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The Art of Referral Marketing
Driving growth through word-of-mouth and affiliates
The story of Bryan Altman’s journey into web3 starts halfway across the world - in Manila.
Back when he was COO of Setter, a home services marketplace, he was leading a team of 100, of which more than 40 were based in Manila, Philippines. He describes the experience of building a team in Manila as one of the most rewarding experiences of his career, and also the reason he fell into the web3 rabbit hole.
After Setter exited to Thumbtack in early 2020, Bryan knew he wanted to build again. It was his Philippines team that introduced him to the world of play-to-earn gaming, and the DAOs that formed around it. While he had been an investor in crypto for a while and “battle scars” include Mt Gox and QuadrigaCX (which Netflix recently made a documentary on), the utility and possibilities of web3 led Bryan to start DAO Exchange - an AngelList for DAOs.
As he continued down his journey, Bryan started to realize how DAOs were increasingly challenging to sell into. Not only was the product hub he built for DAOs underutilized, he also observed that the curiosity to discover DAOs on a regular basis was not consistent.
However, one of the tools DAO Exchange built seemed to strike a cord - a Discord bot for projects to create bounties and reward individuals for micro-tasks. With a growing number of creators setting up bounties for marketing purposes, Bryan and his team identified an opportunity, which eventually led to ChainVine, a web3 referral SaaS and affiliate network. Having worked with dozens of web3 startups over the past year on their referral and affiliate programs, he is familiar with the pieces that must fit together for referral marketing to work.
In this exclusive interview, Bryan gives growth leaders a better sense of where to start, and demystifies the complexity around referral programs. Read on to learn what missteps to avoid, considerations when designing referral rewards, and how to get started with affiliate partners to drive visibility
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Major pitfalls to sidestep with referral marketing
Bryan believes getting referral incentives and mechanisms right requires an experimental mindset and willingness to have an honest dialogue with your advocates - the individuals who will put their reputation and networks on the line to “shill” your products and services. Every interaction with your advocates acts as a traffic light - are you on the right track and should continue, or should you make adjustments to your approach?
Though that advice seems straightforward, Bryan observes three mistakes that are most common to referral marketing programs.
Mistake #1: Rewards are not compelling enough
“The number one mistake I see is rewards that simply don’t excite anyone. Rewards for referrals need to be compelling to drive serious growth. Dropping native tokens that do not have any utility or value, or designing a payout that is so tiny that it is immaterial is the most common reason why new referral marketing programs do not take off,” says Bryan.
He then cites several non-web3 brands with strong referral incentives - from Dropbox’s eponymous 500MB storage per referral (which might not seem much in today’s world, but was substantial a decade ago), to Tesla’s US$1,000 credit for a car purchase. “Find rewards that are meaningful,” emphasizes Bryan.
Mistake #2: Don’t market the program
“One of the missed opportunities is not marketing the referral program after it is launched. Projects often put out 1-2 tweets, and tuck the referral program in a discreet corner of the website. Instead, growth leaders should think about how they can blitz-scale the referral program at every touchpoint,” says Bryan, “Sign-up flow, email drip, in-app notifications, above the fold on the website…projects should capture every moment to bring someone on.”
Mistake #3: Making the rewards unsustainably lucrative
In a space abundant with “airdrop hunters” and “reward farmers”, another mistake projects make is rewards that are unsustainably lucrative. “Projects should think about how they can make rewards unprofitable to farm. Either the cost of farming is too expensive (for example, due to gas fees), or the project is earning more than the rewards being paid out,” suggests Bryan. Combined with tools like IP address and device ID tracking, projects can create internal friction to avoid referral rewards from being abused. “While these are not 100% foolproof, the goal is to make it more difficult for bad actors to abuse the system.”
Considerations when designing referral rewards
As advocates put their name on the line to share about the product, it is critical that they are fairly incentivized and rewarded. Bryan advises growth leaders to adopt a flexible approach towards rewards. It might be one of the following:
Configurable - be prepared to regularly adjust the reward logic and payouts. You’ll find different groups of users need different types of rewards and in some cases you’ll want to offer one-off rewards to high-profile affiliates. You may also want to adjust the rewards for a certain period of time. Set up your program so you can adjust.
Tiered - after an advocate brings in a handful of users, would it make sense to upgrade the rewards to keep them continuously motivated?
Tied to the right action - what is it that you are going to reward for? Is it clicks, registrations, conversions, or even attaining a minimum level of activity / transactions?
Each of these levers can be used individually or in combination, hence growth leaders should focus on getting a referral program up and running first, then validate what resonates.
How to start with affiliate partners
Affiliate partners are those who have existing distribution, and are open to promote your products and services in exchange for rewards. Unlike the word-of-mouth, refer-a-friend programs where the advocates tend to be existing users of your product or service, affiliates tend to function more of a “performance marketer” and can potentially drive higher volumes of traffic efficiently.
Affiliate partners can take many forms - they can be media platforms like newsletters and podcasts with captive audiences, or SEO ninjas who build high-search-engine-visibility content to maximize organic discoverability. To figure out which are the right partners, Bryan advises, “Start with your customer persona. Where do they get their information from? Then reach out to these sources of information and negotiate an affiliate marketing partnership. Another growth hack would be to look at competitor’s websites and their backlinks. Which platforms are driving traffic to their sites, and can you reach out to those sources and get involved?”
Naturally, a fledgling product or service might not be immediately appealing to affiliate partners, especially those with sizable distribution and brand recognition. Growth leaders then need to juggle with the tension of paying upfront compared to paying for results.
“It is common for affiliate partners to ask for some initial upfront payment because they are taking on a lot more risk at the start and do not have a lot of data on how the audience would convert. It makes sense to make a small investment upfront to help the affiliate partner form an understanding of how the conversion would work, and combine that with a performance-based reward. The latter is important - you want to give them a taste for what the numbers could potentially be,” says Bryan.
He however points out that the most effective affiliate partners tend to prefer performance-based partnerships quickly, because they want to share in the up-side - “The best affiliates tend to think in a performance-driven manner. They are not looking for quick hits, but are looking to build a consistent stream of income. So the quality of an affiliate partner can be quickly judged if they are willing to align themselves to your referral program - they win only if you win.”
Bryan concludes on affiliate partners, “You do not need 100 affiliates. The Pareto principle applies - you only really need 10-20 effective partners, and they will turbocharge your referral marketing.”
Bringing it all together
For growth leaders launching their first referral marketing campaign, it can be a challenge to know where to begin. For starters, do not fall into the three most common traps: not offering rewards compelling enough, creating an unsustainably lucrative scheme and not marketing the program upon launch. Instead, kickstart referral programs with a flexible approach and invest the effort to identify and align with a handful of affiliate partners. Then, growth leaders can look forward to their referral marketing efforts gaining momentum as satisfied users and motivated partners spread the word.
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