Customer Referral Program terminology can quickly becomes confusing, not to mention down right frustrating. This presentation was made to help clear up the 12 most important terms in customer referral programs and set a common language for us all to talk in.

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12 Terms you need to know before
you launch a referral program
- Referral SaaSquatch
blog.referralsaasquatch.com
http://www.slideshare.net/ReferralSaaSquatch
ReferralSaaSquatch.com
@getSaaSquatch

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1. Referral Program
A referral program is any systematic way that your
company encourages people to tell other people
about your product or service.

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2. Referrer
These are the people that are recommending your
product or service to others.
They can be users, re-sellers, affiliates, partners or any
other program specific term you choose to use.

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3. Referee
These are the new customers you are acquiring from your
referral program. They can be paying customers, non-paying
customers or even other people who signed up to your referral
program.

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4. Customer Referral Programs
Customer referral programs are referral programs designed to
specifically motivate your existing customers to help you find new
customers.
Customer referral programs work because a friends recommendation
is the only form of marketing that directly produces a purchasing
behavior.

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5. Affiliate Programs
Affiliate programs are referral programs that reward third
parties, typically with cash, when new customers signup for
your product or service as a result of their referral.

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5. Affiliate Programs cont’d
These programs can be effective when you have a collection of
powerful influencers who have the ability to refer your product on a
large scale (blog, podcast, etc…)
With a monetary incentive these individuals have a reason to refer
your product over someone else’s.

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6. Partner Programs
Partner programs are referral programs that reward certified
third party vendors of your product or service with incentives
such as cash, recognition and advertising.

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6. Partner Programs
The key difference is that they are personally vetted by the
company.
This helps to remove the moral concerns companies have
about using third party affiliates to promote their product.

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6. Partner Programs
Partner programs typically have a much more rigorous admission
process than affiliate programs and come with some legal
obligations.
The admission process can include paying fees, going through a
certification program and/or attending training sessions.

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7. Viral Coefficient
Viral Coefficient is the measure of how viral your loop is.
If your viral coefficient is higher than 1, every new user you add
to your system will add at least 1 other user and so on.
Technically, when your viral coefficient is 1 or greater you have
a viral application.

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7. Viral Coefficient
If you don’t have a K-Fact of greater than one don’t worry
about it, it’s a pretty hard thing to do.
For those of you looking for the math, the simplified version of
calculating your K-Factor, or rate of virality is:
I = Number of Invitations
CR = Conversion Rate
I x CR = K = Viral Coefficient

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8. Viral Loops
A viral loop is a mechanism that has users refer
others to your product or service and then
ultimately turns those referees into referrers
through the same mechanism.

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9. Organic Viral Loop
Organic viral loops are viral loops that
occur naturally through the regular use of
your product or service.
Inviting a co-worker to review a plan in a
project management tool is an example of
a organic viral loop.

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9. Organic Viral Loop
Organic viral loops are considered extremely hard to
build into a product or service after it already exists.
This is why authors like Seth Godin encourage you to
include organic viral loops into your application in the
initial design phase.

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10. Artificial Viral Loop
Artificial viral loops are viral loops created exclusively to
encourage a viral loop and do not add to the natural use of
your product or service.
The act of rewarding a customer with $20 credit for every
friend that registers for your service is an example of
an artificial viral loop.

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11. Rewards – Reward Me (One-Sided) vs
Reward Both (Two-Sided)
Rewards are what participants in a referral program earn on
successful completion of an artificial viral loop.
Programs typically reward either the referrer (reward me) or
the referrer and the referee (reward both)

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12. Happy Moment
In referral programs, a happy moment is the time when a
referrer is most likely to make a referral typically due to a
recent happy experience while using your product or service.
The effectiveness of a referral program depends, in part, on
when a user is prompted to make a referral.

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12. Happy Moment
If a user is prompted right after a happy moment they are
much more likely to make a referral even if they have
previously had a bad experience.
Finding a happy moment is not a trivial task. It can require a
critical eye, trial and error and strong in-app analytics to find
your optimal happy moment.

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