How to Use Referral Marketing to Rapidly Grow your Subscription Business

If you’re in the subscription business, then you know how important it is to generate new customers. New customer acquisition is the ultimate method to scale a subscription business; otherwise, profits plateau or, even worse, dip. However, referral marketing is great additional lead generation technique because it not only generates new leads, but also acquires new customers.

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Let’s dive into how referral marketing increases your customer acquisition.

How Referrals Get You New Customers

Referral marketing acquires new customers by using your current customers to refer your brand to their friends. Refer-a-friend programs generally offer double-sided rewards, meaning both the advocate and their friends earn a discount. Offering rewards to both customers and their friends creates a mutual incentive and urgency to buy before the offer expires. As a result, your advocates’ friends become your new customers.

Refer-a-friend programs tap into your existing customer base to share your business with their entire network. When your best customers share your brand with their friends and then their friends make a purchase, your business generates new customers. Then the cycle can continue by offering referred friends who converted refer-a-friend offers!

For the step-by-step process of how referral marketing works, take a look at our infographic.

Infographic laying out the people and chain of events that occur in refer-a-friend programs


Normally, a refer-a-friend program begins with promoting the referral offer. In order to get advocates to share the reward, they have to first know the offer exists and where to find it on your site. A few organic ways to promote your referral program is through owned assets such as email marketing and social media.

Next, your advocate needs to be compelled to share the offer. Here, you can devise the most enticing copy, use attractive images, and provide the easiest share channels. Basically, you want to optimize your referral program to get the most out of distribution, circulation, and promotion.

When your advocates have shared with their friends, it’s up to the friends to act on the offer. With a more compelling discount or gift card, friends are much more likely to convert into customers. When a friend completes a purchase, you can trigger your software to automatically reward your advocate.

As a result, your business acquired a new customer through a referral and your advocate was rewarded for sharing your business. Once you’ve run your program for at least a month, you need to analyze your results to understand if the program is fully optimized. Talkable offers reports and dashboards so you can graphically see your results and learn from your past offers, campaigns, and reward types. Remember to test your hypothesis and run multiple A/B tests to ensure your program is fully optimized.

Why Market Subscription Businesses with a Referral Program?

Referral marketing is a notable strategy to grow your subscription base and increase demand for your products or services. Other digital marketing channels can be more expensive and charge you based on number clicks rather than acquisition. Referral marketing costs you money once friends have made a purchase using their incentives, if advocates redeem their incentives, and the cost of your referral marketing platform that is used to run your program.

Currently, it’s standard marketing practice to utilize digital marketing channels. Due to the ease of use and targeting ability not only have digital marketing channels become more prominent, but they also have become more expensive.

Regardless of cost, digital marketing is continuing to grow in popularity. In 2018, 82% of marketers plan to increase their digital spend and on average companies are spending over $75,000 on digital channels.

Unlike digital marketing channels that charge per click, referral marketing includes a small platform fee and the cost of rewards redeemed. The referral marketing platform cost is fixed, which means the more successful your referral program the lower your cost per acquisition.

For example, Talkable’s customers have an average customer acquisition cost (CAC) of $44, which is almost half the national average ($82) e-commerce companies pay to acquire a new customer. Ultimately, utilizing referral marketing allows you to keep your subscriber acquisition cost down white continually gaining new subscribers.

Referral marketing can grow your subscription services by encouraging your current customers to refer. In addition, customer referrals are highly cost-effective and are more affordable in comparison to many other digital marketing channels. Referrals an excellent marketing technique for any and all growing subscription businesses.

3 Reasons why referrals increase customer acquisition of subscription services

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About Talkable

Talkable is a SaaS platform that allows companies to profit from the science behind referrals, while increasing sales revenue and preventing fraud.

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