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- The Limitations of Referral Programs
The Limitations of Referral Programs
They are great... when you are starting
Don’t rely on your referral program
Insight from Andrew Chen
Referral programs can decrease CAC, increase brand awareness, and bring in new customers.
The most famous is Dropbox's referral program.
However, most referral programs fizzle out.
These programs become less effective because as more users have adopted the product, the fewer friends there are to invite.
To keep growth going, what you really need to build is a viral growth loop combined with a referral program.
A viral growth loop is a strategy used within a product or service that makes people want to share it with their friends.
For example, a feature in a social media app that allows users to share content with their network is a viral growth mechanism. As users engage with this feature, they unintentionally promote the app to new potential users.
The key is that these features are appealing to the existing user base, making the act of sharing feel less like a promotion and more like a natural part of using the product.
For example, in Dropbox, you can share files and work on projects with others. This feature makes people want to bring their friends to use Dropbox too.
Or in Uber, when you use the "Share ETA" feature to let your friends know when you'll arrive, you're also showing them how Uber works, which might make them want to try it.
So, a viral growth mechanism is all about making sharing a normal part of using the app, which helps it grow because more and more people start using it.
As you build out your referral program, try to keep virality in mind!
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