tell us something interesting about you, you think we should know." So I put in my recipe for from-scratch tomato sauce. And they loved it. It was like a match made in heaven. It was one of my favorite jobs - joined the team, really felt at home.
Then we got acquired by Square, which was another adventure. Going through the IPO there, did three and a half years at Uber, which was just amazing. It was a decade of experience in three and a half years, and I loved it. Got to scale acquisition, affiliate and referrals, and job boards with an amazing team. A fantastic experience. Made some of the best friends of my life there.
Since then, I've been at Nextdoor and Service Channel and now I've been consulting for the last two years. My team and I, including some former Uber colleagues, really focus on unlocking tricky growth challenges for companies around referrals, affiliate, or demand. Companies see white space they can't capture because they don't have that same level of institutional knowledge, and they look to us to help create that and build that effort for them.
Will: So, I mean, obviously just an amazing amount of experience there and just deep insights into the space. I often find if someone's run two programs, they're a darn near expert. But definitely with the visibility you've had, you are a world-class expert in the space. You're already casually sharing some major nuggets of wisdom with us there. Before we jump in too deep, you have such interesting exposure to this space, and you and I were talking a little earlier about this - we see this huge amount of potential from these programs, but we also seem to see a lot of companies not really capitalizing on them or not really running them. Maybe you can share some thoughts on what you see in the market around the beliefs around these programs and adoption.
Keith: It comes down to a few things. Part of it's organizational, part of it is philosophy or mindset. I find often companies, even surprisingly large companies, have it as like a box that has been ticked. It's like, "Do you have a referral program? Check." And then they move on. When it isn't that, it often ends up under-resourced, not prioritized, not a part of the key growth strategy - to the company's detriment.
What happens is you create an institutional lack of understanding that's very hard to overcome. It doesn't become a core competency, and this is prevalent everywhere from e-commerce through SaaS to B2B to consumer to everything else. And yet in a number of other places, it's been a massive driver of growth for companies. Some of the biggest, most explosive growth companies we've ever seen had referral programs that made up a very substantial portion of their total growth - we're talking 10, 20% plus of the whole pie, which is absolutely massive because they understood that it was foundational to the growth of the company.
And it's that understanding, I think, that is often missing and is an opportunity. When a company realizes they're missing it, it's like, "Yeah, you can take this thing from 1% to 10% plus - wouldn't you like nine full percentage points of growth in a year?" It could be done, but it also takes a lot of work and often takes a lot of understanding that is not institutional understanding. That's where it starts to get challenging.
Will: You know, obviously, when you start talking about 10 and 20% of your total growth - those are some pretty wild numbers. Why do you think people aren't looking for that? They're okay with that 1% today? They're just checking the box. Do you have any insights into that?
Keith: It comes from the competencies of companies often where you can have an e-commerce organization that can be weak in product, can outsource a great deal of their e-commerce platform, have a strong marketing team, but never have truly resourced around referrals, never have prioritized it from a product perspective because it does marry product and marketing to a very intense degree.
Keith: It requires an understanding of people and an investment of time and energy. Often it gets to a result that's good enough that it can be impactful in early days. But brand takes over and search takes over, and other channels take over and it becomes easy to forget. And it also often can be one where finance teams don't quite understand how to budget or resource against it either. They say, "Well, hey, what do we budget referrals with?" Well, it's not a budget channel. It's not one where you say referrals can spend a quarter million this month. It's a challenge where you say, "Referrals, I just need to hit a target. Please tell me how much you can get." It's a very different question, and so misalignment is often a large component of why it's not truly being capitalized on.
Will: You know, it's interesting - you're talking about going from marketing to product to finance. It really sounds much more like a channel than a program.
Keith: Yes, definitely. It's a channel that requires integration across multiple teams, and that's where it becomes challenging to be able to say, how do we take a product perspective for how we prompt and activate users? How do we take a marketing perspective for strategy and how to drive growth in the company? And how do we get finance to understand what it actually is, how we should resource on this? What is the true metric we're after?
I'm finding this with a number of clients. Finance will say, "Well, we can't really discount our product that much." That's okay because we don't need to give money away. Sometimes all we need to do is give the product away or give value. It's more important. And so it takes the ability to wrangle those together and align those. Often the team isn't empowered or is not experienced enough, or a combination, and they need help to do it. That's where leaders can, if they understand this, come in and say, "Wait a second. We've got to actually do this right. We've got to resource against this. This represents an opportunity, really big white space to go after." But that also takes leadership being tuned into it and understanding it and knowing that it is important.
Will: And that's what we're getting here. I think this is an interesting misunderstanding from some leadership as to the scale and effectiveness these can be. And then you get some misalignment of those resources. And then there's another thing you mentioned, which is we often get under-skilled resources. Maybe you can touch on that one a little bit.
Keith: Without - it's actually not even under-skilled. It may be under-experienced. It may also be stretched thin. It may be a skilled resource that has three or four other responsibilities that they have to take care of that are organizationally higher priority to them. However it happens, you can get a fantastically talented referral marketer in place, but if they're spread across three other channels, they just can't. It languishes because it's not important.
Prioritization is often a part of it, and from a skill standpoint, it's hard to find people with the depth of experience over years of really unlocking it. There are very few and far between with some really interesting examples across the industry. But then that lack of talent's also hard - how do you get someone who can bring that perspective? That's where it gets tough. So you can have people, and you have the will on the part of the people who are responsible internally, but they lack the resources, they lack the leadership, and they may lack the time.
Will: So I know one of the things you're doing is you're helping companies not just run and set up these very effective programs, but helping them actually build the competency internally to then be able to take those programs on. Are there any tips and tricks as to maybe how to identify the right people to join that journey from inside of a company? Or how do you look at developing that skill if it's so hard to find in the market today?
Keith: It's really interesting and it depends. This is an interesting lesson I got from both Uber and from Nextdoor - and I'm immensely grateful to Sarah Friar, our CEO of Nextdoor, for helping me crystallize this years ago. She mentioned that companies go through a transition from athletes to experts - athletes that do, to experts that know.
I thought about that and realized one of the things that worked great about Uber, which for all its faults, I had a great experience in my area of Uber and a really great time there inside marketing. What Uber did very well was create athletic experts - take athletes that could help them become the experts, or take experts that knew and give them the freedom to go.
I think in this one, it's interesting where to really capitalize on these channels, it requires giving this kind of team the mandate and the ability to act. If you have a really athletic junior person who can do stuff, get them somebody who knows to advise them, lead them, that can understand and help them unlock that. If you have a really experienced person who knows the space, let them do it. Take the constraints away, allow them to move because referrals as a channel is driven by action, driven by learning about your customers, finding the value that they are internalizing, prompting them when that happens, saying, "Hey, tell your friends. Tell somebody, here's a way to do it." Provide them all those tools. It's a constant effort and it requires giving the people in seat the ability to act and giving them also the benefit of experience to know how to act.
Will: And I think that that's - I love that little crystallization there, but that is one of the great challenges we see though, is getting that experience and that ability or that will to act. That's kind of a challenge to pull in for sure.
Keith: It requires some understanding on the part of leadership in these organizations too, that you can have a very regimented, disciplined approach and you have to be willing to take some risks. The growth can't come without some risk and it can be a little uncomfortable to say, "Hey, we're gonna actually really push hard on maybe giving some money away on customers, giving value away at a time when we would rather make that profit." But we can prove we can give away some value now and return much greater long-term value. And that's a key part of this - how it creates a step change in customer value. That's a risk worth taking. Having leadership that's willing and able to take those risks is key.
Will: You know what, I kind of got two different lines of questioning there I want to dig in on. Let's maybe touch on that step change first. I think we've both seen that there can be some pretty big effects from referral programs. So maybe you can talk about your experience around that step change that you can see from a referral program.
Keith: In the end, a referral program is a way, it is a lever to drive a change in value on the part of the advocate - the person doing the referring, your existing customer who refers - and the friend, the person that they bring in. It's a way simply to change the value equation for both of them. The act of giving, of an advocate who loves your product saying, "Hey friend, you should totally try this. You should totally ride with Uber. You should go ahead and try Masterclass" - whatever you're doing there. That act right there makes them more valuable to you as a business immediately.
What you give them in return should make them even more valuable as well - increasing their usage of your product, make them want what you have more. Don't cheapen your product by giving money away. Give them something that makes them want to use it more. And then the same for the friend when you receive that referral from that advocate. That's someone you should know and go, "I believe in their recommendation. They think this product is worth it. I want to try this too," and they're going to try it and give it more of a chance than if they were just coming off of the web and off of Google.
A great example of this is Dropbox. Dropbox's program back in the day gave away disk space. And that was it. Like, "Oh, I want more disk space from a Dropbox account." And "Hey friends guys, I need a couple more gigs. Would you go ahead and try Dropbox? You also get a free extra few gigs." And voila, I use Dropbox more. They use Dropbox more and the cycle continues. And understanding that that's key.
Discounts and promotions are overused in this space. Because you're giving away real value in return for real value. But instead, the question we should be asking is, how do we give away perceived value? Value that a customer takes that also increases their value to us as a business, makes them use our product more, makes them value our product more, makes them trust us more. Any of those outcomes are a net positive, and that's all referrals is. It's a tool to drive a change in the value on both sides of the referral equation.
Will: You know, it's interesting. We've done some work with airlines and we've seen them find they have soft goods, right? We'll give away a seat upgrade, we'll give away these kind of things, which the actual fixed cost is very low. But that loyalty that it can drive and that perceived value that you can get is so huge whenever you have that opportunity.
Keith: Any of these things that helps someone understand how your product is more valuable than they might have thought or helps them go, "Yes, I love this product even more than I did before." Any of that, that's all it really takes. And it's same for both the advocate and the friend. I mean, what if you could give your friend a free first class upgrade on a domestic flight?
Will: I mean, yeah, I think pretty much any friend would be very happy to receive that referral versus, "Oh, I'll take a hundred bucks off." It's like, no, I get a free upgrade on qualifying flights. Oh, cool. I'm going to go to Hawaii first class.
Keith: It also fundamentally alters the experience of both the friend and advocate. Going back to that example about giving away a seat upgrade, it makes their experience better. This is giving away to the advocate a free seat upgrade for someone who's never flown first or business on your airline. Then they get it and they go, "Oh, I got a meal. The seat is fantastic. I'm at the front of the plane. I totally want to do this again." Like they're hooked, and it's the same for their friends. So you fundamentally alter their experience of your product. Again, this is that step change in value on both sides.
Will: And have you had any experience kind of seeing that then result into maybe higher lifetime value customers or longer lifetime value customers or anything like that?
Keith: It takes time to get to, and this is part of what makes referrals challenging to unlock - it takes time to test and continuously test. You have to constantly optimize, look for new opportunities. Programs can get stale if you give the same thing away. People get blind to it over time, but if you nail it, you see really significant increases in value. These customers are 30, 40, maybe 50, 60% more valuable on average than the standard customer, and that number goes up even further if you get really good at nailing your incentives.
Because what happens is you're again, changing your experience, your product, and that customer in general, it can be even higher. Some products, going back to airlines again - you have a business traveler, they've never flown domestic first or business or anything like that. You give them a taste of it and they go, "Oh my God, I want to do that again. I'm going to refer another friend." And then now they keep doing this. Now they are using your product, they want the better product. That is a huge change in value long term - they have gone multiple classes of value up for you. So that kind of rule of thumb in that 40 to 60% range - that's conservative because it has to be spread across many, many categories of products. In some, it can be extremely high, four or five, six times.
Will: Yeah, I think that's what starts to get really exciting, right? We start to see that if you can give me four times more, if you can four-x the value of a customer... that's huge.
Keith: It is. And your mileage may vary too. It depends on the product, but it's achievable and that's the key - understanding of the product is so important in order to make it possible. If you only have a superficial understanding of the value your customers have in your product or the value customers see in your product, then the end result is, it will always be kind of held back by that superficial understanding. It really requires that energy. And then it comes down to giving the teams the ability to act, allow them to go. That's how you find it.
Will: And you know, this is one of those things like that ability to act - I think there's authority, but there's also just enough runway, there's enough resources and runway. What do you think? Let's say I'm maybe have a slightly resistant CMO or C-suite team member here. How much time and space do I need to be able to really prove this? Because I'm always worried that they're gonna get penned into that box and you're just not gonna have enough time to really prove an answer.
Keith: It depends on the situation. It can sometimes hit like lightning, but that is very much the exception rather than rule. Six to 12 months is a good baseline to really look at and say, "This is really contributing a lot." But there are milestones in between here and there. They're really seeing virality where you say, "Hey, despite how small the uptake is, maybe starting a new program for a client going, look, it's not big. We're getting maybe a little trickle of business. But these customers are using this more. They are, they like our product more. They advocate consistently for us, the people that they refer in."
By the way, every friend referred is an order of magnitude more likely to become an advocate. So that compounds, and again, if you start to see that pattern emerge, there are signs early on that you should invest. They are relatively quick to get to post-launch - within say, three months. You should know, "Oh, these customers that become advocates are actually worth something." Even if our utilization of the program, our propensity rate, the likelihood to refer is not very high, we can still see that the value's there and then the goal changes. The goal becomes how do we get more, how do we activate more people? That's a very different problem.
Managing those expectations with leadership and being able to say, "Look, we're not gonna make eight percentage points in revenue growth out of this in the first 12 months, but in three to four months we're gonna look at this and go, we can tell for every referral that happens, we see this step change in value." Thus we know it's worth investing in growing activation. And that's what creates the long-term effect. But we have to get there first.
Will: Yeah, and I think that's amazing. You're talking about those milestones and those steps and looking for those early signs. Right? I think that we, whether you want to use a viral coefficient or just the idea of exponential growth, I've talked to a lot of people that kind of want that lightning in a bottle, and maybe they're even stepping into these programs a little early in their company's life cycle. I don't know if you've any kind of exposure to that as to when is the right time to start this as well.
Keith: You can definitely catch lightning in a bottle. It just takes a long time to catch lightning in a bottle. Your success rate is pretty low. Going back to your question, like when's a good time to start it? It actually depends a lot. You can start very early in your product's lifecycle, but it doesn't require the level of formality. If you want to start up in day one, you could just have a "share this with a friend" and just some parameters to track what happens and ask people. It doesn't have to be formal. It can even be very informal. You don't have to have a referral program to know that you are getting referrals. Customers want to share. That tells you something.
So at any point you can learn, is this worth it? I would say that it's likely when you have some matter of product market fit, where you can see people are seeking you out. They're finding you, they're using you. You can see they're advocating to others. That's when it starts to make sense as a discipline - something you say, "This is a very specific effort I want to resource and task against, and develop strategy around." Very early in the startup life cycle, just do something. Just get something out the door so that you can tell, and then look for how it lands, and then that gets you to the point where you know it's worth investment.
Will: You know, I really like that idea. I've often kind of explained to people that a formalized referral program is an accelerant of a fire, not a starter of a fire. And that I think just speaks very well to that. You've got the little tracking, you got a form, you got a link, whatever, so you know what's happening. You could even just go out there and see in the social world, are people advocating for you. And sure, now you start to know you're ready.
One of the things we're kind of talking about here is gaining that support, right? How do we gain that support? And we've talked about some really nice metrics here and some really powerful pieces of the referral program. But I still feel like we're gonna have resistant CMOs out there. We're gonna have teams that are kind of like, "Yeah, I ran a referral program at my last company and it didn't really do much." Do you have any kind of finishing moves that you think our audience could use to really help get their CMO on board and get that buy-in so they can run this program they know is gonna be successful?
Keith: The resistance can come from a few places. In my experience, one of those is, "Oh, we had referrals before. It didn't work out there." Well, often it just comes down to pointing out, was that referral program actually that well-run? Past experience is not indicative of future success or lack of success in this case. And so being able to pick apart where was that previous experience, what worked or didn't work there, and how does that inform leadership's decision, but also how to look at that and say, "Well, what are the lessons that can be learned from there and how do they apply in some ways but not apply here?"
I've had that before at companies where they're very resistant to something based on past experience. I go, "Well, that was then - technology was very different. Customers were different and the product was different, and the market was different." There are many factors that don't carry over, so we have to assess based on the now.
The second one is it's often just down to priorities. It doesn't often seem like a priority when leadership says, "We've gotta do this. This is our strategy." It's like, well, that's lovely, but if you can't connect the dots as a marketer to that senior executive level strategy, then that's where it also falls flat. And most of the time actually the resistance is broken down when I get to that stage, I can present to a CMO to the C-suite and go, "Look, I understand that your priority is to drive net growth in the company in a way that maybe leads to profit for an IPO or that goes ahead and exceeds our growth targets every quarter for the street. But we can do that and here's how."
And being able to connect the dots, and this is where we talked about skill and we talked about teams and resource and often they're so far away from senior leadership that they don't have the time, they don't have the mandate or even the ability to connect the dots and to be able to make that case. And that's where it gets critical - if when I go to a CMO or someone on the C-suite and be able to say, "Look, I know what you've dealt with over here, but this is how the dots connect, and we can craft a strategy that ties into the broader company strategy and priorities." That's the aha. And that's when it happens.
Will: You know, I like that. I think that that's a challenge that people see in many different roles across the organization, but it's ultra important here. I think partly because the C-suite doesn't yet know these programs well enough to connect that dot themselves and when we bring those practitioners in, we can.
Keith: Yes. Actually there's another part of it too, and this is what I encountered from other places, was board pressure. So investors and others coming back around to the company and saying, "Oh, you need to work on your viral growth. You need to focus on organic and other things." And there can be that pressure from the board to look for efficiencies and look for ways to drive growth.
Will: Yeah, it's interesting just that the board really wants to see it and I could see that if you were in a thousand plus person organization, the board's pushing for something and you've got whatever your 15 layers between you and the board, that could be pretty hard to keep those dots in mind.
Keith: Yeah. It's a visibility question and it's a clarity of purpose question. Where I found that the best-run organizations are the ones that make it very clear what's important, what the priorities are, and if they can clearly articulate those priorities out to the team, it makes it possible for people on the front lines to say, "Hey, I get that that's a priority, and here's how I can serve that priority."
Will: Absolutely. Now, maybe veering a little bit left or right here for a second, but we're kind of talking about this person inside the organization who's helping connect the dots and run the program. But where do you think the referral program makes the best sense to live? You know, this is kind of a, I don't know if it's contentious, but it's kind of different everywhere.
Keith: I say early on, referrals often lives within product teams because it's very, at that stage, depending on the product too. Some products, it does make a little bit more sense where the work and the strategy is driven by how people use it. It gets a little different later on, it becomes a marketing thing because in the end, it is a holistic, it is a part of a holistic marketing effort. It is a channel with a strategy and results.
So in the end, leadership and my experience generally should go in marketing because that is what it is in the end. A lot of how it operates is within product and engineering in many organizations, where the way that it is integrated within requires that understanding of the product, the points at which we prompt people to activate them, and how we drive that growth. But also as the program matures, that gets also a bit less important because when your core integration with like Sasquatch as a platform is built out, there's a lot less work to do, a lot less engineering, and it now is an activation and strategy question and less of an under-the-hood engineering and product question.
Will: I think that makes sense and it is like maybe a good segue into kind of some of the things that I'd love to learn maybe on a more tactical level today on those programs. You know, I think we've all seen a "give your friend 25% off and get 25% off" kind of program, maybe where buying a T-shirt or whatever it might be. But when you're looking at that reward, figuring out what is the right incentive - I think that's where a lot of people focus. Even though I think you and I can talk about lots of other pieces here, but that incentive piece seems to be where people glob onto first. What do you find is the most effective way to discover the right incentive, test the right incentive? How do you kind of think about incentives in these programs?
Keith: Without going - you know, it's easy to say, "Oh, we should focus less on discounts." That is definitely a philosophy that has been born through a lot of hard experience. But it comes down to answering instead a different question: What do your customers actually care about? So from the advocate, the person doing the referring, what do they actually care about and what do you want them to do?
If we're to think about, again, like Duolingo as a product - Duolingo did a fantastic analysis of the math, which I can't even get into here because this whole thing, I break it down into a math equation. They did an amazing analysis, but when it comes down to it, what do they want them to do? Well, they wanted them to use Duolingo more. Well, what gets somebody to use it more? What are those levers? And then if we were to give somebody something that gets them over a critical hump to higher value for us, what is that?
And can we prompt them at the right moment and offer them the thing that gets them to share with a friend to do what? Again, evangelizing the value that they've internalized - share with the friend. And once they receive the reward to use the product more, that's where it goes.
And that can be a lot of things. In e-commerce, it could be as basic as just saying, yeah, I want them to buy more stuff. Well, do we have to give them a discount or can we give them free shipping? Can we give them buy two, get one free? Can we do anything beyond just a number off discount? Something that doesn't cheapen the product, but gives them more? Could we say, "Hey, when you refer a friend, we'll give you five $5 coupons, one at a time usage." Instead of giving someone twenty-five bucks off, let's give them something that gets them to purchase more than once. That's one example.
We talked again about giving away a free seat upgrade. What do the customers care about that will motivate them to evangelize the value and thus when they receive their reward, actually use the product? That's the question we have to answer. And it's the same for the friend. When you receive something from a friend, what makes you want to actually use it and feel that the product is more valuable than you would've otherwise? That's the other half of it.
Also, I'd like to segue just a little bit into too, the other core component is timing. Knowing when to prompt to activate someone - at Uber, like we figured out it was right at your first five-star trip. Like, "Oh, I got a five-star trip!" Like, "Yeah, congratulations. Refer your friends." Get them to refer more than one person. Prompt right there. And it was beautiful because that was the moment they went "Wow." Whether they were a rider or a driver. Looking for that moment, those key points is important.
Will: Yeah, and I was gonna ask about that. Because I think prompting is often a concern. Much like we see in email marketing, people are worried about sending too many messages. Prompting is often a thing where I've seen people really delay when they prompt - they wanna make it very late in the customer journey. Or they may even wanna hide it, maybe they want this to be something that sits back in the "my account settings" whatever, billing level. What's your view on prompting and how to think about that?
Keith: You can absolutely be obnoxious about it, and that is a problem and it is important to bear in mind, but it is not something to be afraid of. Fear never drove that same hypergrowth. You know, again, it requires a boldness and to say, "I am willing to test this. I want to test an assumption."
That's one of the things I often do is end up challenging a lot of companies' very ingrained assumptions because it's saying, "Well, why do we believe that?" Well, actually, what if we did prompt at this critical customer point? Well, sure we might sacrifice a few points in further uptake, but the gain from the referral should outweigh it. And it's being able to have the staying power to say, "Hey, we're gonna test this, and we're gonna see if the value we get from it is greater than the value we gave up by not doing it, or that we gave up if we hadn't done it."
That becomes critical. So you can certainly over-prompt. Absolutely. And you can make the prompt kind of something you get blind to by just always doing it at the same point. But at the same time, don't be afraid. The fear, I think, is the greatest enemy of this channel's success, and it holds companies back.
Will: You know, I couldn't agree with you more about that Keith - that the fear of what this might do just seems to hold so many companies back. There's this, like you're saying, this kind of resistance to test. And I think the best way I've ever heard it put is, you know, a really good referral program is a feature. Right? It is value in and of itself and you don't want to hide that value.
Keith: Agreed. It is value in and of itself, and yes, you never should. Why would you? Why would anyone hide value? It should be a part of a journey that you want every customer to take, and it comes down to propensity rate, you know, or activation rate. How, what percentage of your customers will refer? Maximizing that number and the number of invites they send, how many people do they refer when they try it? Maximizing those two numbers is where all the growth comes from.
Will: So why would we hide it? We want to find a way to make sure everyone possible will be activated and will refer because in the end, in order to do that, they have to be a happy customer. I mean, again, that's the priorities. Like we think about customer satisfaction, you've gotta be happy before we tell you to do it. So by damn, let's make sure you're happy and let's look at this as a way to help create the happiness. And that's how it ties together. And that's where it comes down to priorities from leadership and the company and the board and being able to say, this is how we fit together into this equation. This is how we are creating value in the end.
Keith: Absolutely. And I think what's interesting is, you know, you're hitting on the emotional part of referral programs, right? Sure. We're looking for happy customers to make them happier.
Will: When you're actually working on designing a referral program, have you found any emotional triggers or any kind of keys that you find really help get that person to participate from the more emotional side?
Keith: I had a discussion with some friends earlier today about this. Often it is the giving, and so that emotional component, the giving is often the more important thing. I've found this proven time and again, that the advocate is less motivated by what they receive than what they give. It's because we're often - you can get advocates who are motivated by their reward, but they're not necessarily the ones you want to use because they're not doing it out of the genuineness of their love of the product.
If you over financially incentivize people, you get ones that only care about the monetary equation and they're not actually who you want. So that emotional component is you actually want the ones who are like, "I don't need anything. I wanna tell my friend and give them something. I want my friend to like this." And that emotion there is core to finding the right person you wanna activate, because that's the one that's happy, that's the one that sees the value in what you have to offer, and that is the one who will share that value with others and is motivated by the giving. That's the emotional thing that I found most important.
I mean, after all, as a company, would we rather have a program that's responsible for 10% plus of its growth to be driven by people who are motivated by a monetary reward or motivated by giving their friends something? I want the giving, the giving every time.
Will: Yeah. And it's interesting because we've seen some data, we've had some people on the show here talk about as well the data of the reward for the recipient and the friend. Just from a pure conversion metrics perspective is also more important. Right? So we're feeding that ability for someone to feel like an insider and special to their friends and that joy. But also we know there's a higher friction level for the person who's about to try a new product.
Keith: Definitely. It's the kind of thing too that the offer itself should make them see the value in your product more. That's what I loved about Dropbox with giving away disk space - you look at it like, "Oh, like an extra space! How many gigabytes?" Like it should make you go, "Wait, wait a second here." It should make you think about that and think about the product in a way you wouldn't have otherwise as a new customer.
Works really well, and by the way, it can extend to existing customers, people that are churned, people that haven't used it. Why not? If they haven't used your product in the way you want, give them a little kick in the pants and let an existing customer refer someone who maybe hasn't used your product the way you want. It shouldn't always be restricted to new customers either.
Will: Yeah, no, and I think that's interesting cause we've definitely seen some people even with multiple products allowing referral of existing customers to new product lines and to expansion. Cause you know, hey, if I'm buying only one of our three products and someone can influence you to buy our second product, why should you be punished? But a new customer gets the reward? It just doesn't...
Keith: Exactly. And it also can be one where it just changes someone's appreciation of your product. Like in a B2B SaaS standpoint, one of my favorite proposals I made was to a company and said, "Look, you got a bunch of customers on your free tier. Why don't we let existing customers refer people that might even be on the free tier and give them a month of the first level pay tier for free?" I mean, you just got a pay customer because they still gotta enter their credit card and if they use it for a month, they're probably gonna continue. That's a one-month payback period. I think that's a good deal.
Will: It's like those little kind of mind-blowing moments there.
Keith: Yes.
Will: So, you know, I think these are all really great tips and great things for people to do. I'm kind of curious if you are seeing any pitfalls, any mistakes that people are making that you kind of would like to just warn the world about right now?
Keith: Yeah, it's a hard one. Resourcing is one. It does require a bit more. It requires some dedication, like real resourcing and realistic expectations. Looking at a program and going, "We're gonna spend some time, we're going to find the growth." We can be very confident that the growth is there, but we have to go find it. That's staying power and firepower to say like, how do we say? We're gonna see this through to the point where we identify those design patterns, those behaviors that create the growth that now we can invest in and grow activation. It's the first one, they just, you gotta take the plunge and you have to stick with it.
The other one too is just being super hung up on discounts and promotions, and it comes to both existing programs and new ones. Don't give away too much. We don't even have to give away that much when we do it. And instead it's about saying like, what helps someone understand the value? And that can come in a lot of ways, doesn't even have to be monetary. It could just be a limited edition of a product, special access to something new. It doesn't even - they're still gonna buy, give them something they wouldn't have been able to get otherwise or would've been able to get, but maybe just gets into it faster.
That's a hard one because the perception of referrals is hung up on discounts and giveaways. Same as affiliate marketing often is, by the way. And that perception, that's a pitfall. That is an excuse to not act, I've found where it's like, "Oh no, we don't wanna deal with this." Cancel. I'm like, "Well, no one says you have to." It's like, "Well, we're not ready." Well that's 'cause you keep thinking of it as this. It doesn't have to be that.
Will: Yeah. No, that's some really good advice there. You know, one of the things you just mentioned though, is kind of the affiliate side. Right? And I think that people can sometimes get a little bit - I don't wanna say confused, but they can kind of blend the affiliate with the referral with maybe even like influencer kind of. How do you see those channels? Do they work together? Are they counterproductive to each other? How do you see that mix?
Keith: They work together, and this was something we hit on back at Uber, was referrals is one to few. It's where you should, as an advocate, know who you're talking to, know who you're selling this to, or who you're saying this to, because that's where the value comes from. It should have some measure of trust. Someone should believe in you because of your work. You are a more trusted source of the value that's being evangelized than the brand itself directly.
But that hits a limit. You know, it's not a commercial thing. And I think that it's - I often end up putting caps on lifetime rewards for advocates to try and say like, "Look, if you hit a certain level, this isn't you talking to your friends anymore. This is a commercial relationship" and it should graduate into affiliate, into performance partnerships, and it should be something where you should always look at a referral program as a source of new partners that you wanna scale with. When that person hits, you know, 10, 20, 30 referrals, you go like, "That's awesome. Congratulations. Why don't we get on a phone call and talk about how to make this something bigger?"
And that comes to something else. So referrals and affiliate influences, all of that growth in those channels is driven by one very important thing: growth in your partners. The number of partners you have. Every referrer, every advocate has a limit to the number of people they're gonna get to, and so does practically every affiliate and influencer. You're gonna hit a point in which you can't get more out of them. You are constrained by their growth, so go get more of them. And so with referrals, the key growth metric is always activation - get more people to activate as advocates.
Same goes for affiliate influencer. Go get more partners. Referral should be a source of those partners. And a way to capture their growth. So the brand can say, "We have how many tens of thousands, hundreds of thousands of advocates referring for us every year. We get X many out of that to become affiliates and partners and influencers." And their growth is something that we as a business also help capture by creating a long relationship with them. And as they grow, we grow too. And that is a really fascinating thing because if you execute well against it, one partner to start, one referrer who refers a few friends could be worth tens or hundreds of thousands of customers in the end.
Will: I like that. I like that. "Go find them." That sounds like the real advice to this story today.
Will: You know, before we kind of wrap up here, I just wanted to see - referrals is kind of a space that's been around for a long time, but feels like it's still developing, it's still maturing very much. Are there any kind of educational resources, any blogs or books or people, is there anyone else out there that you would say, you know, make sure you go and consume this content on this topic?
Keith: The team at Duolingo did a write-up for a very product-level referral. So they did a fantastic write-up on how they unlocked that growth in their program. And that is probably, I think, one of the single most educating pieces actually. I think it's almost everything you need to read to just get a handle on both its complexity and yet its also simplistic elegance that in the end all it came down to was figuring out what got people to use Duolingo more, give them more of that. Same thing. There's no great single resource, there's no great single spot. I think it's one where it's still like learning lessons from companies looking up when they've spoken about it too. Things like what we're doing today and we don't have as good centralized resource yet. But maybe we need that.
Will: Maybe we do. Maybe we tackle that. Now before we end here, is there any last kind of comments or thoughts you wanna make sure we leave the listeners with around this topic?
Keith: It is such a no-brainer every program, B2B, every company from Big B2B down to micro B2C - everyone should have this in some form. It is foundational to your growth as a company. What it comes down to is figuring out how. Each company is gonna have a different answer to that question cause each product is a bit different. And so don't be afraid of investing in it. Don't be afraid of taking a plunge because in the end it's worth it. So stick with it and know that you should have it. And if it's not 10% plus your revenue, it should be, and you gotta figure out how to get there, answer that question, what does that program look like to get there and then work backwards from that.
Will: Love it. Love it. Where can people find you if they want to connect? They wanna talk to you about this, they wanna get your help in getting that 10% plus growth.
Keith: Best place to find me first is just LinkedIn. Hit me up on LinkedIn anytime. Send me a message. I'm a fanatical messenger. I would love to hear from you. You can always go ahead and find me as well at my website, zorz.com, and email me as well at
[email protected]. Get back to you cause I would love to chat with anyone who needs help here cause this is something we really enjoy.
Will: Thank you very much for sharing all that Keith, and thank you for making the offer to our audience there. For anyone who does wanna reach out to Keith, we'll be linking to all the information you just shared there in the show notes. Thank you very, very much for your time here, Keith. I know I really enjoyed it. I know I learned a bunch. I'm sure our listeners did as well. Just thank you very much for joining us today.
Keith: Thank you as well. It's been a pleasure.
Will: Thank you for tuning into another episode of the first season of the Advocacy Channel. Join us next season as we bring on more expert guests like Keith. If you like what you heard and like to help support the Advocacy Channel, please review, rate and subscribe wherever you listen to podcasts. If you'd like to learn more about customer marketing, head over to the Sasquatch blog or follow us on LinkedIn. The links are in the show notes. If you're looking to create powerful customer marketing programs that will help you better activate, engage, and retain your customers, head over to Sasquatch.com through the link in the episode's description and learn more about our referral platform. That wraps up another great episode of the Advocacy Channel. We'll see you real soon.
