how to generate more referrals, especially through word of mouth has been a hot topic in #productmarketing circles, especially for #saas and rightly so, because of the major benefits it delivers.

Every business… B2B or B2C see referrals as an additional way of growth, especially when it comes to word of mouth, but most companies (56% from my research) do it the wrong way…

When you tell someone of a service you enjoyed, most times you do it without expecting any reward in return and this is a normal phenomenon because humans feel good when they recommend good stuff.

As a company, rewarding customers for referrals is great motivation, but the way you reward can make or mar your business and the perception your customer base might have of it.

The best way ( which has been scientifically proven) to reward customers for their referrals is by giving or sending them gifts instead of cash rewards. (56% of companies do the opposite).

The reason is that cash might signify the reward gesture as more of a “business transaction” rather than an altruistic transaction, especially if the company is a strong brand. Rather than cash rewards, craft reward offers that resonate with your audience. Eg. Free movie tickets, free car service, free lunch, and so on.

For SaaS try as much as possible to make sure the reward is highly valuable and revolves around your product. E.g extra one-month subscription for a referral, extra cloud storage space when you refer someone ( Dropbox did this ), and so on In conclusion, a referral is great but make sure it revolves around your product as much as possible and it doesn’t feel like another “business transaction”

P.S: Lastly if it’s a startup or a new company that wants to gain quick traction cash incentives will work but it’s not sustainable. Best not to totally rely on it or slowly shift from that model